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Operator: Good day, and thank you for standing by. Welcome to the Ducommun Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Suman Mookerji, Senior Vice President and Chief Financial Officer. Please go ahead. Suman Mookerji: Thank you, and welcome to the Ducommun's 2025 Third Quarter Conference Call. With me today is Steve Oswald, Chairman, President and Chief Executive Officer. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q&A session that follows. Certain statements today that are not historical facts, including any statements as to future market and regulatory conditions, results of operations and financial projections, including those under our VISION 2027 game plan for investors are forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are, therefore, perspective. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include, amongst others, the cyclicality of our end-use markets, the level of U.S. government defense spending, our customers may experience delays in the launch and certification of new products, timing of orders from our customers, our ability to obtain financing and service existing debt to fund capital expenditures and meet our working capital needs, legal and regulatory risks including pending litigation matters generally as well as any potential losses arising from third-party supplication claims related to the Guaymas Performance Center fire that may become material, the cost of expansion, consolidation and acquisitions, competition, economic and geopolitical developments, including supply chain issues, international trade restrictions, the impact of tariffs and elevated interest rates, risks associated with the prolonged U.S. federal government shutdown, the ability to attract and retain key personnel and avoid labor disruptions, the ability to adequately protect and enforce intellectual property rights, pandemics, disasters, natural or otherwise, and risk of cybersecurity attacks. Please refer to our annual report on Form 10-K quarterly reports on Form 10-Q and other reports filed from time to time with the SEC as well as the press release issued today for a detailed discussion of the risks. Our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made, and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call. We have filed our Q3 2025 quarterly report on Form 10-Q with the SEC. I would now like to turn the call over to Steve Oswald for a review of the operating results. Steve? Stephen Oswald: Okay. Thank you, Suman, and thanks, everyone, for joining us today for our third quarter conference call. Today, as usual, I will give an update of the current financial situation of the company, after which, Suman will review our financials in detail. Let me start again on this quarterly call with Ducommun's VISION 2027 game plan for investors as we finalize our third year of execution in Q4 2025. Strategy and vision were developed coming out of the COVID pandemic over the summer and fall of 2022, unanimously approved by Ducommun Board in November 2022, then presented the following month in New York to investors where we got excellent feedback. Since that time, Ducommun's management has been executing the strategy by increasing the revenue percentage of engineered products and aftermarket content, which is at 23% this year, up from 15% in 2022, consolidating our rooftop footprint in contract manufacturing, continuing our focused acquisition program, executing the offloading strategy with defense primes and high-growth segments, driving value-added pricing, expanding content on key commercial aerospace platforms. All of us here as well as my fellow board members continue to have a high level of conviction in the VISION 2027 strategy and financial goals and believe the market catalyst ahead present a unique value creation opportunity for shareholders. The Q3 2025 results show again the strategy initiatives are working with both gross and adjusted EBITDA margins, for example, at record levels with much more opportunity to come for DCO. I'm also very pleased to announce that our next investor conference will be in the fall of 2026 in New York, and we will present the next 5-year vision for DCO, which I believe will be very compelling, I look forward to it. For Q3, I'm pleased to report that revenues reached a new quarterly record of $212.6 million or 6% over last year, beating our prior record of $202.3 million just set last quarter and marking this our 18th consecutive quarter of year-over-year growth in revenue. We achieved this despite continued headwinds in our commercial aerospace business, which has been previously forecasted due to destocking at BA and SPR. Company, however, continued to see double-digit growth in defense business, which grew 13% during the quarter, making it our third double-digit quarter in a row. The growth in defense was driven by strong -- very strong performance in our missile franchise, which grew by 21% in the quarter, although with our military fixed-wing aircraft business up 17% and rotary-wing aircraft platform is rising 22%. The outlook for our Defense business continues to look great. In addition to the highlights I just mentioned, the Apache tail rotor blade is now fully approved by BA and in production at our new location in Coxsackie, New York. The total missile case is also in production in Guaymas, Mexico, which is one last sign-up from RTX on the case harness remaining. This is all very good news with the Tomahawk, our last major program to move, set for full production in 2026. Separately, and as previously mentioned, our team continues to build scale at other defense customers outside of RTX which has been a long-term goal. A great example is BAE Systems at over $21 million, up 39% year-to-date versus 2024. DCO also had an excellent bookings quarter with $338 million of new orders in Q3, representing a book-to-bill of 1.6x. This increased our remaining performance obligations to $1.03 billion as well, a new record for the company. We feel very confident now about our momentum in orders, and Q4 as well is looking strong across the board. I talked about our missile business earlier this year, and that continues to outperform. We are positioned very well strategically to benefit from the replenishment of depleted worldwide inventories along with a very robust U.S. and FMS order activity. Ducommun is a supplier on over a dozen key missile platforms, including AMRAAM, MIR, PAC-3, SM2, SM3, SM6, tomahawk, Naval Strike Missile and TOW, amongst others. Our missile business was up 21% in the third quarter and is now up 27% year-to-date in 2025. We see continued growth in our pipeline of opportunities going forward, which is excellent news. Complementing our missile portfolio is a strong radar franchise, which is up and coming at DCO. This includes marquee programs such as the SPY-6 radar, which I mentioned earlier, the [ LTAMDS ] radar, which is part of the patriot missile defense system, the TPY-2 radar used on the THAAD missile defense system, the G/ATOA radar used by the U.S. Marine Corps and various other radar platforms. This combination of both missile and radar platforms positions and aligns us with key defense priorities outlined in the U.S. defense budget, including the Golden Dome as well as NATO priorities. Strong growth in our Defense business more than offset lower revenue in our commercial aerospace business, which declined 10% in the quarter. However, the outlook is promising for Commercial Aerospace as Boeing received approval from the FAA to increase their build rates from 38 to 42 on the 737 MAX as well as strong momentum in the 787 bills. This reinforces our optimism about the commercial business once we get through the destocking in 2026. We also like the balance of having both defense and commercial aerospace revenues, contributing and offsetting at times. Gross margins also grew $3.8 million to 26.6% in Q3 on par with the record gross margin percentage achieved in the first half of 2025, up 40 basis points year-over-year from 26.2% as we continue to realize the benefits from our growing engineered products portfolio with aftermarket, strategic value pricing initiatives, restructuring actions and productivity improvements. We also sold the Berryville, Arkansas facility in Q2 and are actively marketing the Monrovia, California facility, and we're seeing initial cost savings in our P&L with $11 million to $13 million still on target in 2026. For adjusted operating income margins in Q3, the team delivered 10.6%, which was just above the prior year of 10.5%. Structural Systems segment margin grew nicely in the quarter with productivity improvements and a good mix of profitable business. Adjusted EBITDA continues to improve on our march to our VISION 2027 goal of 18% in 2027 from 13% in 2022. DCO achieved 16.2% of revenue for the first time in Q3, up $2.5 million from Q3 2024 to $34.4 million, tremendous progress in the past 3 years. This is our third consecutive quarter with adjusted EBITDA above $30 million, and it represents an expansion of 30 basis points above prior year and 9 quarters to go to reach 18%. Subsequent to our 3 months ended September 27, 2025. In October, we entered into a binding settlement term sheet to resolve the Guaymas Fire litigation against us. Term sheet provides for, amongst other things, the final dismissal of the Guaymas fire litigation against us with prejudice and release of claims against us in exchange for us issuing a payment of $150 million, $56 million of which is expected to be funded by our insurance carriers. In addition, we also settled ancillary subrogation claims for $1.35 million. The Guaymas facility fire occurred in June of 2020. We recorded settlements of related costs of $99.7 million in Q3, and those charges are reflected in our GAAP earnings results. GAAP EPS was a loss of $4.30 a share in Q3 2025 versus income of $0.67 per diluted share for Q3 2024. With the adjustments, diluted EPS was $0.99 a share in Q3 2025 and in line with the adjusted diluted EPS of $0.99 in the prior year quarter. The lower GAAP EPS was due to litigation settlement and related costs net. I am happy to report this quarter the company's RPO grew to a new record level of $1.03 billion, increasing $125 million sequentially. Growth in RPO during the quarter was both across commercial, aerospace and defense business. We closed on a number of opportunities that restocked our RPO and are well positioned for continuing revenue growth. Our book-to-bill again was 1.6x, a great number for DCO and excellent momentum ahead in the pipeline for Q4. On the outlook for the fourth quarter, we expect to see continued momentum in defense business, partially offset by the impact of destocking and commercial aerospace. We are reaffirming our guidance of mid-single-digit revenue growth for the full year 2025 and reiterating our expectation for low double-digit growth in Q4. In addition, tariffs have not had a material impact on our results, and we expect that to continue, which is a great story for our investors. Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we saw revenues of $126 million compared to $111 million in Q3 2024. Growth was driven by a fifth straight quarter of strong year-over-year improvements in missile programs such as the Naval Strike Missile, RAM, AMRAAM as well as solid growth in military rotorcraft on the SPY-6 radar and our military ground vehicles. Within our commercial aerospace operations, third quarter declined 10% year-over-year to $77 million, driven mainly by lower rates on regional and business jets and of course, Boeing platforms. As I mentioned earlier, we believe that finally, much better stories ahead for BA and MAX. Now that inventory production is ramping up and they are working through their overstocked inventory. Revenue in our Industrial businesses increased $5 million during Q3 with customers making last time buys and replenishing depleted stock. While not a core to our portfolio, there are a few customers we continue to serve with no interruption to our core aerospace and defense business. With that, I'll let Suman review our financials in detail. Suman? Suman Mookerji: Thank you, Steve. As a reminder, please see the company's 10-Q and Q3 earnings release for a further description of information mentioned on today's call. As Steve discussed, our third quarter results reflected another record quarter of revenue with strong growth across all our military end markets, including missiles, fixed-wing aircraft, rotorcraft, ground vehicles and radars. Gross margins maintained at record levels established in the first half, and we saw another quarter of record EBITDA. We are nearly at the end of our facility consolidation project, which will drive further synergies into 2026 as we ramp up production of the various product lines that were moved. As Steve highlighted earlier, we also made great progress in continuing to build up our engineered products portfolio with those revenues contributing 23% to our mix this year. These actions, along with our strategic pricing initiatives drove continued gross margin expansion in Q3 and is keeping us on pace to achieve our VISION 2027 goals. Now turning to our third quarter results. Revenue for the third quarter of 2025 was $212.6 million versus $201.4 million for the third quarter of 2024. The year-over-year increase of 6% reflects strong growth in military and space of 13%, driven by increases in missiles, fixed-wing aircraft, military rotorcraft, ground vehicles and radars. This was partially offset by weakness in our commercial aerospace business, mainly driven by lower revenues across large commercial, including both Boeing and Airbus platforms and on business jets. We posted total gross profit of $56.5 million or 26.6% of revenue for the quarter versus $52.7 million or 26.2% of revenue in the prior year period. We continue to provide adjusted gross margins as we had certain non-GAAP cost of revenue adjustment items in the prior year period relating to inventory step-up amortization on our acquisitions. On an adjusted basis, our gross margins were 26.6% in Q3 2025 and 26.5% in Q3 2024. I also want to add that we did not see any measurable impact from tariffs in the third quarter. And as Steve mentioned, we do not anticipate any significant impact to our P&L at this time. We are a U.S. manufacturing business with U.S. employees and generate 95% of revenues from our domestic facilities. Our revenues are also largely to domestic customers with U.S. revenues in excess of 85% year-to-date Q3. Revenues to China were up 3% year-to-date, mostly 1 customer for Airbus and there has been no impact to those volumes or orders at this time due to the tariffs. Our supply chain is also largely domestic with less than 5% of our direct suppliers being foreign. Some of our domestic suppliers do source materials from outside the United States, but even that is a very manageable spend with China being a low single-digit percentage. We expect to largely mitigate the impact of tariffs on our material spend through military duty-free exemptions, alternate sourcing of materials from domestic suppliers or by passing on the impact to our customers. Ducommun reported an operating loss for the third quarter of $80.1 million compared to operating income of $15.3 million or 7.6% of revenue in the prior year period. Adjusted operating income was $22.4 million or 10.6% of revenue this quarter compared to $21.1 million or 10.5% of revenue in the comparable period last year. The net operating loss was experienced due to the litigation settlement and related costs of $99.7 million. The company reported a net loss for the third quarter of 2025 of $64.4 million or $4.30 per share compared to net income of $10.1 million or $0.67 per diluted share a year ago. On an adjusted basis, the company reported net income of $15.2 million or $0.99 per diluted share compared to adjusted net income of $14.8 million or $0.99 in Q3 2024. The GAAP net loss was primarily due to the litigation settlement and related costs and the higher adjusted net income during the quarter was driven by higher adjusted operating income after excluding the litigation settlement and related costs. Now let me turn to our segment results. Our Structural Systems segment posted revenue of $89 million in the third quarter of 2025 versus $86 million last year. The year-over-year change reflects $6 million of higher revenue in our military and space business, driven by military rotorcraft and ground vehicles, offset by $2.5 million in lower revenues across our commercial aerospace business, mainly driven by lower revenues on business jet platforms. We have completed the transition of certain commercial rotorcraft product lines under our facility consolidation initiative, and we are starting to see growth in those platforms. Structural Systems operating income for the quarter was $11.9 million or 13.3% of revenue compared to $8.3 million or 9.6% of revenue for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 16% in Q3 2025 versus 14.7% in Q3 2024. The increase in year-over-year margin was driven by savings from plant consolidation. Our Electronic Systems segment posted revenue of $123.1 million in the third quarter of 2025 versus $115.4 million in the prior year period. The year-over-year change reflected $8.2 million in higher revenues in military and space applications driven by strong growth in missiles and fixed wing aircraft and radar systems. Our industrial business increased $5 million during Q3 with certain customers making last time buys. Growth in these segments was partially offset by lower revenues from commercial aerospace. Electronic Systems operating income for the third quarter was $21.1 million or 17.1% of revenue versus $18.9 million or 16.4% of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 17.5% in Q3 2025 versus 16.8% in Q3 2024. The year-over-year increase was driven by higher manufacturing volumes. Next, I would like to provide an update on our ongoing restructuring program. As a reminder and as discussed previously, we commenced a restructuring initiative back in 2022. These actions are being taken to better position the company with stronger performance in the short and long term. This includes the shutdown of our facilities in Monrovia, California and Berryville, Arkansas and the transfer of that work to our low-cost operation in Guaymas, Mexico and to other existing performance centers in the United States. We continue to make progress on these transitions and the receiving facilities have started ramping up production here in Q4. Last month, we started full production of rotor blades for the Apache helicopter at our Coxsackie New York facility which completes the transition of that program from California. We also completed the transition for 737 MAX spoilers and TOW missile cases, both of which are now in production in Guaymas. During Q3 2025, we recorded $0.6 million net in restructuring charges. We expect to incur an additional $0.5 million in restructuring expenses as we complete the program by the end of Q4. As previously communicated, we expect to generate $11 million to $13 million in annual savings from our actions and have already seen some realization of savings in 2024 and in the current year. We expect the synergies to ramp up in 2026 as the receiving facilities move up the learning curve and ramp up to full rate production. We are actively marketing the land and building in Monrovia after having closed on the sale of the Berryville facility in Q2. Turning now to liquidity and capital resources. In Q3 2025, we generated $18.1 million in cash flow from operating activities, which was an improvement compared to $13.9 million in Q3 2024. The improvement was due to higher adjusted operating income, lower interest costs and lower cash taxes, partially offset by higher operating working capital. As of the end of the third quarter, we had available liquidity of $250.7 million comprised of the unutilized portion of our revolver and cash on hand. Our existing credit facility was put in place in July 2022 at an opportune time in the credit market, allowing us to reduce our spread, increase the size of our revolver and allowing us the flexibility to execute on our acquisition strategy. Our strong cash generation allowed us to pay down the remaining balance on our revolver during Q2 2025, and the entire $200 million revolver capacity is available to us at this time. We expect to draw down $95 million during Q4 to make payment under the legal settlement agreement. After the drawdown, we expect pro forma net leverage to be approximately 2.3x. This leaves sufficient leverage headroom and also in excess of $100 million available to us on the revolver, along with cash on hand. This provides sufficient liquidity to fund our operations and execute on our acquisition agenda. Separately, we are working with our banking group to expand and extend our credit facility to support the next leg of growth at Ducommun. Interest expenses in Q3 2025 was $2.9 million compared to $3.8 million in Q3 of 2024. The year-over-year improvement in interest cost was primarily due to lower interest rates, along with the lower debt balance. In November 2021, we put in place an interest rate hedge that went into effect for a 7-year period starting January 2024 and pegs the 1-month term SOFR at 170 basis points for $150 million of our debt. The hedge will continue to drive significant interest cost savings for the rest of 2025 and beyond. To conclude the financial overview for Q3 2025, I would like to say that the third quarter results continue the strong results we have achieved this year, building on the momentum from 2024 and positions us well for the rest of the year and beyond. I'll now turn it back over to Steve for his closing remarks. Stephen Oswald: Okay. Thanks, Suman. Appreciate it. Okay. Just in closing, Q3 was another success, I believe, for DCO and its shareholders to continue driving our strategy while effectively managing the headwind from commercial aerospace. We achieved another quarter of record revenue. Adjusted EBITDA margins and adjusted gross margins were also at record levels of 16.2% and 26.6%, respectively. The company is also well positioned to meet and exceed our VISION 2027 target of 25% plus of engineered product revenues, year-to-date 2025 Q3 at 23%. As everyone knows, driving this percentage as high as possible is our #1 strategic focus and drive here at the company. Finally, with the continued strength in defense activity, the commercial bill rates heading higher, I'm very optimistic about what lies ahead in Q4 and the next few years for our shareholders, employees and other stakeholders. So thank you for listening, and let's go to questions. Operator: [Operator Instructions] Our first question comes from the line of Ken Herbert of RBC Capital Markets. Kenneth Herbert: Steve, I just wanted to ask really strong bookings in the quarter within commercial aerospace, can you provide any more detail in terms of what you saw there? And specifically, level set us maybe at what your ship rate is currently on the MAX and maybe how much of a headwind we should think about that into 2026? Stephen Oswald: Yes. Let me just -- thanks, Ken. Good to hear from you, and Suman can jump in as well. We first talk about the build rates. So the MAX build rate is really -- people always talk about Boeing and the build rates, and that's true for us. But we have a lot of business in Spirit. So it's really -- I think we probably have more on the MAX and Spirit than we do at Boeing. We obviously do spoilers direct and we do some other things direct, but we do a lot of stuff for the fuselage at Spirit, that's still down. I mean it's still running, I would say, probably 26, 28 a month, right? Suman Mookerji: That's right. In terms of us shipping our physical product, we're seeing mid-20s to high-20s, as Steve noted. And I would say our -- we want to maintain level load in our factories. So our production, depending on the parts and our view of inventory in the system, our part production may range to between 30 to 40 aircraft per month. So there are times for certain parts where we are continuing to build ahead to balance production in our facilities. We did see growth in bookings across Boeing and Airbus. We got some good additional order inflow for work we do on the nacelles for Airbus, not directly to Airbus, but on Airbus platforms. So there was -- it was good to see the bookings pick up and remaining performance obligations tick up for commercial aerospace. I mean it certainly did for defense as well, but it was good to see that tick up for commercial aerospace as well this quarter. Stephen Oswald: Yes. We're really -- again, we're really happy with the orders and we are really -- would really like to see the activity at Airbus for us. So I think it was strong across the board, Ken, as you know. Kenneth Herbert: If I could, the guide mid-single digit growth for the full year, your comment implies low double-digit growth in the fourth quarter. What are the puts and takes on that mid-single digit? I mean, where could we maybe see upside in the fourth quarter? Where are you still sort of seeing some pressure perhaps as you think about closing out the year? Suman Mookerji: I would say there continues to be pressure with destocking on the commercial aerospace side. So we expect that to continue to be a headwind that we will work through. Medium- to longer-term outlook continues to get more and more positive and brighter, but the immediate impact here in Q4, I think we'll continue to see some pressure there. On the defense side, we continue to see strong activity. We expect that to be the bright spot in Q4 as well, both with order intake and revenues. I think we try to be as balanced as possible with our... Stephen Oswald: And also -- I mean, one of the real bright spots at BA, Ken, you know, the 787, even though they're going to do a lot more down and they have a lot of plans for that is that they've been -- when they get to 8 or 10, which I'm sure they'll get through fairly quickly, that's real money for Ducommun. So we're really -- we're very enthusiastic about that program as well. Operator: Our next question comes from the line of Mike Crawford of R. Riley Securities -- or B.Riley Securities. Michael Crawford: Yes. Thank you, B. Riley. So what's that $100 million difference in the RPO and the backlog between that $1.03 billion and the [ $1.116 ]. Stephen Oswald: You mean what is the -- where is the... Suman Mookerji: [indiscernible]. Stephen Oswald: Yes. So it came evenly between both commercial aerospace as well as defense. So we saw order intake on both fronts, driving the growth in RPO. As we said, in the commercial side, we saw growth with Airbus, but also with on Boeing platforms in order intake. On the defense side, we continue to see strong intake of orders on missile platforms that continue to support our growth there. Suman Mookerji: I think he was asking also the difference with backlog and RPO. Stephen Oswald: The difference between backlog. I'm sorry, Mike, is that what you want? Michael Crawford: Yes. Stephen Oswald: Yes. Okay. So RPO is a GAAP term, right? So that's the remaining performance obligations that is revenue yet to be recognized. Backlog is more linked to shipments. So that's kind of the primary difference. Backlog, we also constrained to a 2-year window. We include forecasts under LTA within backlog. So I would refer you to our 10-K and Q filings where we have kind of given a full and more precise definition of the backlog. But those are the key items that are within backlog, whereas RPO is unconstrained, so there isn't any time period constraint. It's the total remaining orders that are unfulfilled or for which we have not recognized revenue as yet in our financial statements. Michael Crawford: Okay. Yes. That makes sense. And then for Engineered Products, the year-to-date mix was 23%, I think that's the same as it was in the first half. So I just wanted to make sure that was the mix in the third quarter itself. And then if you had any thoughts on whether that is growing faster than the rest of the business in Q4 and/or next year? Stephen Oswald: Yes. So first -- yes, so look, we're really happy from where we came from a couple of years ago, 23% is a good number, hard to do, right? Because you do have -- we have a big contract manufacturing business, right? So you're fighting the percentages. So we're pleased that 23%. We did have -- we've had a good first 9 months. I see that going forward. Now I'd also mention that the upticks last year have been all organic, which has been terrific, right? So what we're using for shareholder money and buying these companies in the last 4, 5, 6 years, actually had doing a fairly good job for the organic growth. So we see that continuing. Obviously, we also have our other leg of our strategy, which is our acquisitions, and that's all going to be Engineered Products in the aftermarket. And that's -- Suman is obviously leading that, along with myself and the rest of the team. So we feel good about it. We've got 9 quarters to go, Mike. So we're confident we're going to beat that number in '25. Michael Crawford: And then last one for me is, so from last time buys, industrial was up in the third quarter, but I imagine that starts to come down and it is down next year, maybe thereafter. And so what do you do with that manufacturing space? Is it -- what does it port over to? Stephen Oswald: All right. I mean that moves primarily to aerospace and defense. And that's the objective behind pruning our industrial business where we're not getting sufficient returns. And we did see, as we noted, slightly higher revenues this quarter. I think it goes back to the run rate we have been seeing in Q1 and Q2 of this year, again, here in Q4. And it kind of -- it will be flattish to slightly down potentially in the future. If we don't make the required margin, we're not going to continue that business. Suman Mookerji: And Mike, goal, all that business are -- its cards. So all that business is circuit cards or CCA. So as that goes down, that goes directly over to Raytheon cards and other cards that we're making for customers. It's primarily out of Appleton, right? This is the Appleton facility. So it's a nice mix where we're just going to -- we have still SMT machines. We have the same people. It's just that -- so it's not like it's in 3 different locations. So it's going to be easy for us. Operator: Next question comes from the line of Sam Struhsaker of Truist Securities. Samuel Struhsaker: On for Mike Ciarmoli today. Appreciate you taking the questions. It looks like margins have kind of been nice steadily improving and expanding here. I was just curious if you could give some thoughts from you guys on sort of where you're thinking about kind of the cadence of opportunities to continue to expand those margins might fall both for 2025 and throughout 2026? Stephen Oswald: Yes. It's a good question. And we do expect margins to be stable here for the rest of 2025 and then -- and as we look into 2026, again, we don't provide specific guidance on margin. But what I would say is that a big opportunity for us is to drive the savings from our facility consolidation efforts. So all the product lines that Steve mentioned earlier that we have transitioned from high-cost locations to lower-cost locations are going to ramp up and we get up the learning curve on production with these products, they're going to drive strong savings for us in 2026. So that's going to be a key driver. In addition to the things we do all day, every day, right, we want to get paid for the value we provide and drive strategic pricing. We want to find opportunities to continue to drive cost efficiencies and we want to continue our transition to more engineered products, which improves the revenue mix and drives higher margins. So those will continue. But the big the big nugget there in 2026 is the facility consolidation. Suman Mookerji: Yes. Yes. I think overall, Sam, that's sort of the recipe. We're going to continue to enjoy. We have very good demand in aftermarket in the commercial aerospace. We'll continue to enjoy that. Obviously, we're going to continue to -- where we provide value raised prices each and every year in that area as well as engineered products. So we have a lot of strength there and just more of the same. So we feel good about next year on margins. Samuel Struhsaker: That's great. And if I could just sneak in one other. I'm curious, you guys obviously called out M&A as a point of interest in the past, but just kind of curious about your thoughts on capacity there following this recent litigation expense? And maybe if there's any change in time line there? Stephen Oswald: So we do continue to have availability on our revolver, and we will post the drawdown related to the litigation settlement. We -- our net leverage, as I said earlier, is expected to be low 2s after making that payment. And we continue to generate cash. We'll continue to pay down debt and lower that leverage, and that opens up capacity for us going forward. So we are in discussions with our banks to increase the size of our facilities and extend the tenor of our current facility so that we have more flexibility going forward on being able to execute on acquisitions. So M&A continues to be a focus area for us, and we have and we'll continue to ensure we have sufficient liquidity to be able to execute on that plan. Operator: Our next question comes from the line of Tony Bancroft of GAMCO Investors. George Bancroft: Great job as always. Just you talked about Golden Dome. I know it's pretty far out -- it's [ Boeing ] pretty far out there, but your -- a lot of your customers -- a high percentage of your customers are going to be big, probably participants in this program. And have you heard anything initially, maybe what they're telling you so you can begin planning phase or where -- what parts of your business do you think you're going to be most exposed to it? Stephen Oswald: Yes. Well, look, we're -- it's certainly something we're excited about because we are very to your point, very well positioned. Obviously, the missile franchise that we have, depending on what they use, what they deploy. I mean we're pretty much on every missile or pretty close to every missile persist on the RTX side. So we feel great about that. The other positive thing for investors, and I talked about this, it just -- it's happened for reasons like offloading from RTX for the SPY-6 and other things. And really -- we're really starting to build a radar franchise that is gaining more and more traction. That's going to be the other thing, right? I mean, we not only make radar for ground-based installations, I mean something that's exciting that we're thankful that it's going to go forward as the E7 Wedgetail, which we do a lot with for Northrop, it's folks that don't know it's a Boeing plane outfitted for sort of the brain of warfare and so that's on its way as well. So not that it's not goal, but it's all about us being well positioned in missiles and radar. Have we heard a ton about it yet from our customers, no. But we are on everything that we believe is going to be utilized pretty much. So we'll have more on that in the future, Tony. Operator: [Operator Instructions] Our next question comes from the line of Noah Poponak of Goldman Sachs. Noah Poponak: I know I guess if I look at the total company organic revenue growth through the year, low single digit in the first half, you're going to exit the year at low double digit and the defense business has had good growth for the year. Aerospace is down with the destocking. I guess as we go into 2026, can '26 look like the exit rate you're going to have here in the fourth quarter because the defense drivers -- I mean, that will be a tougher compare, but the defense drivers sound pretty durable. And then on the aerospace side, you're going to at some point, you're going to link up with Boeing, which will be pretty good growth off pretty easy compares. Can '26 grow double digits, total top line? Suman Mookerji: So we will provide guidance on 2026 early in the year -- we don't typically provide the guidance now. But I would say that commercial aerospace destocking, we expect will continue to have an impact in 2026. I don't think we see ourselves catching up to Boeing production rates in -- at least the first half of 2026, given the amount of inventory held by them and also inventory at our end, right? So it's kind of destocking both at the customer and at our end that we need to work through. So I do agree with you that. I think we are at a trough, but how quickly we move off the trough, we'll have to see based on how quickly destocking gets done here over the next couple of quarters. On the defense side, we do continue to see good order intake and growth in our RPO. So the outlook continues to be positive for defense growth. Stephen Oswald: No, we'll -- just our cadence, we'll -- I think our call is probably the end of February, right? So we will have a full view of our numbers. But I think you bring up a great point about, yes, there are lower comparison, which are going to be good for us, right? And eventually, we are going to sync up. The thing that I'm always a little bit worried about is that Spirit is always little bit a wildcard, still not closed with the purchase, and the fuselages and I don't know how many are back -- backyard these days, and that's more than half of our MAX business, right? So -- but we're very positive, but maybe in the first 6 months, it will be still a little rocky for commercial aero on the BA side. Noah Poponak: Okay. Okay. I guess, how is 4Q growing low double digits if you're seeing that rockiness or the inventory destock for the next 6 to 9 months? Suman Mookerji: Continued strength in our defense business. No, that's a key driver. Stephen Oswald: And a little compare to what, 197? 197 in Q4 last year, we were up 201 in Q3. So a little bit less on the compare there. Noah Poponak: Right. The compares can move around on you, okay. Can you just approximately how much of your revenue at this point on an annual basis is the MAX? Suman Mookerji: So it's -- if you look at large commercial aerospace, it's about -- if you look at Boeing and Airbus, it's about 50% of our total commercial aerospace business and Boeing is more than half of our large commercial. So it's a meaningful portion of our commercial aerospace business, maybe it's still less than 20% of our Commercial Aerospace business today but expected to ramp up. Stephen Oswald: Yes, And it's just -- yes, we're looking at the numbers here. We have a little cheat sheets here. I mean I'll add last year versus this year, year-to-date for the MAX, it's down double digit. So it's a good part of our business, but it has hurt us. Noah Poponak: And then Suman, on the cash flow statement, you've had improvement in the working capital turns year-to-date after that's built up on you over the last few years. Putting the payment aside, do you expect 4Q to be up year-over-year? Or maybe where do you expect the conversion from your adjusted EBITDA to come in for the year on free cash? Suman Mookerji: So we think about free cash flow to adjusted net income, and we are at 73% year-to-date, which is a significant improvement from where we were last year where that same conversion was around 40% and 33% back in 2023. So a significant improvement in free cash flow to adjusted net income conversion for the company. We don't provide specific guidance on cash flow generation, but we expect Q4 to be a continued strong quarter for cash flow generation kind of in line with what we have seen in the past couple of quarters. Stephen Oswald: Yes. And our goal is 100%, which we're working. Suman Mookerji: Our goal is 100%. Noah Poponak: Okay. And what is the cash payment you will make? How much is the cash payment you'll make regarding the litigation in the fourth quarter? Suman Mookerji: So the cash payment that we will make is a net payment to us net of insurance recoveries is just over $95 million. Noah Poponak: Sorry, sorry, in our out? Suman Mookerji: It's payment outflow of $95 million. Operator: Thank you. It appears there are no further questions at this time. I would like to turn the call back over to Steve Oswald for closing remarks. Stephen Oswald: Okay. Thank you very much. Thanks to everyone for joining us again for the call. Just to wrap things up here, we feel as we head into the end of the year, we feel great about our margins, what we're doing with defense. I mean we disappointed with the destocking and the continued sort of rocky road a little bit with commercial aerospace? The answer is yes. But we know that's our best futures ahead of us. And we're well positioned in capital, well positioned with the customer and look forward to a strong close to 2025 and excellent 2026. So again, all the best. Thank you for joining us, and have a great rest of the day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Trond Johannessen: Good morning, and welcome to this presentation of Pexip's third quarter results. My name is Trond Johannessen, and I'm the CEO. Together with me here at Lysaker, I have our CFO, Oystein Hem; and our Chief Revenue Officer, Åsmund Fodstad. Together, we will take you through the highlights of the past quarter and our focus going forward. The standard disclaimers apply as usual. First, a brief overview of Pexip for potential new viewers. Pexip was founded in 2012, and currently, we operate in 25 countries across the globe. We are a specialist video conferencing and infrastructure company focusing on interoperability and secure and custom meetings. We do software only, Delivered as a Software or Delivered as a Service. Pexip has unique and established partnerships with the leading companies in our industry. You see some of them on this slide. We complement and enhance their solutions and do not generally directly compete with them. Our customers are mainly large organizations in both the private and public sector that have complex needs when it comes to video collaboration. The financial performance is strong and has been improving over the last quarters. Now to the highlights of the past quarter. Our annual recurring revenues grew with $3.2 million during the quarter, and this leaves us with an ARR base of $122.2 million out of Q3. In the quarter, we had particularly strong performance in our Secure and Custom business area, and the development here is supported by increased public awareness around the need for secure and sovereign IT and communication solutions. In Connected Spaces, our Connect for Zoom product continues to perform well. We also see that our solutions for self-hosted interoperability in high-security private clouds in the U.S. is developing positively. In Q3, we also launched a brand-new product in cooperation with Google that enables Google Meet hardware to connect to Teams meetings with excellent quality. This was not possible before. EBITDA came in at NOK 52 million in the quarter and fresh -- and free cash flow came in at NOK 29 million in the quarter. If we look at our Q3 performance in the context of the last 12 months, we see that the positive trend we have seen over the past quarters continues. Our total ARR continues to grow and is at an all-time high. Year-over-year the growth rate is 12%. Our 12-month rolling EBITDA reached NOK 310 million, which is a 74% improvement since Q3 last year, and this corresponds to a 25% EBITDA margin. The free cash flow in the last 12 months was NOK 303 million. This is 45% higher than at the same time last year. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position. Pexip has 2 main solution areas. Pexip Secure and Custom is about privately hosted video meetings that give complete privacy and data control with the desired level of customization. Pexip Connected Spaces is about video meeting interoperability by enabling any meeting room to connect to any meeting platform. First a few words about Secure and Custom. This area grew 30% year-over-year in Q3 and now constitutes 44% of our total ARR base. Here, Pexip provides a video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom in those situations when you need to close the door and have a secure meeting. Our solution includes security features such as tailored user authentication, clear meeting classification labeling and complete control over what data is stored and where. Integrated chat is also an option. The secure meeting can easily be booked through the Outlook calendar or started through a chat session exactly the same way as with Teams meetings. I believe that most large organizations will have more than one video meeting solution in the future, and Pexip is very well positioned as the secure meeting's alternative. AI functionality is clearly in demand also for organizations that use secure meetings. Pexip works with NVIDIA to bring relevant AI features to our customers as added features in Secure meetings. Previously, we have launched live captions. And now in Q3, we introduced translated live captions covering 36 languages. Next up is exporting transcripts to enable video meeting summaries and the like. This will come in our version 3 of the Pexip AI Media Server. A typical use case for AI-based translated live captions would be court hearings where all participants do not speak the same language. On this slide, you see an example of a satisfied customer that used translated captions in a recent court hearing in the U.K. Cleaven Faulkner, Director of the U.K. Military Court Service says, "Today, the U.K. Military Court Service used Pexip's Secure Meetings platform to enable remote participation in the hearing at the Bulford Military Court Center by native German-speaking attendees. Through Pexip, powered by NVIDIA, all spoken content was translated in real time into German, allowing the participants to follow every part of the proceedings. I think it's a pretty good testament to the perceived value and, of course, the observed quality of this Pexip functionality." In our other business area, Connected Spaces, Pexip has the vision of connecting any meeting room to any meeting platform, a vision that now pretty much has become a reality. With Pexip's unique technology, interoperability focus and industry partnerships, we have a market-leading position in this field. The new solutions for Google hardware, Zoom Rooms and Teams Rooms are unique to Pexip and are evidence of the leading position that we have. In Q3, we launched a brand-new Connected Spaces product named Pexip Connect for Google Meet hardware. With this new product that we have codeveloped with Google, all meeting rooms that have Google Meet hardware can now connect to Teams meetings with excellent quality. This was not possible before. The market interest is strong, and we closed $250,000 in new ARR on this product during the month of October alone. This is really no big surprise to us as Google has stated that this is the most requested feature for Google Meet hardware by their customers. Let me show you a short demonstration of how the solution works and looks. [Presentation] Unknown Attendee: Your Google Meet hardware can now dial into a Teams meeting. I've already dialed in 3 Teams users from their Teams application on the laptop. Let's connect the Google Meet hardware as well. Notice how we get a Teams like experience when using Pexip Connect. At any given time, we get the Teams like features seen here as exemplified with profile picture, speaking indicator on the ones speaking without sending video; someone in Teams has clicked raise hand; and at the same time, we maintain most of the screen real estate for those that are sending video. If someone wants to click share from their Teams application, down here, we have Powerpoint live list. Let's go for the top one. Content is being prepared and shared in Teams, which in turn is being projected on the Google Meet hardware as well. Trond Johannessen: I hope you like it. In my humble opinion, it looks pretty good. Moving over to a slightly different use case within Connected Spaces where Pexip is truly unique. In the U.S. government space, various private or government clouds are in use for different classification levels up to top secret. Interoperability solutions are required to enable the use of Microsoft Teams from meeting rooms and organizations using these various government clouds. Pexip works closely with Microsoft to deliver these critical solutions. It is worth noting that Pexip is the only technology partner enabling video devices to join Teams meetings in U.S. government clouds. This past quarter, we initiated 2 different projects within high-security government organizations that now will get access to Pexip's Connect products for the first time. We expect these projects to expand significantly in 2026. So stay tuned. Now I hand it over to Åsmund for a sales update. Åsmund Fodstad: Excellent. Thank you, Trond, and good morning, everyone. I'm proud to say that Pexip's success in Secure and Custom continues with another very strong quarter, ending at USD 2.8 million in ARR growth to USD 53.4 million. It represents a 30% growth year-over-year. Pexip solutions for defense and justice are yet again significant to our growth in this space. In addition, we do see an increased demand for secure collaboration and sovereign IT, especially in Europe, adding several large customers wins and expanding opportunities for regulated privacy-focused solutions in Q3. Let me share with you a recent win with exactly this in mind. The Spanish State Agency for Digital Administration serves as a service provider for the Spanish public sector. To enable secure and seamless communication across millions of users, [ SGAD ] turned to Pexip, the only provider certified by the National Cryptologic Center, CCN. Pexip powers 2 distinct national platforms: Number one, citizen to government communication, a scalable platform that makes it simple and safe for Spanish citizens to connect with public services, of course, without friction or any compromise. Second, intergovernment communication, a highly secure collaborative environment with advanced authentication and data protection. And Pexip was the only provider capable of meeting Spain's strengthened security, scalability and user experience requirements, delivering a modern service to both citizens and public services. Let me move to Connected Spaces. This is the second consecutive quarter with growth for Connected Spaces, ending the quarter at USD 68.8 million despite the one-off reduction of USD 1 million from the change of our partner business model announced back in Q2. Pexip continues to see strong momentum with all our strategic partnerships like Microsoft, Zoom and Google. And as Trond said, we have already seen very good traction with the new Pexip Connect for Google product now in Q4. Pexip maintains a solid pipeline for our Connect portfolio, and we expect continued strong traction into 2026. Let me also share a major win from Q3. As the leader in universal interoperability, Pexip was selected by one of the world's largest banks to extend seamless video collaboration across this highly regulated environment. The bank wanted employees to move seamlessly between Zoom and Teams, this time from virtual desktops or so-called thin clients. Thousands of virtual desktops are enabled with Pexip Connect for Zoom, allowing flexible video communication between the platforms and at the same time, maintaining strict compliance and data protection standards, which is, of course, very important in the financial market. This marks Pexip's first interop for PC clients, demonstrating the company's ability to innovate in new areas for interoperability. And with that, I'm going to hand it over to Oystein for the financial details. Øystein Hem: Thank you, Åsmund. For annual recurring revenue, as stated, we grew 12% overall, driven by strong growth in Secure and Custom of 30%. Connected Spaces is flat year-on-year. However, it's seen modest growth for the past 2 quarters. And the growth came from customers in government, health care and defense in terms of geographies with good contributions from both Americas and Europe. In terms of net retention and new sales, Connected Spaces saw an increase of $400,000, and it's the second consecutive quarter with a slight growth. This is despite the large downsell we mentioned in the Q2 presentation, which impacts the net retention for this quarter, and it shows a positive underlying momentum within Connected Spaces. Most of the growth, as Åsmund mentioned, continues to come from Secure and Custom, which had new sales of NOK 1.6 million and existing customers growing with 1.2 million. In terms of the P&L, revenues grew 16% year-on-year in Q3, helped by strong software sales and the ARR growth of 12%. EBITDA came in at 20% for the quarter, up 12 percentage points year-on-year. On a 12-month rolling basis, revenues grew with 15% and EBITDA is now at 25% if you look on a full year basis. For the quarter, Pexip increased its EBITDA with NOK 34 million compared to the revenue growth of NOK 37 million. So we're continuing to leverage the scale benefits of our software business, enabling us to grow without adding significant costs. In terms of costs, they were flat overall compared to Q3 of last year. Cash-based salary expenses are up NOK 1.5 million. Share-based compensation is down NOK 5 million and other OpEx is up NOK 4 million compared to Q3 of last year. Other OpEx was lower in Q3 of last year, while this year, it came in very much in line with the past couple of quarters. So overall, a fairly consistent development and in line with previous quarters. Looking at cash flow, Q3 had NOK 44 million in operating cash flow, which is up NOK 23 million year-on-year. Investments and leases are stable year-on-year. And in total, we delivered NOK 29 million in free cash flow. We also completed our buyback program in Q3, leading our cash and money market fund position in total to close slightly below Q2 and is now at NOK 526 million. To summarize, revenues are up NOK 37 million, gross profit is up NOK 35 million and adjusted EBITDA is up NOK 34 million and is now at 20% margin. Depreciation is slightly down year-on-year, while net financials is down due to currency fluctuations this quarter going against us. And this resulted in a profit before tax of NOK 33 million for the quarter. And with that, I hand it back to Trond. Trond Johannessen: Thank you. Now a few words about our outlook. As described earlier, we maintain a positive market outlook based on the key trends we see in our markets and the unique technology, strong market position and solid industry partnerships that we have. Our expectation going forward is that we will end Q4 with an ARR in the range of $124 million to $127 million compared to the $122 million we had leaving Q3. This expectation is a reflection of our belief that the positive trend we have seen over the past quarters is expected to continue. Our near-term targets of consistently delivering above 10% ARR growth and above 20% EBITDA margin have been reached over the last quarters. Longer term, we have an ambition to deliver above Rule of 40 performance across ARR growth and EBITDA margin. Last 12 months, we are at 37% on this parameter. Finally, before we go to Q&A, our Q4 presentation will be given on February 12 next year. Now Q&A, and I welcome my friends back in the studio. Øystein Hem: Thank you, Trond. We'll start with a question from the analysts that are with us live. Jørgen Weidemann from Pareto. Do you have any questions for us? Jørgen Weidemann: So first of all, could I ask the U.S. shutdown? Have you seen any effects on that? Or do you expect any effects of that going forward? Åsmund Fodstad: We still have strong momentum in both federal and public sector in the U.S. However, it's hard to really predict what's going on, on the U.S. side. So far, we haven't seen any impact on the opportunities we are working on, but it's hard to predict what's going on, on the U.S. side on a daily basis. Trond Johannessen: Yes. I think the uncertainty is higher than it has been. Some of the projects we are working on are kind of classified as sort of a kind of importance level that enables sort of those organizations to keep on working and those employees to operate as normal. But of course, there might be situations where we see delays, which I think will be the actual effect, not actually business going away, but orders being delayed if there is any effect at all. We have to just wait and see on this, I guess. Jørgen Weidemann: Okay. That's fair. And then considering 2026 is getting closer, could you remind us what you did on pricing this year? And if you see any possibilities of increasing prices into 2026? Øystein Hem: So I think on average, there are some product variations. But on average, we increased our prices with 5% in 2025 and also in 2024. And I think that's a fairly fair estimate for 2026 as well, that decision is still... Jørgen Weidemann: Okay. That's fair. And a final question from me. It seems like the interest in Secure and Custom is still quite high. But could you give us a little color on what you see on sales compared to leads generation as of right now? Trond Johannessen: We normally don't comment on order intake. Of course, we measure our pipeline. And I think what we have said around securing customer mix is that the growth momentum we have seen, we had 27% over the -- last time we reported our year-over-year growth of 27%. This time, it was 30%. It's definitely a level that we think is achievable going forward, whether it's going to be a bit higher, I mean, let's work to make that happen. But there's at least no kind of indication that the growth here will slow down. Øystein Hem: Then we'll move on to Christoffer Bjørnsen from DNB Carnegie. Welcome, Christoffer. Christoffer Bjørnsen: Can you hear me? Øystein Hem: Yes, we can. Christoffer Bjørnsen: Yes. I know this is a video-focused company, but I'm traveling, so I can't really do video today, unfortunately. But I just want to -- first of all, on the revenues, it was pretty strong. We're thinking maybe there's going to be some currency headwinds and so on. So just can you maybe unpack a bit what drove that strong revenue development? Was there any -- I think you mentioned in the report that there were some renewables and some license deals and so on. So maybe unpack a bit the strength of the revenues. Øystein Hem: Yes, happy to. So I think we benefited in terms of revenue recognition this quarter by most of the ARR growth coming on software as opposed to Software-as-a-Service, which accelerates revenue recognition somewhat. So that's the main sort of driver for it. Then we are, as you say, starting to face sort of a bit more difficult comparisons given that we invoice mostly in U.S. dollars and the currency rate is a bit stronger compared to the Norwegian kroner now than it was a year ago. But so far, we've been able to sort of offset that effect by our ARR growth. Christoffer Bjørnsen: All right. That's helpful. And then on the -- you mentioned you've won this bank, which was, I think you said is your the first use case for Connected Spaces or interop on desktop, right? Øystein Hem: Correct. Trond Johannessen: Correct. Christoffer Bjørnsen: So -- that's super exciting. Can you maybe help us understand a bit better? Is this typically something that the customer would do when they have like a new office setting up from greenfield? Or is this also kind of relevant for retrofitting of existing office facilities? And just how much does this expand your TAM essentially because this goes from -- I think I don't know how many more webcams there are in offices than there are meeting rooms, but this sounds pretty exciting. Øystein Hem: No, absolutely. I think there's a -- most common use case for sort of PC to PC video calls is to download another application. So that's -- if you're using Zoom in your normal work life, if you're invited to a Teams call, you will download the Teams application to do that specific call. And that's what we mostly see and what I think will be the most common sort of workflow going forward. For this bank, in particular, their virtual desktop environment made it a lot easier to just have one application than 2. And also the fact that by using one application, they can make sure that they're fully compliant with all types of compliance recordings across all calls, not just the ones that are on their platform. So we're super excited about the opportunity and sort of having the first sort of project live out there. But it remains to see sort of to what extent will this be a common adoption, I think outside of regulated industries, having 2 apps will still be the most common workflow, but excited to see how -- if we can get more traction on this also outside of this one back. Åsmund Fodstad: If I can expand a bit on this. So this is already an existing customer on the room side, now expanding to the desktop and then clients. And again, of course, the main point here is the regulation being able to review all the recordings and what they have with the compliance around that. And that I do think is one thing is bank and finance, but we could see that in different industries also. But again, this is our first win, a large win with this product, and we're excited about the future for this interop solution as well. Trond Johannessen: It clearly speaks to the flexibility of the technology and the way we can work with various types of endpoints and connection points into video and be that interoperability expert even when we're talking beyond the specific room systems that's been the kind of the core business for a long time. Christoffer Bjørnsen: Yes, definitely. It's super exciting. And then just finally, on that headwind to the ARR in Connected Spaces from that shift from fixed to more variable oriented deal structure or pricing structure. Can you just give an update on like that 1 million that end up being like a pure [indiscernible] with no gain from signing new customers up on that new deal? Or just -- and then how do you expect that to develop into the kind of Q4? Øystein Hem: Yes. We have had some minor sort of, call it -- we've reclaimed a small portion of that in Q3, and then I expect to sort of reclaim rest of that throughout the contract period ahead of us. So I would say progressing as planned. Christoffer Bjørnsen: But just -- sorry to be difficult but so -- when is it like base case to be reclaimed? What's the contract period, remind me? Øystein Hem: So that over the next, I would say, 1 to 2 years is my best estimate. But that depends on sort of to what extent -- when those new opportunities close with that new partner or with that part. Then moving on to Markus Heiberg from SEB. Markus Heiberg: So first one, just on the timing of revenue recognition. What do you expect for Q4 relative to ARR to help our modeling going forward? Øystein Hem: So Q4 is usually a fairly strong software quarter. So I expect that this year as well. So my sort of main assumption will be that revenues will grow roughly in line with ARR. And then I would factor in that we are facing a bit more headwinds with regards to the currency, which was extraordinarily good for us in Q4 of last year, whereas this year, it will be more sort of normal. Markus Heiberg: And then on Connected Spaces, can you elaborate on the new revenues that you have? How much of that is from sort of new service attached rooms? And how do you expect that to develop over the coming quarters? Do you expect that pace to increase now with Google? And secondly, of course, Microsoft Teams for Android rooms that are coming? Maybe you can give some more flavor there. Øystein Hem: Absolutely. So native rooms have increased around USD 1 million quarter-on-quarter, this quarter as well, which has been a fairly consistent pace over the past 4 quarters. Then I think it's fair to expect some acceleration of that now with the Connect for Google Meet. And then we're hopeful that with the introduction of Android that we will also get a bigger contribution from Teams. I do think that native rooms, if you look a year or 2 ahead will be a significant part of the Connected Spaces revenues overall. Markus Heiberg: And the final one for me is on the employee side, it's flat quarter-over-quarter. And how should we think about that now over the coming quarters? Trond Johannessen: We do see the scaling effects that was mentioned during the presentation that sort of even with a relatively stable cost base, we're able to grow the business. We are planning for a slight increase in number of employees. We've talked about maybe around 300 being kind of a reasonable figure. So -- but don't expect any kind of major shifts or kind of dramatic increases, but kind of a stable increase to basically mainly, I guess, on the -- to build capacity on the engineering side as we have new products and new solutions in the market and to have sort of enough salespeople in the parts of -- or in the geographies where we have significant traction, for example, in the U.S. Øystein Hem: Then moving on to Halvor Dybdahl from Arctic. Can you hear us, Halvor? Halvor Dybdahl: Yes. Can you hear me? Øystein Hem: Yes, we can. Halvor Dybdahl: Perfect. So just a question regarding the ARR guidance for Q4. The delta ARR seems to be quite in line with Q3, which often is more -- is the seasonally slower quarter, so how should we think going into Q4? And do you have any large contracts announced in Q3 that we sort of have to extrapolate or just some color on that. Trond Johannessen: I think the Q3 was a reasonably good normal quarter, and nothing kind of major that drove within -- in the direction it ended. So kind of across the board, pretty solid. Looking at Q4, the guiding that -- and as I said in the presentation, the guiding that we're giving for Q4 is meant to sort of send a signal that we expect the positive trend that we have seen over the last quarters to continue. It's not meant to give you kind of a decimal figure to put into your spreadsheet. It's meant to indicate that we sort of see the trends that we have seen over the last quarters will continue also in the fourth quarter and hopefully beyond. Øystein Hem: But to add some color to that, I think we did 3.6% in Q4 of last year. Trond Johannessen: Yes, right. Øystein Hem: And if -- from our starting points, we sort of have a range now of 2% to 5%. So our expectation is that Q4 will be a good quarter in line with the previous Q4s. Lovely. Then we move on to Lisa Wimmer from [indiscernible] Unknown Analyst: First, I wonder what is the current progress on the Teams for Android rollout? Åsmund Fodstad: January? Again, I think we said that in the previous earnings call as well. We're dependent on the Microsoft putting this out in the market. We are on track, and we know they are saying Q1 2026. We also know that they are talking to some of their largest customers about this coming. So we're very optimistic about rolling that out in Q1, but it sits with Microsoft for now. Trond Johannessen: I think the official road map says -- say, January or it say Q1. Åsmund Fodstad: Kind of. We don't care. We have heard rumors of January. Trond Johannessen: Yes. Unknown Analyst: Okay. And what do you see in ARR potential for the Microsoft rollout of Teams for the U.S. government potential? And when do you see potential deployment from this contract? Trond Johannessen: I think that's an excellent question. The potential here could be significant. Currently, our current sort of projects are in the sort of hundred thousands kind of dollars ARR. We see sort of potential for going into the millions just with a couple of projects that we're currently working on, and there could be potential beyond that. So the uniqueness of Pexip's technology and the market position we have and the cooperation with Microsoft is really helping us in this area. But to give you a more exact answer than that is a bit difficult. We're kind of working to understand which organizations, which clouds, which deployment situations will be relevant for us here going forward. Åsmund Fodstad: And it's an excellent opportunity to also add some more color working with these large communities, especially on the federal side in the U.S. is long sales cycles. That's one thing. What's going on in the U.S. market currently is kind of hard to predict. And you typically go through proof of concepts, et cetera, et cetera, before you basically get the entire deployment. But we are in a very, very good place, but also hard to say when will it happen and the exact timing on it, which is a couple of components that we are not able to control basically. Trond Johannessen: But it's clearly one of the reasons why we are feeling good about the development in securing customer going forward. Åsmund Fodstad: Yes. Øystein Hem: Thank you. That concludes our Q&A session. Thanks for the attention. Trond Johannessen: Thank you. Åsmund Fodstad: Thank you.
Operator: Good afternoon, and welcome to USA Rare Earth's 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lionel McBee, Vice President of Investor Relations. Please go ahead. Lionel McBee: Thank you, operator. Hello, everyone, and welcome to USA Rare Earth's 2025 Third Quarter Earnings Conference Call. I'm joined today with our Chief Executive Officer, Barbara Humpton; and our Chief Financial Officer, Rob Steele. Earlier this afternoon, we issued our third quarter fiscal 2025 results. Our 10-Q, earnings release and slide presentation can be found on the Investor Relations section of our website at usare.com. Following Barbara and Rob's discussion of our quarterly results and updates on the business, we will open the lines for Q&A. During today's call, we may make projections and other forward-looking statements under the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. These statements may discuss our business, economic and market outlook, growth expectations, new products and their performance, cost structure and business strategy. Forward-looking statements are based on information currently available to us and on management's beliefs, assumptions, estimates or projections. Forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. We refer you to the documents the company files from time to time with the SEC, specifically the company's Form 10-K and Form 10-Q. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. All statements made during this call are made only as of today, November 6, 2025, and the company expressly disclaims any intent or obligation to update any forward-looking statements made during this call to reflect subsequent events or circumstances, unless otherwise required by law. And with that, I will turn the call over to Barbara. Barbara? Barbara Humpton: Thank you, Lionel. This is my first earnings call as the CEO of USA Rare Earth, and I feel privileged to lead this company at such a pivotal moment. Our work addresses what I believe is the defining business challenge of our era. I see this endeavor as mission-critical. The western world has awaken to the stark reality of how dangerously fragile our rare earth supply chain has become over the last 30 years, how critical these materials have become to every sector of our economies and just how dependent we've become on China to supply these critical needs. At USA Rare Earth, we are aggressively working to eliminate that single point of failure, diversify the supply chain and ultimately remove the geopolitical leverage for the benefit of the U.S. and our allies. We are well capitalized, debt-free and working to lead our industry forward. Our goal is to become the partner of choice across the value chain: investing, collaborating and consolidating to rebuild the proprietary technologies that will define the future. I have served just over 1 month as CEO. And during that time, I've had the chance to visit our sites across the United States, meet the team at LCM in the U.K. and hear from numerous customers and stakeholders. You've heard us present our mine-to-magnet strategy. But today, let me take you from magnet-to-mine and share my observations. First, magnets. At our magnet manufacturing plant in Stillwater, I met David Bushi and his team of engineers who are assembling Line 1a and preparing for commissioning. David's plan is rigorous, and the team is executing well. The entire facility from the manufacturing floor to the front door is being brought back to life. The magnet sales pipeline is strong. And while many of you are curious about the customers we are engaging, I know you will also understand our need to be discreet. The work we're doing is highly sensitive, both for national security and commercial reasons. In a moment, Rob will give you additional insights. But for now, I'll move to the next link in the chain, and that's metals. The acquisition of LCM, Less Common Metals, creates a unique competitive advantage and enhances our revenue-generating ability. The transaction is a transformational one that significantly accelerates our strategy and establishes a fully integrated rare earth supply chain. With LCM's proven operations, we gained more than 30 years of unparalleled expertise in metal and alloy production, securing the feedstock for our Stillwater facility and adding a critical link, connecting our domestic mining operations to our downstream magnet production. LCM will continue to meet demand for metals, alloys and strip cast from other customers. One of their most crucial offerings is samarium, recently identified by the U.S. Geological Survey as the #1 critical mineral at highest risk of having supply chain vulnerabilities. LCM's ability to produce samarium and samarium cobalt are vital to sectors, including defense and medicine. With the help of Grant Smith and his team of experts, we're also addressing the shortage of skilled talent in metal making by launching an apprenticeship program that will train U.S. metal makers, transferring critical expertise to rebuild America's rare earth supply chain. In short, this transaction combines domestic resources, advanced technology and world-class talent. We remain on track for closing before year-end and can't wait to welcome the impressive LCM team to our organization. Let's move on to processing. Now Grant Smith is keenly focused on the upstream sources that will provide the oxides needed to produce metals and alloys. And that's why I was thrilled to meet the processing team at USA Rare Earth. Ben Kronholm manages the midstream research and development lab in Wheat Ridge, Colorado, where we continue to progress our proprietary rare earth extraction and purification technologies. This integration across functions differentiates us in the industry and enables us to deliver value to our stakeholders. And that brings us to mining and at Round Top Mountain, North America's largest deposit of heavy rare earth and other critical minerals. We recently announced Alex Moyes, our new VP of Mining, who joins us from Ramaco. We're assembling a team with strong technical skills, operational experience and a shared dedication to building a resilient U.S.-based rare earth supply chain. Their efforts are turning this vision into reality. And it is within this context, vision to reality that we have several important milestones that we are pleased to announce regarding our processing and mining initiatives. The first is related to recycling. Our Wheat Ridge lab has now progressed our swarf recycling flow sheet through bench scale testing with promising results. This allows us to begin progressing with pilot scale testing of our recycling flow sheet in the first quarter of 2026. The ability to recycle our own swarf, which is reusing our scrap material from finishing magnets is an important capability to creating a circular supply chain and making our operating costs more efficient. Second, based on our successful leaching and SX piloting, we are now thrilled to begin the pre-feasibility study phase of Round Top development project. This is particularly exciting as we are moving to the PFS stage with our most challenging SX circuits derisked at pilot scale. We're targeting completion of our PFS around the third quarter of 2026. Lastly, while piloting these SX methods, we found that in addition to our heavy rare earth separations, we've also extracted and isolated hafnium. Hafnium is used in multiple strategic industries, including advanced semiconductors, nuclear reactors and aerospace materials, further broadening the breadth of our offering. As you can tell, this first month has been busy, and I'm motivated by what I've seen so far. And it's the people who matter. And no one has been more helpful to my onboarding than my partner in finance, Rob Steele, CFO of USA Rare Earth. He has exactly the background we need at this phenomenal moment of transformation. Let me hand the baton to Rob, who will take you through more details about the business. William Steele: Thank you, Barbara. I know I speak for the entire leadership team when I say we're inspired by your vision and the momentum you've already created. It's an exciting time to be part of this mission. Let me start with our cash position, which remains strong at over $400 million as of November 3, 2025. Including the exercise of the remaining investor warrants pursuant to our notice of redemption issued last week, we will obtain an additional $123 million of cash. Our strong cash position allows us the flexibility and liquidity to execute and accelerate our magnet-to-mine strategy as we secure, reshore and grow. For magnets, we continue to see thousands of tons of growing demand for 2026 and in particular, 2027 and beyond, across a wide range of industries, including agriculture, industrial, defense and medical as well as high-growth sectors like drones and data centers, sectors which are projected to double and triple in size over the next decade and require massive quantities of precision-engineered micromagnets with advanced surfacing. The question we consistently receive from our customers is how quickly can you produce, which speaks to the appetite for magnets made in the United States. Given our strong cash position, breadth of customer demand and growing pipeline into and beyond 2026, we are accelerating our plans for growth in our manufacturing capabilities and with our personnel. These plans include enhancing our magnet finishing capabilities to meet customer specifications across multiple industries, accelerating our investment in Line 1b to ramp Line 1 to 1,200 metric tons and making additional customer-facing improvements to our Stillwater magnet plant. Altogether, we should be able to complete this additional work for approximately $100 million. In addition, we will be investing in human capital and hiring in preparation for our Q1 commissioning and enhancing our core infrastructure, including systems and cybersecurity to ensure operational readiness. In September, we announced the acquisition of LCM, which creates value across our entire supply chain. LCM significantly accelerates our strategy and delivers unique ex-China metal making capabilities for the U.S., our allies and importantly, becomes our supply of strip cast for our Stillwater manufacturing facility. Their current capacity includes 1,500 metric tons of NdFeB strip cast and is expected to expand to 2,000 metric tons going into 2026. We will invest in and expand LCM's capabilities, and we will further benefit from an experience curve effect as we grow with LCM. We are planning on expanding LCM's capabilities in the U.S., U.K. and Europe to support the broader ex-China industry, including for a wide range of defense and industrial applications. These plans include establishing a strategic light and heavy rare earth metal and alloy manufacturing facility in France, building upon LCM's strong relationships with governments and supply chain customers. We look forward to sharing more as these plans crystallize over the next several quarters. As Barbara mentioned, the acquisition of LCM is expected to close by the end of the calendar year, subject to customary closing conditions, including regulatory approval in the United Kingdom. Regarding formal guidance for 2026, we look forward to sharing that with you during our fourth quarter results in early 2026. In the meantime, we are intensely focused on ramping our magnet production capacity and ensuring we have the flexibility to scale with customer demand. We are also in the process of securing the metal inventory needed to support projected growth in 2026 and beyond. And our feedstock sourcing strategy incorporates both mined and recycled non-China-based feedstock via our LCM acquisition, enabling us to lay the groundwork for sustained supply into 2027. Operationally at Stillwater, we will begin running metal to test our first manufacturing line in the next few weeks. This will be a key milestone that will allow us to validate our supply chain and qualify the raw materials on commercial scale equipment and paves the way for commissioning in Q1 2026, which remains on track. As for Round Top and Wheat Ridge, given our success with our bench and pilot testing, we will begin investing in our PFS in Q4 2025 and investing in our pilot for swarf recycling in Q1 2026. And as we are accelerating our investment in our capabilities for Line 1 and Round Top, we now anticipate adjusted ongoing operating expenses in Q4 2025 to be $13 million to $15 million. For the third quarter of 2025, we reported operating expenses of $15.9 million. Our ongoing adjusted operating expenses for the quarter were $8.9 million, adjusted for M&A-related expenses, stock-based compensation and severance costs. We reported a net loss attributable to common stockholders of $156.7 million or a loss per share of $1.64. This includes a noncash fair value adjustment of $142.4 million related to our warrant and earn-out liabilities. Excluding this, our adjusted net loss was $14.3 million or an adjusted net loss per share of $0.25, which we believe is a more accurate reflection of our core operating performance. Going forward, we will provide this adjustment to facilitate your analysis of our results. We ended the quarter with $257.7 million in cash and no significant debt, positioning us well to execute on our near-term milestones, the LCM acquisition and accelerate our manufacturing capabilities. In summary, we remain financially strong and are deploying capital with focus and discipline to support scalable long-term growth at attractive returns while meeting the needs of our growing customer base. We now have the financial flexibility to consider lower cost funding options for future phases, and we expect our cost of capital to improve as we continue to execute. Now I will turn it back over to Barbara for closing comments. Barbara Humpton: Thank you, Rob. So here's what you can expect from us. While the industry is in the middle of the geopolitical spotlight, we are focused on controlling what we can to capitalize on the market opportunity. We're advancing each of our key initiatives with precision. Our job is disciplined execution of our plan. We appreciate your outreach. Since we announced our acquisition of LCM, we've heard from many of you. You recognize the unique opportunity we have to transform the supply chain as well as the approach we're taking: open, collaborative and trustworthy. We aspire to be the partner of choice in this sector. The increased focus on critical rare earth only reinforces what we are building, a fully integrated U.S.-based rare earth material and magnet platform that supports national priorities, delivers supply chain stability and creates long-term value for our shareholders. We're working at the intersection of global necessity and technological innovation at a level not seen in decades. The simple truth is that industries worldwide cannot meet their ambitious goals without a stable supply of rare earth materials, and USA Rare Earth is helping to make that happen. But this isn't something we can do alone. As I've said publicly, networks beat hierarchies. We're collaborating across industries and governments to create an ecosystem that guarantees a reliable, sustainable supply for America and our allies. We are proud to be part of this mission and energized by the scale of what lies ahead. Operator, let's open the line for Q&A. Operator: [Operator Instructions] The first question comes from Neal Dingmann with William Blair. Neal Dingmann: My first question is just on the magnet facility. Specifically, you all mentioned in the prepared remarks about being on track for the commissioning of the commercial scale production in first quarter of next year. Just wondering, could you discuss, Barbara or for you Rob, what steps still are left to achieve this? And what will be needed beyond that to bring the entire Line 1 online? William Steele: Sure. It's Rob. I'll take this. Barbara Humpton: Go ahead, Rob. William Steele: So in terms of the line itself, it really comes down to execution at this point. And the 2 big elements of execution are making sure that we have the equipment installed and up and running, which is going to be completed in Q1 as part of our commissioning. And the second piece is human capital and making sure we have the trained engineers and manufacturing personnel to be able to operate the line. So those are the 2 big pieces that we're focusing on at this point in time. And we are on track, as we said, to complete -- to essentially complete installing what we need for premanufacturing by the beginning of -- end of Q1, beginning of Q2. Neal Dingmann: Sounds great. And then my second question, just on LCM. While I know the deal hasn't closed yet, just be able to discuss what gives you all the confidence that going forward that LCM will be able to timely source its needed oxides? William Steele: Yes, sure. So as part of our diligence process, what was really important to us is exactly that, that they had the ability to source the range of rare earth oxides and other critical minerals that we need to support not only our efforts, but the needs of their customers as well. And so if you look at what they're going to be doing and have been doing, they are going to be supplying us and they're going to be supplying third-party magnet manufacturers and also supplying samarium and samarium cobalt to the U.S. government as well. And all of those sources are coming from Europe currently, and we expect that to be sufficient to meet our demand certainly over the next year to 18 months. Operator: The next question comes from George Gianarikas with Canaccord. George Gianarikas: Welcome, Barbara. Maybe to start, I just -- I know you need to use discretion with regard to the customer conversations that you're having, but can you maybe give a little form and shape as to what end markets they may be involved in and how broad in scope some of those conversations are? Barbara Humpton: Yes. Let me jump in on this. Rob, sorry, let me just jump in on this quickly with some information about those customer segments. The -- probably the primary thing for us to be thinking about right now is that we prioritize the defense sector. And so conversations with leading aerospace entities and particularly those innovative front runners who need to assure reliable supply. Now we all know that the aerospace sector is a small segment of the addressable market, but we prioritize that because of its criticality. In addition to that then, we are really pleased at the response from both automotive and then the agricultural sector. Moving forward then, some of the more interesting things are the expanding energy sector. And as you heard in Rob's remarks, the details related to semiconductors as well as data center. Rob, sorry, I jumped in on you. William Steele: No, that's great. That's perfect. And I think, George, as you look at the demand curve and overall demand, we don't have enough capacity to supply demand for 2026. And certainly, as you look at the demand curve expand in '27, in fact, our demand curve goes out to 2033. What we have to be doing is investing in capacity and capability to meet that demand for a wide range of magnet types. And so that's exactly what we're doing. George Gianarikas: And maybe as a follow-up to that, to the extent you're trying to build this capacity, you had mentioned previously that it's obviously a capital equipment constraint and a human capital constraint, which of the 2 is more tight and more difficult to procure? William Steele: I mean, I think they're both critical, and they're both elements that we have to work on. Now the capital equipment is a little bit easier to plan, and we do have to plan in advance for that because some of the equipment can take as long as a year to arrive. And as a consequence of that, we're already looking at Line 2. So we're making plans there to potentially move forward on that to make sure we have the equipment we need to expand beyond 1,200 metric tons and into 2,400 metric tons in 2026-'27 time frame. So that's one piece, but that is somewhat predictable. The human capital front really is all about -- again, it's an execution story and making sure you're planning in advance to make sure you have the people you need to be sufficient to run the equipment at full scale. And we're already doing that at our facility right now and making further plans to expand well in advance of our capacity that we have coming online. Operator: The next question comes from Derek Soderberg with Cantor. Derek Soderberg: My congrats as well to Barbara. So Barbara, starting with you, you mentioned that the LCM acquisition is on track to close before year-end. But I imagine because the acquisition is pretty strategic to the U.K. and U.S. militaries that there might be some added hoops to jump through. To the extent you can, I'm wondering if there's a close collaboration between the U.S. and U.K. governments on the acquisition? And can you provide some insight into your confidence level that the acquisition will actually close? And then I've got a follow-up. Barbara Humpton: Yes. Thanks, Derek. Good question. Yes, we actually have high confidence in this. Right now, the U.K. government, of course, will go through a national security interest determination, right, of their own. We don't see any signals of issues there. And in fact, you can witness the close collaboration of our governments in their ongoing work, particularly in this critical minerals sector. We believe that expansion in the U.K. is the appropriate first step as we look to really scale this capability outside of China. So the LCM has already begun. So just order ahead of demand as we are doing for the Stillwater facility in Oklahoma, they're getting ready for the increased demand on their operations. And in fact, Grant Smith has been circling the globe, working with all of his stakeholders to ensure everyone understands, in particular, the value proposition of scaling this business and enabling LCM to continue to address the needs of the full competitive field. This is an area where LCM will have a broad set of customers that even extend beyond those to be addressed by our magnet-making capability. Derek Soderberg: Got it. That's helpful. And then, Rob, I think in the past, correct me if I'm wrong, the plan is to sort of do sort of a cost-plus model for magnet agreements. In that scenario, would all of the plant overhead and direct labor be sort of rolled into the target gross margin you're talking about? And then... William Steele: That's correct. That's correct. Derek Soderberg: Got it. And then can you help us sort of quantify the variable and fixed costs maybe for the first 1,200 tons or the first line fully up and running or maybe it's easier to do for the full plant just as we're nearing production here? Wondering if you can help us understand some of the variable and fixed cost estimates. William Steele: Yes. Let me -- I don't have that in front of me right now. Let us follow up on that. I'd be happy to do that. Operator: The next question comes from Subhasish Chandra with Benchmark Company. Subhasish Chandra: The question -- so you talked about the comfort with oxides. Just curious if that extends to the heavies and sort of with the LTM relationship and your expansion, I think, of your customer base, where does the heavy investment? Where is your comfort level there? William Steele: Yes. So I mean -- so in terms of heavies and global sourcing right now, as I mentioned, I mean, we feel based on current global capacity for heavies, we feel very good that the current capacity will -- can supply us over the next year to 18 months. What is happening in parallel is there is a number of places where heavy capacity is expanding from upstream feedstock and growing. And the processing capability is being expanded in a number of places in parallel. That capacity does have to be put in place from processing heavy rare earth concentrates into oxide. But we feel confident based upon the number of different potential sources that are ex China that we will have the source of heavies in place to be able to supply us going forward. And it's more than a handful of projects that are going on to be able to provide those heavies. And so what you're looking at is global ex-China expansion in parallel given current capabilities and current investments that are going on. Subhasish Chandra: Okay. Got it. And then on the PFS, so the PEA, was it last time -- a, does the sort of the PEA still apply? Does that need to be updated at all? Or should we sort of assume that as a given a constant before you launch a PFS? William Steele: Yes. I mean the PEA is not our PEA. That's TMRC's PEA. I think we've always looked at it as something that provides a general guideline as to what types of minerals are there. But our flow sheet is not based upon their flow sheet. It is a different flow sheet. And so the economics that we're looking at are different than those on the PEA. So I would say it's helpful, but doesn't really apply to our approach to driving economics from the heavies and critical minerals out of Round Top. Subhasish Chandra: Okay. Got it. So we should wait for your PFS for... William Steele: You bet, yes. You bet. I mean the economics that we're looking at are very good. But it is a different -- it assumes a different flow sheet and slightly different mix of rare earths and minerals, particularly ours is focused on heavies. That's really important to understand. Our flow sheet is really focused on heavies and critical metals. It is not really focused on lights. Operator: The next question comes from Suji Desilva with ROTH Capital. Sujeeva De Silva: Rob, Lionel and Barbara, best of luck in the new role. So the initial customer MOUs are hitting a phase now where you'll be getting POs, I'm wondering if the pricing is coming in as expected if the customers are comfortable with the levels you had kind of guided to earlier? William Steele: As expected, yes. Sujeeva De Silva: Great. And then your thoughts on larger customers who might support line expansion with capital infusions of their own versus using USAR capital to grow across the diversified customers. Any updated thoughts there? William Steele: Yes. I mean we're still primarily focused on using our own capital to expand the line. I mean you raised a good question. It is a debate. But given the demand and the demand curve that we have across a wide range of customers and industries, it does support going on our own in terms of our investments near term. Now having said that, of course, we cannot rule out a large customer, many of which we are talking to coming in and taking down an entire line. But for the time being, we're going with a range of different customers across a range of different magnet types and be able to produce for them over a number of years using batch processing. So yes, that is our current focus. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Lionel McBee for any closing remarks. Lionel McBee: Thank you. And thank you all again for joining us this evening and for your time. Please feel free to reach out to us with any additional questions tomorrow or over the coming days. Look forward to speaking with you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Third Quarter 2025 Analyst Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Kyle Martens, Senior Vice President, Corporate Development and Investor Relations. Please go ahead. Kyle Martens: Thank you, Betsy. Good morning, everyone, and thank you for joining us. On the call today, we have James O'Sullivan, President and CEO, IGM Financial; Damon Murchison, President and CEO of IG Wealth Management; Luke Gould, President and CEO of Mackenzie Investments; and Keith Potter, Executive Vice President and CFO of IGM Financial. Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on Slide 3 of the presentation. Slides 4 and 5 summarize non-IFRS financial measures and other financial measures used within this presentation. On Slide 7, we provide a list of documents that are available on our website related to IGM Financial's third quarter results. That will take us to Slide 9, where I'll turn it over to James. James O'Sullivan: All right. Good morning, everyone, and thank you for joining us today. We're pleased to report another record quarter across many dimensions of our businesses, including an all-time high adjusted EPS of $1.27. Most importantly, the outstanding third quarter demonstrates strength and continued momentum in our core businesses, IG Wealth and Mackenzie Investments. Last quarter, we noted an important inflection point in Mackenzie's retail adviser channel. That momentum continued in the third quarter, alongside continued strength in the institutional and partnership channels, positioning Mackenzie, I think, for sustained growth. IG Wealth's leadership in delivering best-in-class advice to mass affluent and high net worth clients continues to be a powerful growth engine, driving record assets and reinforcing our position as a premier wealth management firm in Canada. IG and Mackenzie combined achieved $2.4 billion in net inflows during the quarter and delivered year-over-year earnings growth of 24% and 15%, respectively. Complementing the strong performance in our core businesses, our strategic investments delivered continued growth and demonstrated value for IGM's shareholders. We have spoken in the past about narrowing the gap between trading price and net asset value by highlighting and demonstrating progress in our strategic investments. The Rockefeller transaction underscores its strong growth and adds new long-term investors further strengthening the ownership base. Importantly, IGM will remain Rockefeller's second largest shareholder when the deal closes later this year and the only strategic in the capital stack. After doubling client assets in just over a year, Wealthsimple's financing round marked another key milestone for the firm as they continue their focus on developing and launching innovative solutions for the benefit of their clients. IGM continues to be the largest shareholder of Wealthsimple, pro forma the financing round. Each of these investments remain strategically important to IGM. We're naturally very pleased to share these developments that showcase the significant value and strategic optionality embedded within our Wealth Management segment. Looking forward, we are in a very strong position financially and look forward to returning increasing amounts of capital to our shareholders in 2026. Now moving to Slide 10 and the current operating backdrop. Markets have continued to be strong, driving IGM client returns of over 6% during the quarter. Resilient markets have continued to support investor confidence, helping drive another quarter of positive industry flows. At the same time, we're mindful that markets can correct at any time and we keep a keen eye on differentials between the financial economy and the real economy. Periods of volatility remain probable over the near and medium terms. Slide 11 provides a snapshot of the strong double-digit earnings growth across all of our segments, which Keith will address later in the call. Finally, on Slide 12, you'll see the double-digit asset growth across each of our businesses that contributed to IGM's record assets under management and advisement. I'll now turn the call over to Damon. Damon Murchison: Thank you, James, and good morning, everyone. Turn to Slide 14 in Wealth Management's third quarter highlights, including IG Wealth, Rockefeller and Wealthsimple. Riding on the momentum IG has built, the third quarter continued to deliver record results. We ended the quarter with record AUM&A of $156 billion, up 14% versus Q3 of last year, supported by record Q3 gross inflows and sales of $3.8 billion and $3.9 billion, respectively. Total net flows for the quarter were $426 million and represented our fifth consecutive quarter of positive net flows. IG Wealth continues to be a new client acquisition machine, delivering record Q3 new client gross inflows of $1.2 billion with 71% of these inflows coming from mass affluent and high net worth clients. During the month of October, the momentum continued with our highest gross inflows on record and strong net inflows of $276 million. Also during the quarter, the Investment Executive 2025 dealer report card was published. And once again, IG was ranked as an industry leader. I'll speak more to this and to the demonstrated strength of both Rockefeller and Wealthsimple on the upcoming slides. Moving to Slide 15. This shows the continued momentum that this business has built. On the left, you can see in all 3 periods that we are at record levels for gross inflows, which is in turn driving our strong net flows. The graph on the right illustrates the ability of our advisers to work with their clients to dollar cost average into long-term IG solutions. Turning to Slide 16. You can see our operating results, which continue to provide great insight into the strength of this business. I'll note our third-party AUA growth is driven by our ability to acquire new clients as we continue to drive new mass affluent high net worth client acquisition we expect to see similar growth in this category. Everything on this slide continues to point in the right direction, illustrating our growth and our adviser's ability to work with their clients to dollar average cost in from GIC's HISA balances and in short-term investments over time. Moving to Slide 17. Our gross inflows from newly acquired clients demonstrate the client acquisition machine that IG is today, and it's across all segments. Most notably, the newly acquired mass affluent high net worth clients. Turning to Slide 18. You can see the continued momentum in our mortgage and insurance businesses, both of which has delivered strong year-over-year growth. We continue to see strong growth prospects in our insurance business, while our advisers also see opportunity to engage their clients to win new mortgage business as their clients and mortgages come up for renewal. Now turning to Slide 19. I want to briefly focus on the strategic pillars that we spoke to at our last Investors Day, investing in the business, elevating the business and driving a best-in-class advice experience. The wealth drivers is focused on our investment on partnerships to support the advice that our clients demand and our prospects seek. We're enhancing our advisers' capabilities through these partnerships, which in turn provides them a better line of sight to the client's full financial picture. At the same time, we're elevating our platforms and products by expanding our exposure to private assets, extending our growth in insurance and lending offerings as well as providing accounts to help our clients and their children save for their first home. These initiatives are driving our strategy, resulting in success in both our entrepreneurial and corporate channels. 36% of our new client gross inflows are coming from the high net worth segment while our corporate channel represents 7% of our AUM&A and 34% of our clients. Further validation of our success of our strategy is seen through the eyes of the industry's advisers. This year, IG continued a top ranking in the 2025 investment Executive Dealer Report Card, where we once again ranked first overall amongst our peers, improving our score year-over-year and placing first in 15 categories. Now turning to Slide 20. I'll update you on Rockefeller's program. Client assets were up 25% year-over-year, supported by market inorganic and organic growth. Over the last 12 months, organic growth has driven $6.7 billion in client assets, while Rockefeller continued to add to their private advisory network with 60 new advisers being added over the last 12 months. Now moving to Slide 21. This slide illustrates Wealthsimple's momentous upward trajectory. At our 2023 Investor Day, Wealthsimple set a target of $100 billion in AUA by the end of 2028. During the third quarter, they achieved this, ending the quarter with $100.8 billion, up a remarkable 94% over last year and setting a new all-time record high with $16.3 billion in AUA growth during the third quarter. Wealthsimple has increased their clients served by 15% year-over-year, ending the quarter with over 3 million clients. With that, I'll now turn the call over to Luke Gould. Luke Gould: Great. Thanks, Damon. Good morning, everyone. Turn to Page 23, you'll see highlights for Mackenzie and for Asset Management for the quarter. This was a quarter of very strong momentum across a number of dimensions. It was a good quarter for clients with investment returns of 6%, and we ended the quarter with record-high assets of just under $240 billion, up 6.6% in the quarter as a result of both investment returns and net sales of $2 billion in the quarter. This net sales result was up meaningfully from last year with momentum across channels. Investment fund net sales, you can see on the top right, of $407 million improved by $700 million from last year driven largely from improvements in retail. Retail net sales of $7 million are up $510 million from last year, with strong momentum in quant and active equity ETFs in particular. We're pleased to see a lot of the momentum with products launched during the last 36 months. We also onboarded $1.6 billion from 3 institutional clients as we disclosed last quarter. Two of these clients were large foreign public pensions and wealth funds and the third was a large Canadian pension. We have another $400 million award funding in Q4 and a very good near-term pipeline. Few weeks ago, we received the results of the 2025 adviser perception study for each of mutual funds and ETFs. Results were broadly stable on the mutual fund study and we maintain rank of second on sales penetration across channels, brand equity and overall score relative to large peers. We experienced noteworthy improvements on the ETF study with our overall score increasing to 7.9 from 7.1. Rank is tied for third versus our score of eighth last year. We're pleased to see this momentum on the ETF study given our activity in broadening our ETF suite around active and better beta mandates. We continue to be very busy on the product launch side for retail. We've launched 11 new products in the third and fourth quarter of this year, and we launched 12 products in the first half of the year across mutual fund ETF and offering memorandum vehicles. These launches include this quarter, our fifth private markets fund the Mackenzie Northleaf multi-asset fund. We've also launched 4 better beta ETFs in the quarter as well as expanding our value style offerings and providing our U.S. alpha extension mandate in ETF form. And at the bottom, you can see both ChinaAMC and Northleaf continue to generate good growth. ChinaAMC's investment funds were up 30% from last year and 7% during the quarter, supported by a robust rebound in Chinese markets, where equity markets were up 19% in Q3. And Northleaf continues to have strong fundraising of $5.2 billion over the last year and $1.5 billion during the quarter. Turning to Page 24. You can see the trend and the history of Mackenzie's investment fund net sales on the left, you can see that this is our best invested funded sales across all 3 periods since 2021, with meaningful improvements from 2024 as highlighted earlier, a majority of the momentum in Q3 investment fund net sales was driven by retail, and you can see this improvement on the chart on the right. I'd also remind on the left that we don't publish ETF gross purchase and disposition activity due to data challenges, but we estimate that retail gross purchase activity include ETFs was up about 50% year-over-year. On the right, overall, we're positive and improving our last 12-month trailing basis. And you can see ending the year that retail is trending towards positive territory as well on a last 12-month basis. We've also added a note on the right that we disclosed on our October results. Investment fund net sales were $235 million, a very good result and a meaningful improvement over 2025 and this excludes the $950 million net purchase of our passive ETFs by an institutional client who made allocations to Mackenzie within their managed solutions. Turning to Page 25 at the top right. You can see our net sales segmented between retail and institutional and by delivery vehicle. We've circled the improvement within our retail investment funds with notable increases in both the mutual fund and ETF structure. You can also see the $1.55 billion onboarded institutional awards during the quarter. And at the bottom left, you can see our last 12-month trailing net sales rate has been closing ground relative to mutual fund industry peer group. Turn to Page 26, you can see our performance and net sales for our retail mutual funds and ETFs by boutique. Across the slides looking near the top of the slide, you can see compelling performance relative to peers across multiple boutiques. Towards the middle, you'll see our global quantitative equity boutique has exceptional relative performance across the 3 time periods where this team managed the money. And you can see the strong growing net sales for this team. I'd also highlight that we have strong performance and net sales or net sales improvement within a number of other boutiques, including our resources team, our Greenchip team, global equity and income and the multi-asset strategy team. Turn to page 27, we've added a slide to give an update on our private market funds for retail investors with -- in our partnership with Northleaf. You can see at the top that we are on a mission to bring private asset classes, what we call the missing middle to Canadian households. We've been working hard to remove every impediment to Canadian households having a proper allocation to these asset classes. This has included education and promotion, helping with the adviser accreditation ensuring products are eligible for registered plan and ensuring that the products are scaled. The existing products, you can see on the left are achieving scale and have increased sales momentum. In October, as mentioned, we introduced the Mackenzie's Northleaf Multi-Asset Private Markets Fund. This is a single ticket that brings private equity, private credit and infrastructure together and provides a very nice complement to an existing 60-40 portfolio. The underlying products, you can see have delivered excellent track record since launch, and we provide a graphic in the middle of the slides to convey the missing middle concept. We've seeded our new multi-asset product with $100 million from our other managed solutions and we are looking very forward to promoting in the market. We've also in the bottom right, highlighted that we held our first private market Summit in London, England at the end of May. We're very proud of the strength of this event in terms of both the quality of the content and speakers as well as the engagement with the -- a lot of the investments that are held in the portfolio and the investee companies. Turning to Page 28. A few comments on the Chinese investment fund industry. On the left, you can see the industry grew by 6% in the quarter, driven primarily by strong equity markets. In the bottom left, you can see the net sales trend and wealth overall industry net sales were positive, including money market. Long-term funds were in slight net outflows with equity funds where clients took some of the gains with the recent upturn in the market. On the right, we're pleased with the continued strong performance of ChinaAMC relative to peers. And they continue to see market share gains, our long-term funds increasing to 6.7% of the industry, up from 6.4% last quarter and 6.3% last year. On Page 29, you can see the strong growth in ChinaAMC's AUM. The company is very proud to have reached an important milestone of RMB 3 trillion this quarter, so close to following its previous RMB 2 trillion milestone just 6 quarters ago. You can see that investment fund assets were up 7% in the quarter and 30% over the last year. And on Page 30, you can see another very strong quarter of fundraising at Northleaf with $1.5 billion in fundraising in the quarter and $5.2 billion over the last 12 months. Fundraising was strong across private equity, private credit and infrastructure, particularly -- in particular, as they closed their products they had to market. And I also want to recognize just a few days ago, we celebrated the 5-year anniversary of our partnership with Northleaf. I just want to say we're very pleased with the progress. We're very proud of this team, and we're very excited about the future. I'll now turn the call over to Keith Potter. Keith Potter: Thank you, Luke, and good morning, everyone. On Slide 32, you can see key highlights for Q3. Adjusted EPS, which excludes Lifeco's other items, was $1.27, up over 23% year-over-year and a record high. These strong results were diversified and driven by our core businesses and contribution from our strategic investments. We returned $183 million to shareholders in the quarter, including approximately $51 million in share repurchases. We have repurchased 3.6 million shares to the end of September, and we'll continue to be active repurchasing shares through the remainder of the year. In line with past quarters, we are also strengthening our financial profile by steadily lowering leverage and cash dividend payout ratio while maintaining financial flexibility with unallocated capital growing to approximately $700 million. Finally, as previously announced in October, we have reported a $1.4 billion increase or approximately $6 per IGM share in the value of Rockefeller and Wealthsimple combined details of the Rockefeller transaction are yet to be finalized, and we will update you on the Q4 call in February. Turning to Slide 33. You can see our AUM&A and flows on a year-to-year basis. Strong equity markets during the quarter supported ending an average asset growth with both up approximately 6.5% since Q2. In particular, we saw a robust growth in the Chinese equity markets with the CSI 300 up 19% during the third quarter, which was supportive of ChinaAMC's results. I'll speak to these in a few moments. On the left-hand side, similar to last quarter, it's worth noting that at the end of October, ending AUM&A is up approximately 5% from the Q3 average. And if markets remain stable, the increase in assets will a key driver for revenue growth in Q4. Turning to Slide 34, point 1 and point 2 helped to illustrate the diversified drivers of our 23% year-over-year growth in adjusted EPS on point on a year-to-date basis, our combined operations and support and business development expenses are up 4.1% from last year, and we are maintaining guidance of 4% for the full year, and we look forward to providing our 2026 expense guidance on the February call. On Slide 35, we present the key profitability drivers for IG Wealth Management. I'll highlight a few points. On the left side, you can see that average AUM&A was up 6.6% and on the right, as a reminder, the advisory fee rate includes advisory fees charged on AUA as well as interest earned on client cash on deposits. During the quarter, our advisory fee rate dropped 1.4 basis points primarily driven by clients moving up wealth bands with average AUA increasing 6.6% in the quarter, and secondly, by a decrease in client cash balances as adviser works with their clients to invest in long-term solutions. As I mentioned at the end of October, our AUM&A is up approximately 5% from the Q3 average and assuming markets hold. We do expect to have an approximate 1 basis point impact on the advisory fee rate in the fourth quarter this client to move up wealth bands and expect moderately lower cash balances. And for context, similar to last quarter, these types of returns and impact are more in line with what you'd expect in 1 year versus 1 quarter. Finally, the asset-based compensation rate was flat quarter-over-quarter. And as we look to the next quarter, we would remind that the rate is typically higher in Q4 due to year-end seasonal programs. On Slide 36, IG's overall earnings of $155.3 million in Q3 or up 23.7% year-over-year. On point 2, our financial planning revenue to be supported by strong mortgage and insurance performance. And on point 3, IG operations and support of this development expenses were $164 million in line with last quarter and up approximately 4.1% year-over-year. Moving to Slide 37. We have Mackenzie's AUM by client and product type as well as net revenue rates. On the left, you can see average AUM was up almost 6% versus Q2 and on the right, third-party rate, excluding Canada Life decreased primarily due to onboarding of $1.6 billion in institutional assets as we guided during the Q2 call. As we look forward to Q4 with the full quarter of the additional institutional assets and additional institutional ETF flows of $950 million during October, we expect to see this rate come down approximately 1.5 basis points in Q4. Turning to Slide 38. Mackenzie's earnings were $68.2 million, up 14.8% year-over-year and on point 2, operations and support and business development expenses were $120 million, up 4.3% year-over-year and 1.6% sequentially. Slide 39 has ChinaAMC's results. As I spoke to a few moments ago, the Chinese equity markets performed very well during the quarter, which supported investment fund AUM growth. And on the right can see ChinaAMC's strong earnings of $46.1 million that benefited from seed capital gains driven by strong equity returns. Adjusting for the fair value gains, Q3 results were relatively in line with the last few quarters. And as we look to the next quarter, I'd remind that the fourth quarter is traditionally a seasonally elevated expenses, and we do expect to see earnings contribution from the company, somewhere in the range of where we've seen over the past 3 quarters, excluding the impact of any significant market movement. Slide 40 has earnings contribution from companies in each segment. I'll make a couple of comments here. First, Rockefeller earnings turned positive during the quarter, in line with our expectations. And as we look to the fourth quarter, we'd expect continued progress toward improved profitability, excluding any transaction-related expenses with the recent announcement. And as I mentioned, we will provide more details on the transaction during our February call. For Northleaf, during our Q2 call, we guided to earnings for the next few quarters of approximately $5 million. Q3 came in lower due to seasonality of some expenses, accrual true-ups and a few onetime items. I do expect quarterly earnings over the next few quarters of approximately $5 million on average. But to remind there is some variation in earnings from quarter-to-quarter. A few points on Slide 41. We have updated the indicative values for Rockefeller and Wealthsimple. The total value of both investments represent approximately $16 per share. It's worth noting that neither contribute meaningfully to IGM earnings but do contribute significant value. On Northleaf, we increased the carrying value by $33 million net of NCI for the earnout, which reflects continued strong fundraising. Also worth highlighting, we did receive a $7 million dividend from Northleaf this quarter. And finally, at the bottom right of the slide, you can see that strategic investments and unallocated capital have an indicative value of $8.3 billion in aggregate, which represents $35 per share value. Slide 42 demonstrates continued execution against our capital allocation priorities. We continue to return capital to shareholders and strengthen our financial flexibility. In addition to paying a quarterly dividend and repurchasing shares, we continue to have a reduced gross leverage, now just over 1.4x. And we've also included debt net of unallocated capital, and you can see both measures present the same directional story. Our cash dividend payout ratio is now at 59% and is down from 62% last quarter. And finally, at the end of the quarter, our unallocated capital grew to approximately $700 million. That concludes my remarks, and I'll turn it over for questions. Operator: [Operator Instructions] The first question today comes from Jamie Gloyn with NBC. Jaeme Gloyn: Congrats, the business seems to really be humming on all facets. And so with that, and obviously, some strategic investments doing well, core business doing well. We have unallocated capital continuing to rise. James, is it something you're discussing with the Board now where maybe a shift in mindset around M&A. Over the last couple of years, focus has been on organic growth. But is that something that's entering discussions now? And then if not, should we maybe expect to see maybe a more accelerated buyback than just sort of like the 2% of shares we've seen over the last little bit here. James O'Sullivan: Sure. thanks for the question. I don't expect any meaningful change in our posture towards M&A. We have the business that we want. We're proud of the construction of this business now with 2 divisions, 6 businesses, 3 in each. We believe, James, that we're built for growth, built for diversification. And I think we're starting to show that. So as I look forward to 2026, I think thematically, 2026 is going to be about returning capital to shareholders. If there was a single theme to think about as we head into the year, that's what I'm thinking about. How do we return capital to shareholders. And of course, we've got, as you point out, high levels of unallocated capital. We've got and we've had strong growth in client assets, strong growth in earnings. So I think we're in a position to look very fully at that question. At both the kind of buyback, how big a buyback do we do? What do we do with the dividend? -- everything's on the table, and we will be taking a capital plan to our Board in February. Jaeme Gloyn: Okay. Great. And then as I think about the strategic investments and what you could do there, a little bit more of an investment in Wealthsimple. But is there -- what's the discussion with the parent around maybe where Wealthsimple fits best. Is there anything you can share from your discussions on that? James O'Sullivan: It's a question that's out there, and it is something that Jeff -- or and I discussed from time to time. But I would not be anticipating any change, certainly in the foreseeable future as to where kind of well simple resides. It resides at Power, it resides within IGM. I think each of us are proud of our position and very happy with our position and so I'm not contemplating any change in the locale, if you will, of -- Wealthsimple. It's a great business and collectively, we control it and are very proud of their progress. Jaeme Gloyn: Okay. Great. And my last one, maybe for Damon, nice tick-up in the Net Promoter Score. It's always good to see that. Can you maybe sort of detail or describe what's driving that? What are you seeing in shifts? And when do you expect to see flow through from that nice jump? Damon Murchison: Yes. Thanks, Jim. I think that's an indication of how we are planning for our clients and the areas that we are really focusing on with them. And it goes back to the wealth drivers that we've talked about. We obviously do a great job investing their money and we make the money, build their wealth. But it's about retirement planning, it's about estate planning and generational wealth transfer. It's about those that have small businesses. Whether they need financing or they're ready versus succession plan. We help them there. We connect families together so that high net worth families can talk about their wealth openly and honestly. And we call that high net worth financial literacy. And then we're helping our clients create that want to give back and lead to what a better place and we help them create legacy plans while they're living. So all of that, combined with our ability to manage money and make the money leads to higher Net Promoter Scores. And it leads to obviously getting greater share of wallet and it leads to new client acquisition. Operator: [Operator Instructions] The next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe I can just start with Luke, starting to see some pretty solid institutional flows at Mackenzie, an improvement in your retail flows but still lagging what we're sort of seeing at IG Wealth in terms of flow rates and momentum. What are the sort of the products or maybe the strategic pieces needed to get Mackenzie flow sort of up to the next level on the retail side? Luke Gould: Yes. Thanks, Graham. Good question. Going back to Page 24, like we're feeling we got all the ingredients and heading into 2026, we've got this momentum. You can see the trend if you extrapolate it. We're pleased with the success we're bringing on. And when you look at the suite we've got in retail to promote right now, we're kind of just getting started. Just with quant and active ETFs as a theme, we're pleased with what we brought in too, but the tip of the iceberg when you look at the broad categories that these products play in and just how compelling not only the investment process is but the demonstrated track record so as we're sitting here looking at our retail suite and the outlook for 2026, we're feeling very, very good. Graham Ryding: And then if I could just jump to Wells, I think you said there's now $100 billion of assets at Wealthsimple. Can you give us a feel for how that mix looks across the different categories and distribution channels? James O'Sullivan: Yes. Look, it's a fair question as the company goes from strength to strength and gets larger and larger. It remains a private company. And so at least at this point, we're not going to be adding to current disclosures. What I've said in the past, I'll say continues to be true. If you had to look at the composition of their assets or the composition of their flows, I think you'd be deeply impressed with the diversification across all of their businesses, including trading, invest, save, work, crypto. It remains a very well-diversified platform overall. Graham Ryding: And the large ETF institutional flow that we saw in October, is that Wealthsimple related? Can you speak to that at all? And then just broadly, how much AUM is Mackenzie managing on behalf of Wealthsimple currently? James O'Sullivan: Yes. Good question, James. So we generally don't disclose that clients when it comes to institutional flows. We do manage about $7 billion for Wealthsimple in our passive ETFs. So we are part of the fueling of their product offering. And we do have a private label suite that we manage for them. They are labeled wealth simply ETFs and Mackenzie has them under management. And we are very pleased, obviously, for the partnership we have with them. Graham Ryding: And any private assets with Northleaf in that channel? Luke Gould: We don't currently, but I know there's good discussions going on between Northleaf and Wealthsimple, and Northleaf would love to be on that platform. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Kyle Martens for any closing remarks. Kyle Martens: Thank you, Betsy. We'd once again like to thank everyone for joining us on the call this morning, and Betsy, I think with that, we can end today's conference call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to the Euronext Third Quarter 2025 Results Conference Call. On today's call, we have Stephane Boujnah, CEO and Chairman of the Managing Board; and Giorgio Modica, CFO. Please note this conference is being recorded. [Operator Instructions] I will now hand over to your host, Stephane Boujnah, to begin today's conference. Please go ahead, sir. Stéphane Boujnah: [Audio Gap] quarter 2025 results call. I'm Stephane Boujnah, CEO and Chairman of the Managing Board of Euronext, and I will start with the highlights of this quarter of the year. Giorgio Modica, the Euronext CFO, will then develop the main business and financial highlights of the quarter. As an introduction, I would like to highlight three points. First, Q3 2025 is Euronext's sixth consecutive quarter of double-digit top line growth. This quarter, our revenue and income grew by 10% plus 6% (sic) [ plus 10.6% ] compared to Q3 2024 to EUR 438.1 million. Our adjusted EBITDA margin increased also double -- increased by 1.2 points to 63.2%. This strong performance was driven by the expansion of non-volume-related business, driven also by resilient trading and clearing revenues and also driven by continued cost discipline. Second, during this quarter, we were very proud to announce the inclusion of Euronext within the CAC 40 Index. This milestone demonstrates that when Europeans decide to succeed together, they can transform European capital markets and the financial infrastructure landscape. And this inclusion in the French blue-chip index will have a positive impact on the liquidity of our stock. Third, we are at a cornerstone moment for the development of the group in terms of industrial developments. All the Euronext teams are fully engaged to deliver the ambitious targets of the Innovate for Growth 2027 strategic plan. Progress accelerates with all our clients and partners to achieve these objectives and to create more competition in the European market. We recently launched the first fully integrated European marketplace for ETFs with substantial efficiency gains for the entire value chain, including issuers, market makers, distributors, custodians and investors. To boost retail participation, we have introduced the first ever mini-sized cash-settled futures on main European government bonds, and we were pleased to see that they have been trading from day 1. We are providing the innovative and competitive post-trade solutions that the European market needs. This is reflected in the growing momentum with clients that actively commit to support our CSD expansion program, a key requisite for the success of this initiative. Let me give you now a quick overview of the Q3 2025 highlights on Slide 4. As I said earlier, Euronext delivered double-digit revenue growth in Q3 2025 for the sixth quarter in a row. This quarter, revenue and income grew by plus 10.6% year-on-year up to EUR 438.1 million. So first, our non-volume revenue reached 60% of total revenue and income and posted a strong performance overall. This plus 12% increase of non-volume-related revenue year-on-year was driven by sustainable growth in custody and settlement and the first full quarter contribution of Admincontrol. This quarter, we reached a new record level of EUR 7.5 trillion in assets under custody, driven by growth in equities and bonds. And that tells a lot about the strength and the growth of our post-trade business. Second, volume-related business was fueled by double-digit growth in fixed income and commodities trading and clearing. Euronext continues to record robust volumes and revenue capture in cash equity trading and clearing, driving revenue up plus 11.5% year-on-year. Our underlying expenses, excluding D&A, were EUR 161.4 million, up plus 7.3% compared to Q3 2024. And this increase reflects our consistent growth, investments in innovation and human capital and the impact of acquisitions. But in February this year, we announced an underlying cost guidance of EUR 670 million for 2025. Thanks to this continuous rigorous cost discipline on recurring expenses, Euronext today upgrades its underlying operating cost guidance for 2025 to EUR 660 million. As a reminder, this guidance does not include Admincontrol. Our Q3 2025 adjusted EBITDA grew by plus 12.6% compared to last year, reaching EUR 276.7 million. Euronext's adjusted EBITDA margin increased by 1.2 points to 63.2%, reflecting strong top line growth and cost discipline. Adjusted net income was EUR 169 million. Reported EPS was EUR 1.49 per share and adjusted EPS was EUR 1.68 per share. As a reminder, and this is quite important for comparison purpose, last year, Euronext received a dividend of EUR 23.4 million in Q3. This year, this dividend was received in Q2. Therefore, net income and EPS are not really comparable year-on-year. In our continued commitment towards deleveraging, net debt to last 12 months adjusted EBITDA was 1.5x at the end of September 2025 from 1.8x at the end of June 2025. The large decrease compared to Q3 2024 reflects our strong operating leverage and ability to generate cash flow. The leverage is in line with our target range between 1 and 2x announced as part of the Innovate for Growth 2027 plan. On the basis of this strong financial position and in line with our capital allocation principles, I am pleased to announce the launch of a EUR 250 million share repurchase program to be executed from the 18th of November until the end of Q1 2026. Today -- moving to Slide 5. Today, Euronext is ready to contribute to the next level of consolidation of markets in Europe. Our offer for ATHEX Group is a step towards this consolidation of European market infrastructure to support European listings and economic growth and create even deeper liquidity pool in Europe. Euronext expects to deliver significant synergies from the integration of ATHEX into its European market infrastructure, into its single liquidity pool, single order book, single technology platform. And we expect EUR 12 million of annual cash synergies to be targeted and delivered by the end of '28. This combination is fully aligned with our investment criteria to have a return on capital employed above the WACC of the company in year 3 to 5 after the closing of the transaction and post synergies. The transaction is expected to be accretive for shareholders following the delivery of synergies from year 1. The deal provides major benefits for the Greek market, which is going to become much more integrated into European flows and into global flows. This transaction is clearly a sign of confidence in the recovery of the Greek economy. I now give the floor to Giorgio for the business and financial review of Q3 2025. Giorgio Modica: Thank you very much, Stephane, and good morning, everyone. Let's now have a look together the strong financial performance recorded in the third quarter of 2025. I'm now on Slide 7. I like this slide because it shows how we have truly increased the share of our revenue that is not related to volumes. Capital Markets and Data Solutions are today the largest contributor to our top line and a sustainable source of recurring revenue growth. This is also the case for Securities Services, driven by another quarter of double-digit growth of custody and settlement. Total revenue and income in the third quarter 2025 reached EUR 438.1 million, up 10.6% compared to last year. Today, non-volume-related revenue represents 60% of our top line and covers 162% of underlying operating expenses, excluding D&A. Let's take a closer look at the key drivers behind this performance, beginning with non-volume-related revenue and income and move together to Slide 8. Starting with Securities Services. Revenue was at EUR 77.3 million, marking a solid 6% increase compared to the third quarter of 2024. Custody and Settlement revenue reached EUR 70.6 million, an 11.8% increase compared to the third quarter of 2024. The strong performance was driven by the growth in assets under custody that reached another record at EUR 7.5 trillion. This double-digit growth was also supported by resilient settlement activity and continued growth of value-added services. Other Post Trade revenue declined 32% compared to the third quarter of 2024 to EUR 6.7 million. This, as discussed in previous quarters, stems from the migration of derivative clearing from LCH SA to Euronext Clearing and the internalization of the related treasury income into the net treasury income line of our P&L. Net Treasury Income was up 23.8% compared to the third quarter of 2024, benefiting from the expansion of Euronext Clearing that I just mentioned. As announced during the previous results, we have successfully migrated Italian markets to a harmonized clearing framework at the end of June 2025. These important milestones offer Euronext clearing clients material risk management benefits and operational efficiency and helps them to optimize their total trading cost. This optimized clearing system provides clients with resilient, stable and efficient infrastructure. It will serve as the pillar of all new product and services Euronext Clearing is developing, notably for our repo expansion initiative. Turning to Capital Markets and Data Solutions. I'm now on Slide 9. Revenue reached EUR 168.4 million, reflecting a 13.9% increase compared to the third quarter of 2024. Primary Markets generated EUR 46.2 million of revenue, up 3%. Euronext maintained its leading position for equity listing in Europe with a solid rebound in the third quarter, recording 20 new listings. Advanced Data Solutions revenue grew to EUR 66.2 million, up 6.5% compared to the same quarter last year. This good performance was driven by steady growth in our data solutions, thanks to rising demand for diversified data sets and increasing interest from our retail clients. Corporate and Investor Solutions and Technology Services reported EUR 56 million of revenue in the third quarter of 2025, up 37.3%. This outstanding performance reflects the full quarter contribution of Admincontrol, alongside the growth of Investor Solutions and colocation services. Moving to our volume-related activities. I'm now on Slide 10. Revenue of FICC Markets reached EUR 81.9 million, marking an 11% increase compared to 2024. Revenue for FICC Markets include fixed income trading and clearing, whose revenue grew 14.7% to EUR 46.8 million, driven by the continued strong volumes. In particular, MTS Cash average daily volume was up 29.5% year-on-year at EUR 44.8 billion (sic) [ EUR 48.8 billion ]. MTS Repo term adjusted average daily volume reached EUR 585.6 billion, up 23%. The strong performance was also supported by the expansion of our D2C segment and the growing volumes outside of Italy with significant growth in Portugal and Spain. Commodity trading and clearing revenue increased 11.3% to EUR 27.6 million in the third quarter of 2025. This reflects record intraday power volumes and the recovery of volumes on agricultural commodities trading and clearing. FX trading revenue reached EUR 7.5 million, down 8.3% compared to the same quarter last year. This reflects lower volatility and the negative currency impact on the U.S. dollar. Like-for-like revenue decreased only 2.5% despite an 11.8% decrease in volume, thanks to proactive revenue capture management. Continuing with our review of volume-related revenue, I'm now on Slide 11. Equity Markets revenue saw a 6.6% increase compared to the third quarter 2024, reaching EUR 93.7 million. Cash equity trading and clearing revenue grew 11.5% compared to 2024, reaching EUR 82.5 million. This reflects a 14.8% increase in average daily volume traded to EUR 11 billion. This quarter, Euronext reached solid average revenue capture on cash trading at 0.53 basis points. Lastly, financial derivatives trading and clearing revenue was at EUR 11.2 million, a 19.4% decline compared to 2024. This performance mostly reflects lower volatility. Following clearing migration, certain clearing fees are now reported in the Other Post Trade revenue, and as such, is not fully comparable with the third quarter of 2024. Now I move to Slide 13 with the EBITDA bridge. Euronext's reported EBITDA for the quarter grew 13.9% to EUR 275.2 million, mainly thanks to EUR 29.5 million of additional revenues at constant perimeter and EUR 13.2 million of additional revenue generated through acquisitions. This was offset by EUR 4.3 million of additional cost at constant perimeter and EUR 7.1 million of additional cost coming from the change of scope. Non-underlying expenses, excluding depreciation and amortization, were at EUR 1.5 million. This is slightly lower than the third quarter of 2024 due to the completion of the Borsa Italiana Group integration last year. Euronext's adjusted EBITDA for the quarter grew 12.6% to EUR 276.7 million with an adjusted EBITDA margin of 63.2%, up 1.2 points compared to 2024. The underlying operating expenses, excluding depreciation and amortization, increased 7.3% compared to 2024, mostly related to the growth investment for the delivery of our strategic plan and acquisitions. In parallel, we remain highly disciplined in managing our recurring expenses. I'm now moving on Slide 14. Adjusted net income this quarter reached EUR 169 million. Please note, as Stephane already reminded that the Euroclear dividend was received in the second quarter this year and not in the third quarter as last year. Depreciation and amortization accounted for EUR 49.3 million, up 4.4% versus the third quarter of 2024. PPA related to the acquired businesses accounted for EUR 19.7 million. Euronext reported net financing expense of EUR 6.8 million in the third quarter of 2024 compared to EUR 2.9 million of net financing income in 2024. The variation reflects decreasing interest rate, lower cash position after the redemption of our EUR 500 million bond and the impact of currency variations. Please note that it also recognizes noncash interest expenses related to the convertible bonds. Income tax for the third quarter of 2025 was EUR 58.5 million. This translated into an effective tax rate of 26.7% for the quarter compared to 23.8% in the third quarter 2024. As a reminder, in the third quarter of 2024, the tax rate was positively impacted by the tax exempt EUR 23.4 million dividend received from Euroclear. Share of noncontrolling interest amounted to EUR 11 million correlated to the resilient performance of MTS and Nord Pool mainly. As a result, the reported net income share of parent company reached EUR 149.7 million. Moreover, adjusted EPS was at EUR 1.68 per share this quarter compared to EUR 1.74 per share in the third quarter of 2024. And reported EPS was EUR 1.49 per share. I continue with cash flow generation and leverage. I'm now on Slide 15. In the third quarter of 2025, Euronext reported a solid net cash flow from operating activities of EUR 401 million compared to EUR 237.4 million in the third quarter of 2024. This increase mainly reflects higher working capital from Euronext Clearing and Nord Pool CCP activities this quarter. Excluding the impact of such a change in working capital, the net cash flow from operating activities accounted for 99.9% of EBITDA this quarter. As Stephane already reminded us, net debt to adjusted EBITDA ratio was at 1.5x at the end of the quarter, right in the middle of our long-term target range. I'm now on Slide 16, and I wanted to say that at our Investor Day last year, we have announced that we would have proactively assessed special shareholder returns according to the -- our capital allocation principles. In line with this principle, Euronext has decided to launch a share repurchase program of a maximum of EUR 250 million, which represents around 2% of Euronext outstanding share capital. The share repurchase will start on 18 November and is expected to be completed by the end of the first quarter of next year. This program underlines the strong confidence in the growth prospect of the group and will not impact our strategic flexibility to invest and capture market opportunity. This concludes my presentation. And with this, I give back the floor to Stephane. Stéphane Boujnah: Thank you, Giorgio. And to round things off, we have delivered a very strong third quarter financial results. This quarter's results reflect the strength of our diversified business model with increasing diversification, both in volume-related revenues and in non-volume-related revenues, and our ability to collaborate effectively with our clients, with our partners on their evolving priorities in order to create new offerings and in order to create more competition. Since the beginning of the year, we have demonstrated a sharp focus on the execution of our strategic plan. We are today in an ideal position to deliver our Innovate for Growth 2027 targets. We are confident in our ability to achieve our strategic objectives and to deliver sustainable long-term growth. Our unique integrated value chain has once again proven its strength. We are very pleased to share that we have kicked off the last quarter of the year on an even stronger note. Our assets under custody reached another record at the end of October 2025. And across the business, we continue to benefit from elevated volatility and long-term structural growth drivers as we speak. Our ongoing offer for ATHEX further reinforces our position as the consolidator of European capital markets and creates further attractive growth prospects for the group. Thank you for your attention, and we are now ready to take your questions with Giorgio Modica and Anthony Attia. Operator: [Operator Instructions] The first question come from the line of Michael Werner of UBS. Michael Werner: Congrats on the results. Two questions from me, please. In terms of the Q3 costs, they were certainly below, I think, consensus expectations. You brought down your guidance for costs for the full year. I was just wondering, is this a scenario where you maybe you pushed out some of the investment spend that you had anticipated just because of changing dynamics in the marketplace? Or is this something more sustainable? This is the first question. And then the second question, I think, Stephane, you mentioned at the beginning in terms of the consolidation of the post-trade space that there's a growing list of clients that are supporting this effort. Is it possible to kind of give us an indication as to the number of potential custodians you have signed up or what other signposts we should be looking for when it comes to measuring the progress of the CSD opportunity? Stéphane Boujnah: Thank you for those two questions. Giorgio will answer the question on cost. I will answer the question on the CSD expansion. And let me be a bit blunt. I mean we are implementing an industrial project, which has a certain time line and a certain pace of execution, and we talk once every 3 months about the financial results. Now there is sometimes a disconnect between the pace of financial results every quarter and the pace of delivery of those industrial projects. And let me be a bit more specific. The go-live will happen in September '26. We are in the process of signing all sorts of market participants, custodians, issuers, other critical people in the project. And at the moment, the process of cementing those and signing those -- this support is ongoing. So our intention is to share with the market an interim status update whenever it's ready, let's say, within the next few months, irrespective of the timing of the quarterly results -- financial results announcement. I can't be more specific. And if you want me to be roughly correct or precisely wrong, I would tell you that things are going in the right direction. We are in the process of signing the relevant people. Before sharing with the market where we are, we want to have a sort of critical mass of homogenous signing to be shared and to be communicated. Unfortunately, I can't be more specific at this current moment. Giorgio Modica: Yes. On cost for the third quarter, the message is that this does not come at the expense of investments. We are going full speed to deliver things as quickly as we can. There are three elements that I would like to highlight just to give you a sense of what has happened in the third quarter. So there is an element you are all aware, which is the seasonality in the third quarter, where we record lower salary expenses linked to the holiday season. This is something that you are aware of. The second element that I would like to highlight because it's meaningful and not necessarily -- what we've seen is that what we have recorded in the third quarter is a reduction of the social contribution related to our long-term incentive plan which is driven by the share price performance. So we have recorded extremely high increases in the share price in the first and second quarter and more muted dynamic in the third quarter, which has resulted in a less steep increase of that line of cost. And the last element I would like to highlight is that our cost base, as you know, is largely fixed, but it's not entirely fixed. So there is a small component of cost of sales and as the cost of the third quarter -- sorry, the revenues of the third quarter were lower than the previous quarter, then we record some savings. So to make a long story short, this performance is sustainable, point one, does not come at the expense of investment, and is explained mainly by the element that I just mentioned. Operator: The next question comes from Enrico Bolzoni calling from JPMorgan. Enrico Bolzoni: So one question on MTS volumes. They seem to have plateaued a little bit. I was looking at the statistics for October as well. I just wanted to ask you, what should happen for volume growth to be picking up again basically? And related to that, do you think that the current situation in France with the political instability and clearly, the yields having gone up increases a bit the probability of French debt being migrated near term to MTS? So that's my first question. And the second question is on technology. There's been a bit of rumors, a bit of conversation around the potential disruption that blockchain could bring to post-trade services, for example, by making instantaneous settlement of trades or accelerating the velocity of collateral within clearing houses. Can you just give us some color what are your thoughts there? Is something that worries you, something you're investing into to protect the business? Or you think these fears are a bit inflated and actually nothing will materialize anytime soon? Stéphane Boujnah: Thank you. So Anthony will answer your question on technology impact of the post-trade. Giorgio will answer your question on MTS volumes, and I'm going to answer your question on the French dynamics around the way the French Republic is managing the liquidity and the trading and the secondary trading of its sovereign debt. On that particular point, we have an ongoing dialogue with the French debt management office and with the relevant ministers in charge to demonstrate the benefits of the MTS solution to increase liquidity and to reduce spreads on the French sovereign debt. For the time being, the French Republic is still focusing on the primary dealers only type of structure. But we have a dialogue. But where you have a point is that things have changed significantly. One year ago, well, at least last summer, the 10-year for France was more expensive than Germany, but cheaper than the one of Portugal, Spain, Greece and Italy. The 10-year for France is now more expensive than Greece, Portugal, Spain and Italy. And there is an ongoing analysis within the French Ministry of Finance about what can be done in this new environment, which is fundamentally different from what the situation was 18 months ago. When they will agree to migrate to a form of MTS solution, whether they will do it, how it will be implemented, I can't be specific because I can tell you that there is a dialogue, but -- and that clearly, the more French debt, French sovereign debt looks like the Italian sovereign debt and the numbers are at least in terms of 10-year costs are clear. The more the situation is similar, the better the chances that things will move. But at this current moment, there is no decision taken. Giorgio on the MTS volumes and then Anthony on the impact of technology on post-trading? Giorgio Modica: Yes, absolutely. What I can say is that if I look at the current trading, I see that quarter-to-date, we are above 30% up with respect to where we were last year. If I look at the month-to-date, the increase in excess of 50%, and I now have the statistic of the 5th of November, where the volume traded on MTS were EUR 65 billion. So what I'm trying to say is that the volume remains extremely elevated. And what I can comment is the fact that the market conditions remain highly constructive going forward, and we don't see any reason for a change in the short to midterm. Then elaborating more on what are going to be the volume first quarter next year and the trend is difficult. But again, the message is that the performance remain very strong and the market condition highly constructive. Anthony Attia: This is Anthony. Thank you for your question on the impact of DLT on post-trade and in particular, on clearing houses. Look, to make a short answer, we believe that the impact is neutral to positive with some opportunities. But the longer answer is we need to look at the impact of DLT by asset class. So the role of the clearing house is to provide guarantee and manage potential default. The fact that we have some market demand, some market trend to tokenize collateral is actually a positive thing, and at Euronext, we are working with the market to look at that specific technology change and test it. It is positive, sorry, because it would create some fluidity in the way collateral is allocated and in the way margins are called. So that's the positive part. Now this is true for derivative market, OTC clearing -- OTC cleared market. Now if you move to cash equity, the move towards T+1 gets us closer to a form of a same-day settlement or some would say, instantaneous one. We're not there yet in terms of real-time settlement because we would lose the netting effect. And so some less liquid asset class could benefit from DLT nuclear settlement, if you wish. But in the market that we operate, where it's highly liquid asset classes, the market still benefit from netting effect. So I don't believe there is a negative effect there. Operator: The next question comes from the line of Hubert Lam calling from Bank of America. Hubert Lam: I've got three of them. Firstly, on European exchange consolidation, which has now been brought up by Chancellor Merz, how realistic do you think this is for further and broader consolidation within Europe, including Germany? Second question is on costs. As you said, you improved your cost guidance for this year while you continue to invest. How should we think about cost growth now into next year? Should we expect cost growth to be slower just given a lot of investments assumed are kind of front loaded? And lastly, on -- question on ATHEX. If I look at the implied offer price today, it's close to the spot price. Just wondering if you would consider increasing your offer? And if not, how confident are you in terms of getting the required take-up for your offer? Stéphane Boujnah: Okay. So I will answer your question on ATHEX and your question on the European exchange consolidation and Giorgio will answer your question on cost. On ATHEX, let me reiterate that we do not intend to change the price of the offer and that we will communicate on this offer in accordance with appropriate requirements under Greek law. But we do not intend to change the price of the offer. As you know, the offer is open until the 17th of November. We are intensively communicating and sharing views with all the relevant group of shareholders in order to convince them that the premium we are offering is very attractive and to make sure that they understand the value proposition of making ATHEX business, the Greek capital markets part of an integrated European project. And so far, the dialogue is very constructive. But as I said, the offer is open until the 17th of November, and we will communicate the results of this tender offer on the 19th of November. On the European exchange consolidation, three remarks. We welcome the comments or the aspirations expressed by the German Chancellor that echoed with the ones of Mrs. Christine Lagarde, the President of the European Central Bank. And we share that vision, and we are available to contribute to the next phase of potential consolidation within Europe. Euronext today is the backbone of the Capital Markets Union, is the backbone of the integrated equity markets because as many of you know, the aggregate market capitalization of the companies listed and traded on Euronext amounts to approximately EUR 6.5 trillion, which is more than twice the aggregate market capitalization of companies listed on the London equity market and which is more than 3x, almost 4x the size of the Frankfurt equity market. This is just because we have focused for years on the equity markets, even if at group level, equity trading represents within Euronext 17% of our top line, it's still a multiple of what the other places in Europe, the large players in Europe are doing. And one of the reasons why this vision makes sense is that for all sorts of good historical and corporate reasons, we have found ourselves as focusing historically on equity markets and in fixing the equity financing ambitions of local stakeholders, whereas other players have been focusing in diversifying away from equity markets, sometimes in a very intense way. And by the way, this difference of focus on equity markets is also reflected in the difference of valuation multiples historically because markets tended for long to value diversification away from equity markets more than focus on equity markets. But this is a difference between investors' preferences and stakeholders' aspirations. So we are in a situation where we have been able to build Europe platform that raised 25% of the equities within Europe, which is probably the backbone of any future consolidation because we have the federal governance which is available, we have the integrated processes that are available, we have the strategic focus which is available. We have the operational performance, which is available to be what Mr. Merz and Mrs. Lagarde want to happen. Now why it is not taking place and why it may or may not take place is that because when you do M&A, you operate into a consenting added game. To do an M&A transaction, you need a willing buyer or willing consolidator and Euronext is a willing buyer and is a willing consolidator, but you need also a willing seller. And for the moment, there is just no willing seller. So I think you should not ask us whether we are available. You should ask Deutsche Borse whether they are willing to enter into this type of conversations. And as always in Germany, what the Chancellor says in Berlin is interesting, but what is decided in Frankfurt by Deutsche Borse and in [ Eschborn ] by the government of the land of [ Essen ], which is the supervisor of Deutsche Borse is much more relevant to deliver the output. So that's where we are for the German situation. So we are available, but the answer is in the hands of decision-makers. Giorgio Modica: Yes. On the cost, what I can say is that we will follow the usual time line for cost guidance, which means that we will share with you cost for next year in February next year. And the reason is simple and is the fact that we have not concluded the budget process, which will be approved in December. So it would be a little bit complex to share and commit with you before having secured approval from our governments. Operator: The next question comes from Ian White from Autonomous Research. Ian White: Three from my side as well, please. Just a follow-up on this consolidation or M&A topic. Can you just say a bit about your openness or otherwise to innovative structures or partnerships to boost scale and liquidity in European equity markets? I know there was a proposed joint project with Vitura, I think, a couple of years ago. Would you revisit something like that? Or are you clear that sort of consolidation of European markets in Euronext's own business is the only option you're really sort of thinking about, please? That's question one. Secondly, can I just ask a follow-up as well on the drivers of the performance at MPS? And in terms of the growth, how much is coming from sort of more trading of Italian govies and how much is coming from new pockets, maybe products outside of Italy, B2C, sort of new trading user types, the algo-focused traders that I think you talked about at the Capital Markets Day last year, a bit more detail on that would be helpful, please. And finally, ESMA has issued some new proposals regarding commercial practices with respect to selling market data and particularly with respect to pricing of data across different types of user and restrictions around auditing practices by the exchanges. What's your view on those proposals at this stage? And what impact do you think that might be for Euronext, please? Stéphane Boujnah: So I'll take your question on consolidation, and Giorgio will take your question on MTS and the dynamic on our market data business. On consolidation, when it comes to equity trading, which is the core of the discussion for the moment because the motivation of the German Chancellor was to secure a proper downstream for the liquidity of all the great companies that are developing in Germany that look for exiting public markets. For equities, consolidation is needed to deliver a single liquidity pool because if you want a single liquidity pool, you need to have a single order book, and to enable a single order book, you need a single technology platform. So -- and you need to have processes, harmonized rule book and consolidation is necessary to create scale. Hybrid model and IDs have been very creative. They have not really delivered not because people were not acting in good faith or were not positive and enthusiastic, because it just doesn't fit with what is needed to create a deep, low latency, large liquidity pool. So we are happy to consider all sorts of cooperation when it comes to, let's say, indices, when it comes to listing initiatives, when it comes to facilitating or using tools that facilitate the retail onboarding in public markets. But when you want to create impact, you need more liquidity, and to create more liquidity, you need a bigger order book. And to have a bigger book, you need a solid, robust centralized integrated technology platform. And that's why this is a prerequisite. Giorgio Modica: Okay. Yes. So let's start with MTS. You're absolutely right. One of the ambition of the project is to grow platforms which are different from the traditional dealer-to-dealer and shift more in the dealer to clients. This is -- this platform is something that is performing extremely well, and we can see volumes on that platform growing, I would say, exponentially with growth rate exceeding 50% year-on-year. But still is not a huge proportion of the overall revenues, but the direction of travel is very strong. And the other interesting feature is that we are expanding into the three key segments of the space of the dealer to clients. So we are seeing very good traction in rates, the beginning of an activity in credit, and we are developing the swap. So the results so far are good. The partnership with dealers is performing well, but clearly, this is just the beginning. Then when it comes to the traditional dealer-to-dealer, Italy remains the largest contributor to the pool. However, as I have highlighted during the presentation, we have seen very good growth coming from countries outside of Italy, namely Spain and Portugal. When it comes to market data, we are a recipient of regulation. We are adjusting ourselves. It's difficult to comment at this stage because the game is not over, which means that we are still analyzing the situation. What I can comment is that we are going to see what is going to be the outcome and whether -- who's going to be the actual beneficiary of the change, whether are going to be the large resellers of data or the smaller players in the market. Operator: The next question comes from the line of Arnaud Giblat calling from Exane BNP. Arnaud Giblat: I've got two quick follow-up questions, please. Firstly, on the potential movement of OAT on MTS. I'm just wondering, I heard your comments. I'm just wondering in terms of potential competition, who are you facing up to and how well are you positioned to win that business if it eventually comes over? And my second question is, again, a follow-up on Euronext Securities. I'm just wondering if you can report any progress on getting issuers moved to Italy. Stéphane Boujnah: Your second question, sorry, Arnaud? Arnaud Giblat: Yes. I think so far, it's just Euronext and Exor that have shifted their issuance to Euronext Securities. Are they -- are you seeing any progress with any other issuers? Stéphane Boujnah: Okay. So on the second question, which is basically the pace of CSD expansion. So as I said a few minutes ago, following question of one of your colleagues, we are trying to find the right moment to wrap up what is the precise status of onboarding. As you know, for making that project impactful, we need to have a combination of conditions. One avenue is to go one by one to migrate each individual issuers as it was the case of Stellantis or [indiscernible] company, et cetera, and we are working with others. This will be also filled with some new IPOs that have the possibility to decide their full post-trade chain. So that's one avenue. The other avenue is the custodians and in general, beyond the custodians, all the players who are intermediating issuers with the post-trade chain. So we are working on it. And I hope that soon, and I can't be more specific, we will be in a position to share status of that. But as I said, you have to understand that industrial projects do not have necessarily the same pace and timing as our quarterly meetings. We have in March, the go-live of the power derivatives market that will happen after our full year results, but this is a very important step. We had the ETF moment and European ETF listing trading platform that took place in September, at the end of September. So these things happen when they are ready, and we communicate when they are ready because the go-live for the CSD expansion as a whole is September '26. We need to share with you where we are. We will be in a position to do so soon, but it is not now. On the competition for the French OAT, for the French 10-year, I don't know. I think the MTS situation -- platform is quite unique. It's a European design. It's European-proved. It's a good platform to combine the sort of European primary dealers' culture and practices together with an electronic platform that provides transparency and that has ultimately an impact on spreads. I think as much as the French OAT was perceived as being massively different from the Italian liquidity problems back in the days, just even back in the days means even 15 months ago. Now the facts are that French sovereign debt belongs to the same league as the Italian sovereign debt. And therefore, we believe that there is an opportunity to continue this dialogue. I know you are asking a question you want, but systematically, we continue to explain to [indiscernible]. I must -- my conviction is that the more there is a sort of normalization of French sovereign debt around the debt of Italy and countries that have been through similar type of environments, the stronger the likelihood of all solution being considered and then implemented alongside the traditional primary dealers scheme. Operator: The next questions comes from the line of Herve Drouet calling from CIC Market Solutions. Herve Drouet: The first one is, could you share with us what is the percentage of your cost which is externalized in terms of operation? And could the seasonality we've seen in third quarter be reflected by the fact some of your external costs, either on development, on operations, which are externalized, tends to be lower during that period of time? And the second question is on ATHEX as well. Is there something you can share with us in terms of already what you have secured in terms of acceptance for your open offer for exchange of equity, if there are any you can communicate at this stage? Stéphane Boujnah: I'll take the question on ATHEX and Giorgio will take your question on cost. We will not communicate any interim acceptance level in accordance with applicable laws and regulations. We will communicate the result of the offer on the 19th of November. As you can imagine, we have a close dialogue with the three different constituencies that are owning shares in ATHEX, the local Greek institutions, the international asset managers or the international investors that own shares in ATHEX. And the third group is the local retail investors that interact through their brokers. So we have a very intense, continuous and precise and updated dialogue with those three constituencies. But in accordance with appropriate rules and relevant laws and regulations, we will communicate the outcome of the offer on the 19th of November. Giorgio Modica: With respect to your first question, the percentage of activity which is outsourced is inexistent or absolutely negligible. Our business model is based on the fact that we operate what we do. And the synergies of the transaction we do are exactly based on that, which means that we take care of others' operation and not the other way around. When it comes to the seasonality in our P&L, this is more simply, it's the full-time employees of Euronext. When they go to holidays, we do not record part of the cost in our P&L, and this gives the seasonality. But it has nothing to do with outsourcing. It's an accounting treatment for holidays across the different countries. So what you will see is that there is -- in Nordic countries, this is more June, July. In the rest of Europe, it is more July, August. And this is the reason why it has an impact which is stronger in the third quarter. Nothing more to highlight. Operator: The last question comes from the line of Reg Watson calling from ING. I don't think we have more questions at this time. I will now hand back to our speakers for their closing remarks. Thank you. Stéphane Boujnah: So if there are no further questions, I thank you very much for your attention and for your time, and I wish you a very good day.
Robin John Harries: Good morning, everyone, and welcome to our Q3 earnings call. I'm very pleased with the development of our last quarter and with the opportunities ahead of us both in mobile and with waipu.tv. In mobile, we see strong opportunities for efficient customer growth through optimized marketing mix, through optimized web shops, through a reduction in churn and through the acquisition of mobilezone. And with waipu.tv we also believe that there is huge potential for further customer growth and even more profitability. I'm very excited about the final sprint of The Year and an initiative-rich '26, which will mark our transformation into an AI-first telco. There's a lot to do, and we are on it and looking forward to it. I would like to thank our entire team for their hard work and their courage to discover new paths. I'm truly enjoying this. And I'm -- and we are just getting started. I also want to thank our CFO, Ingo Arnold, working with him is a real pleasure. We have rolled up our sleeves and he has been a tremendous support. Let's dive into the presentation and our key messages. We can confirm our '25 guidance. We are on track. We can show strong key financials. Our most important postpaid and TV service revenues are growing and our adjusted EBITDA grew nicely 1.6% for the first 9 months and for the last quarter, even 4%, Waipu.tv IPTV has been a driver in our EBITDA, contributes nicely. It's a fantastic product, not only growing in terms of customers but also getting more and more profitable. Our free cash flow in the first 9 months is growing nicely with 2.8%. And yes, so we are on track in Q3, impacted by the communicated tax one-off, but fully on track. We are also very pleased with our customer growth. Postpaid net adds even exceeded our expectations. Waipu.tv growth recovers, and we are here on a strong path, and we will continue. freenet TV is declining, but this was also expected. We are focusing on waipu.tv by continuing to monetize our user base at freenet TV. We can confirm our '25 guidance. And when you look into our strategic initiatives in the Mobile segment for our organic growth, we are focusing on 3 pillars. It's optimization of our marketing mix and optimization of our web shops and reducing churn. In terms of marketing mix, we are shifting budgets. We look at the return on ad spend. We don't do just pure brand marketing. We always connect it with direct performance impact, clear messages. And yes, so we improved the transparency of our campaigns. We improved the reporting. We really put the money where we see a direct impact. Conversion rates, I mentioned it last time, the conversion rates on our web shops, they are not there yet where we want to have them. They're not great yet, but we are getting better and better, and we see strong improvements in the last quarter. The page speed improved drastically. We have a better user experience. We create kind of urgencies on our website. All of this helps. And there's still a lot of stuff to do, but we can already see that it's working. And the third pillar is that we are working on churn reduction. If you look at the top 2 reasons why users change their mobile provider, it's either they get a better offer somewhere or because they are not happy about the network connection. So this does not make sense when you look at freenet because we are really offering great deals. We are able to match the most aggressive offers, and we provide all networks. So there's obviously no reason for users to leave us. And so therefore, we are working on it. We see a huge potential in reducing our churn. We have created more than or developed more than 50 initiatives to reduce the churn to bring it down, and we are working on it. And yes, so this is, I think, one of our drivers -- success drivers also for next year. When we look into our customer value management, we also try to use AI wherever we can use it. So whether we look at the customer service, if you look at telesales, if you look at smart pricing, so we try to apply it everywhere, do smart tests, don't do crazy things, but there's -- we believe there's huge potential and we are on it. And besides all of these 3 pillars, of course, we are also constantly trying to improve our other channels. We are very happy about our stable retail business with our almost 500 stores, our strong online and off-line partners, and we are optimizing this as well. In September, we started our first performance-based brand marketing campaign with klarmobil. So we produced a new TV spot. We changed the website, improved the UX. And there was a clear message. So when you look at the TV spot, you can see that there was clear branding, but also clear messaging, a clear offer, and this was reflected in the successful numbers. We could increase the visits significantly and also the conversions and sales. This was a very successful campaign. We have the next campaign in October. We see and also the team see that it's working. It's driving sales on one hand. And on the other hand, it will also create more brand awareness. And klarmobil is one of our top brands. Together with freenet, it's important that we increase the unaided brand awareness and performance-based marketing campaigns will help to reach this goal. We are very happy about the mobile subscriber growth in the first 9 months and also the last quarter. Within the first 9 months, we could increase our customer base, 190,000 postpaid customers. If you look at our historic data numbers, you can see that this is quite a lot, also the last quarter, very successful also when you compare it to last year. So we can see that the initiatives, the things that we changed that they are working. We also are very happy about the renewal of our -- about the 5-year renewal of our strong partnership with the MediaMarktSaturn, it's important channel for us. And yes, next steps, so we will keep doing what we have started in the last quarter, looks promising. And besides this, there's also one big thing that's coming at the moment when you look at our -- I mean, the strongest brand that we have is freenet and we do advertising with freenet. So there, you can see our strongest product, mobile phones, mobile plans. But at the moment, it's on the domain freenet-mobilfunk.de. And if you, for example, go to freenet.de, you can find the news and e-mail portal. So -- and this is not ideal, yes. So you cannot do marketing efficiently with freenet if people or if users then search on Google and end up on freenet.de where they don't find the offers that you do advertising for. So this is something that we changed, we made the decision to change it, and this will be in place beginning of next year. And then we will do advertising for mobile phones and mobile plans on freenet.de. And then we will also start marketing campaigns, performance-based marketing campaigns for freenet.de. So this will increase the conversion. This will be much more efficient than in the past. And so then we believe that this will be a nice potential for the next year to really increase numbers for freenet and increase the unaided brand awareness for freenet as well. And besides this, one big thing is you heard about it, we already disclosed it, we bought mobilezone. This is a strategic acquisition. mobilezone, it's a really strong company. It's a sales machine. So they -- every year, they generate over -- they close over 1 million contracts. It's one of our strongest competitors. They are very successful, they have many nice brands like sparhandy, deinhandy. And yes, so we acquired them. Yesterday, there was also news that the antitrust approved the acquisition. So we are in the process of closing the deal. And this will give us much more -- even more sales power. So consolidation in the market, I think it's healthy, makes a lot of sense if you look at allocating resources about the offerings, so makes us even stronger. We'll -- and I think it's also good for the entire industry, for our partners. We have really healthy relationships to Vodafone, Telefonica, Telecom also to 1&1. And so we believe that this makes us even stronger and that will enable us to further support them. Waipu.tv, I mentioned it. We believe it's a fantastic company. We could show in Q3 subscriber growth again and also nice profitability. It's -- for us, it's important that we have a company that's not only growing, but also getting more and more profitable. I think we proved both of this with waipu.tv, very happy about it, it's developing as expected. So -- and we also believe that in Q4, we will see even stronger growth and that we are on track to reach our guidance for '25. Waipu.tv has started -- has just started a new campaign which is promising it's -- they offer a start-up package with a TV stick and a no-frills product for just not so much money. It's an entry product and which will help to -- for people to experience IPTV and this great product. And so afterwards, we believe that there will be upselling opportunities. And besides this, we also started to do marketing with bundles where we bundle mobile plans together with waipu. And all of this, we believe, is really is -- makes a lot of sense and will bring us or leads us into the right direction. Yes, with this, I hand over to Ingo. Ingo Arnold: Thank you, Robin. So I start as normal with the group financials. I think we are -- and Robin already commented, I think from my side, there's nothing to add. We are really, really happy with what we generated during the first 9 months of the year 2025. We are totally on track to reach our guidance. So in terms of revenues, you see in the quarter, a slight decrease of revenues, I think, main reason, and we will -- I think you will hear the name of the company, The Cloud more often than in the years when we owned the company today. But I think it is important to show the deviations what we do have in -- on the group level, but also on the mobile level. So here, I think what we lost here in revenues with the sale of The Cloud is something like EUR 10 million. So without it, also in Q3, there would be a small increase of revenues. So all in, it's a confirmation of the guidance where we promised moderate growth for the gross profit. I think, much more positive than the revenue development. We see an increase of the gross profit in the quarter by even 7% on a 9-year base, 4.3%. It is definitely driven by the IPTV. I think we are so happy that this is the first year where we do not only generate growth in the base of waipu.tv but where it is also possible to make the business much, much more profitable. And you see the effect here even on a group level. Moving to the adjusted EBITDA, strong quarter, 130 -- nearly EUR 138 million, which brings us to EUR 395 million up to the end of September. And I think I did the calculation in August. I do the calculation again what is necessary to reach the full year guidance. I think it is relatively clear that from EUR 395 million you need a quarter and you need an EBITDA of something between EUR 125 million and EUR 145 million to reach the guidance. And compared to the performance in the third quarter, I think this looks totally doable. And I'm even more convinced now than I was in August to reach it. So moving to the Mobile business. I think, yes, definitely, the revenue looks a little bit disappointing. But on the one hand, again here, there is the reason from the missing revenues of The Cloud in the full quarter. And if you would add the EUR 10.3 million, the difference would be much smaller. On the other hand, we -- and this is something what we already commented in after Q2, we had some no-frills, some prepaid revenues where we could not generate any profit. And to make administration easier, we cut some -- we terminated some of these contracts. This makes a lot of sense from our side. It has a few negative effects on revenue. But as you see, moving to gross profit, this does not have any profit effect. The gross profit in Q3 slightly decreasing. Also here, it was something like EUR 3.5 million, which was missing from The Cloud. If you would add it, I would say it is something like a stable development, Q3 to Q3 and the Q3 '24 was a strong one. So all in, there is an increase in gross profit to nearly EUR 527 million. Moving to the adjusted EBITDA. Also here, we are near to what we had last year. It's a stable development and making the same math, what I did on the group level, what we can see here is that we need an EBITDA of something like between EUR 100 million to EUR 120 million in the fourth quarter, and then we would reach the guidance. Maybe a small comment to marketing spending because we discussed it intensively after the second quarter. And the good news is that even with all the campaigns, what Robin was talking about and all the action and the big growth in the customer base, it was possible to decrease the marketing spending in Q3. So I think in the first half of the year, we spent something like EUR 6 million more in '25 than in '24. But in Q3, we spent less than last year. I think we have some long-running contracts with some brand marketing partners, which does not make that much sense. But I think it is not easy to terminate these contracts. Some of them are still running. So I think there will be a full saving effect from stopping these contracts in 2026 but also in Q3 and in Q4, we will see something comparable. Marketing spendings are down. And I think the results are still affected from the negative first half spending what we saw. Moving to some KPIs of the -- in the mobile business. Yes, Robin already commented. I'm really surprised how strong we are in terms of postpaid net adds. I think we discussed during the year to reach something like 200,000 net adds for the full year time. I think definitely, it will be far above 200,000, what we will reach I think it is still a surprising quarter as ever, the fourth quarter because of Black Week and so on. But I think we are more than on track here to grow the postpaid customer base. Well, we are not that good on track, but I think this is a market problem what the whole market does have is still that the ARPU is decreasing. So what we see at the moment with the growth, what we generate, it is possible to overcompensate the ARPU effect and I'm positive and optimistic that this will also continue in the next quarters. But I think it is a pity and it is market driven. I think we discussed it already in the other quarters. It's not a freenet problem. The market is slightly aggressive. Still, we hope we can come back to a rational, a more rational behavior in the mobile market here. So we are not that unhappy that there will be a CEO change at Telefonica because we saw them very aggressive in the last quarter. So I think this could help to repair the market here. So we are basically optimistic for the following quarters, but -- and this is clearly shown on this chart here. At the moment, the negative trend for the ARPU is continuing. But clear message service revenues are slightly increasing. So it's possible for us to compensate it. Digital Lifestyle revenues, the last picture here on this chart, I think you all know that we were behind plans at the beginning of the year. We could close the gap now. So we are totally on track compared to last year. And yes, I'm even positive for the fourth quarter to see a slight increase here. Moving to the successful TV business, revenues and all financials are mainly driven by the positive waipu.tv developments. What we do see in revenues is in the quarter and even an increase by 10% for the full year, it increased by 7.5%. I think the fourth quarter was a little bit influenced by a media barter deal. What is a media barter deal? It is that we have these deals, these contracts with the private channels. And therefore, we get on a -- at the end of the day, we get some marketing to place -- some channel plays there for free but we have to show it in our figures. So on the one hand, you see it on the revenue. But on the other hand, you see it on the marketing cost. So at the end of the day, these marketing campaigns are for free. But you show it on every level here. And so therefore, we made it clear or we try to make it clear and we wanted to make it clear because especially the development in revenues and in gross profit is slightly exaggerated from these deals, and we want to have positive figures, but we want to have honest figures. And therefore, we mentioned it here that there is an effect of EUR 5 million even in revenues and in gross profit. On the adjusted EBITDA level, you see that we have an increase compared to last year. Waipu.tv EBITDA year-to-date is something like EUR 25 million. So it's a perfect confirmation that the business cannot only grow but that the business can also generate EBITDA. And I think this is -- I think we discussed it earlier times that we expect something between EUR 30 million and EUR 35 million of EBITDA from the business. And I think we are totally on track here. We have lower marketing spending. This is something what we discussed earlier together. This definitely helps in the fourth quarter. Yes, I think we need some marketing campaigns. We need and we want to generate some growth in the fourth quarter. But I think we are also on an EBITDA level, we are very optimistic to reach the goals what we do have. Last page from my side is the free cash flow bridge. I think -- most of you should not be surprised that we have the negative tax effect. I think we -- to be honest, we expect it for years. And now we really got it. So we had to pay something like EUR 20 million for the period 2015 to 2018. I think we are not at the end of the road here because we also took legal action because we -- I think we had a -- we built provision years ago, and -- but we took legal action now. And -- but the legal proceedings will take years to find an end, but we paid the EUR 20 million now because we have high interest rates to pay here in the meantime. And I think there are good chances to win the case. But for now, we paid the EUR 20 million. And I think let's wait and see. I think I do not expect a decision as long as I am here, as CFO. So -- that could be quite open. But there is a good chance to get the money back. But for now, the tax expenses are higher as expected. On the other hand, change in net working capital. It is a negative of EUR 32 million. I think those of you who are familiar with our working capital figures, know that EUR 26 million out of it is a liability or a reduction of a liability where we have to pay a monthly fee to Media Saturn. So out of it, it is more or less stable. Then the CapEx figure, EUR 26.8 million. It's near to what we saw last year. Lease payments. It's easy to calculate EUR 45 million now. So no surprises and interest payments, EUR 15 million. So I'm quite fine here. I'm also fine with the free cash flow for the guidance for the full year because what do I expect from change in net working capital, maybe some more investments in the fourth quarter into the business. So I expect something like EUR 45 million for the full year. I expect EUR 60 million for taxes, EUR 35 million for CapEx. Lease is easy to calculate, something like EUR 60 million and interest payments nearly to EUR 20 million. So this is also in -- the sum is the same what we expected or what we forecasted at the beginning of the year. And so I think at the end of the day, no surprises for all of us. And therefore, I think the guidance could be reached. So therefore, the overview from my side for the financials. So I would hand over to the operator again to start the Q&A session. Operator: [Operator Instructions] And the first question comes from Sofija Rakicevic, Goldman Sachs. Sofija Rakicevic: I have 3 questions, please. The first one is on the guidance. What are the main 4Q drivers that could push results to the low or high end of the guided range? The second one is on mobile. Can you please give us more color on your net adds mix? How many come from the lower end of the market? And how do you perceive quality of your customer base in general? And the last one is on the marketing. So I'm just wondering, can you compete effectively in 4Q without a big marketing increase for both waipu.tv and mobile because we are heading towards Black Friday and Christmas. Ingo Arnold: Yes, Sofija. Thanks for your questions. From my side for the guidance. I think if I would have a clear plan where we would end, I would already have told you. I think there is good chances to end on an EBITDA level between EUR 520 million and EUR 540 million. I think it is correct that we have to look, and it's -- I think the question to the guidance is linked to your last question about the marketing spending. I think we want to grow the business. And therefore, if we see chances, especially during Black Week to increase our customer base in both segments, then we would -- then we have to decide what we would like to invest. So it's difficult to say from today's point of view. So I cannot -- and this is something I think we have not published a guidance which is -- which narrow band because it is still open. I think we will watch the market. And if there will be chances to grow and to have a profitable growth, we will use the chances. And -- but I think this is the main reason why we are not more concrete on the guidance now because as typical during Black Week and during Christmas business, there could be so many chances. And we do not want to miss chances and opportunities. And therefore, I think it is still open. But basically, I would not expect a big increase in marketing expenses compared to last year because also last year, we had the Black Week and we had a Christmas business where we were. And last year, we were very aggressive. So I would even expect that even with a strong and growth-oriented philosophy in the fourth quarter, I would expect marketing expenses to be lower than last year. Robin John Harries: And related to your question regarding the mix, we have different brands. We have brands like Mega SIM, Dr. SIM, Happy SIM, where we have aggressive offers and then we have klarmobil, it's something in between. And then we have our premium brand, which is freenet. And at the moment, we -- freenet is not ready yet. I mentioned this. It does not make too much sense to do advertising with freenet if it's not on the freenet.de domain, yes. So therefore, we don't invest into brand marketing campaigns, we rather focus our activities on the other brands like klarmobil and the other brands where we have better conversions. So this is what we are doing at the moment. And so therefore, the -- it will be, I think, relatively similar to the last quarter. But if we look into the next year, I mentioned it that we want to scale the performance based brand marketing investments for freenet as well, and this is an opportunity for us because with freenet, this is our premium brand. We will be able to also sell for more -- for healthier prices with higher ARPUs. We will focus on mobile phones. We will position freenet as a premium brand. And I think this is a nice opportunity for us next year. And then ideally, we have a freenet as our premium brand for mobile phones with nice brand marketing campaigns but based on performance, so we want to sell. Then we have klarmobil our brand for mobile plans for good prices that make a lot of sense. And then we still have our -- where we -- more aggressive brands like Dr. SIM, Happy SIM, Mega SIM where we try to get users in a more aggressive environment and compete against those brands who think they can be more aggressive. Operator: And the next question is from Ulrich Rathe, Bernstein. Ulrich Rathe: I have 2 questions, please, if I may. The first one is on the service revenue situation. I think you highlighted that this is owing to the market backdrop at this point in time and that is not necessarily a big concern from a managerial perspective at this point. Could you talk about how you see this unfold. I mean what's your base case here for the market backdrop and the service revenue performance in 2026. And related to that, this sort of slight compression on the service revenues, how does this affect your gross margin? I mean that's ultimately a question how the cost to the MNO hosts scales with service revenue performance? And my second question is on the Media Saturn renewal economics. That's more technicality, I suppose. But you talked about this EUR 5 million incremental barter deal in -- sorry, in the third quarter. Is that related to the renewal, should we add that to the renewal? And have you agreed to a different cost compared to the prior contract with a multiyear contract with Media Saturn in the current renewal which explain the economics of that another EUR 5 million sort of fits into this. Robin John Harries: This is Robin. Thanks for the question. Regarding the service revenue, as you -- I mean when you look into the Q3 numbers, you can see the ARPU, but you can also see strong mobile growth. Overall, the effect of both is positive, and we expect that also, if we look into the future, we -- as I just said, we want to also more marketing with freenet. We believe there's a fair chance to sell products with higher prices to increase the ARPU, this might have a positive effect as well. Yes, that -- I mean the market is -- the competition in the market was tough in the last month. I think, is what's driven by Telefonica. So there are some changes. There were -- they announced that there will be some changes. Hopefully, this will be healthy for the market, for the industry, but we are prepared. We have many opportunities to grow our subscribers -- our marketing channels through our website, through performance marketing, through performance-based marketing, to not lose so many users by optimizing our churn. So there's really a lot of potential for us to grow. And so therefore, it also will put us in a situation that we will hopefully also be able to sell for better prices, which are more healthy for us. So therefore, we are quite confident. Ingo Arnold: Yes. From my side, Ulrich, I think you also asked what effect does the service revenue has on our MNO contract. And yes, definitely, this is very relevant. I think in earlier times, when I started in the business, all were only focused on growth of customers, but this changed during the year. So the contracts, what we do have with the MNOs are mainly based on revenue, on service revenue. And so yes, it is important to generate service revenues, but I can only confirm what Robin said. I think that there are -- and I work in this company for a long time, I never saw so many initiatives here to increase the number of customers. And therefore, if we could combine it with a stabilization of the ARPU, I think, and you asked about '26, I have no -- I'm not afraid of '26. I think -- I'm more afraid of the fourth quarter now because this will be difficult to -- and this is what we saw during the year. But with all the initiatives, what we saw -- what we see and what we have here, we are much, much more optimistic for '26 in terms of service revenue than based on '25. Then you asked about the Media-Saturn one-off of EUR 5 million, I think this is, is it linked to the contract? Or it is not linked to the contract? My official answer is not linked to the contract. But I think it's definitely only -- it's only a one-off and it is not by accident that the one-off happens in the same year when we renewed the contract. So -- but this is something that will not happen again in the next years. And what happened -- what has not happened again in the last years. So therefore, it's a typical one-off. It is not typical. I think we have other payments what we do pay -- what we do grant to Media Saturn, but this is definitely a one-off. Ulrich Rathe: Ingo, can I just sort of follow on this comment, which you put into a sub-clause that maybe you're afraid of Q4. Could you just for clarity, explain what you meant by your afraid of Q4? Ingo Arnold: Yes. I think what we see at the moment that is that the service revenues are growing, and we are happy that they are growing, but they are only growing by small euro effect. And so -- can I be 100% sure that in the fourth quarter, it is plus EUR 3 million or minus EUR 3 million? No, I cannot be 100% sure because the effect, the positive effect is not that big that I do have a lot of headroom. So -- and this is the -- I do expect stable service revenue for the fourth quarter to make it very clear here and to clarify it. So thanks for your question. But what I do expect for '26 is that we are not only see a stable service revenue but a growing service revenue. Operator: And the next question is Siyi He from Citi. Siyi He: I just have a question on this redefinition that you put through on the adjusted EBITDA. I think now your adjusted EBITDA is including [indiscernible] sales and restructuring. I'm wondering if you can talk us through the thinking behind that. And also, it seems that the adjustments led to around EUR 10 million uplift on your 2014 EBITDA, but you decided to not change the full year guidance of '25. I want to understand the thinking behind that as well. And finally, just on the free cash flow bridge, you have kept the free cash flow guidance unchanged. But it seems that the CapEx guidance is now reduced from EUR 55 million to EUR 35 million. I want to check if that is a sustainable reduction on CapEx. Ingo Arnold: Yes. So thanks for your questions. I think the -- what is the reason why we started to report an adjusted EBITDA at the beginning of '25 or -- in '24. What we saw were from the sale of the IP addresses. We saw a very positive effect, and it was the idea to show an adjusted EBITDA, which is really based on the ongoing business. So then this year, we had a similar effect from the sale of these IP accounts. And in addition, we had the sale of The Cloud. And so this was also a positive effect in the EBITDA, which we wanted to correct. So I think we were -- we were very open here, and we were very transparent and corrected the EUR 25 million of positive effects this year. On the other hand, what we saw were that, and you all know that we reduced the number of board members here. And we saw a -- and the restructuring, the amount of EUR 6 million is more or less only the payments, the severance payments, what we had to do to the leaving Board members here. So this is definitely also a one-off. And in the thinking, what I was describing before to only show the ongoing business. Therefore, we decided that we use the adjusted EBITDA to correct the EBITDA by the effects in both directions. And so therefore, I think we changed it. Then you had a question about the full year guidance. And yes, you are correct that there was a -- that with starting putting all the effects in the -- on the adjustment list we had also to adjust the year 2024. And you asked if, therefore, the guidance should be increased. My answer is that we do not guide a delta to the year before. What we guide is an absolute EBITDA amount for the year, and we calculated the EBITDA for the year, which was from the beginning, something between EUR 520 million and EUR 540 million. So with a change of EUR 24 million, we do not change our guidance. Your question to the cash flow bridge. Yes, you are correct. To reach the full amount of the bridge and to have a comparable amount to what we forecasted at the beginning of the year, we had to reduce the CapEx compared to what we forecasted at the beginning of the year. I think we expect, especially from the radio business -- from the digital radio business we expected more spending during the year. This has not happened. It is not -- it was not necessary during the year, and it will not be possible to catch up here in the fourth quarter. So from my point of view, the EUR 35 million, what I said is I think this is a strong figure, and I do not see any big risks here. Operator: The next question is from Florian Treisch, Kepler Cheuvreux. Florian Treisch: I have 2 questions. The first one is for Robin, I mean in the Q2 -- sorry. In the Q2 call, you made very clear that you want to change the marketing strategy, the customer journey. I mean, this is what you have underpinned today with the presentation. So my question would be a bit when do you really expect, let's call it, first tangible impact. I mean you mentioned in the presentation that they are first positive signs. But to really make a difference, is it fair to assume that this will only happen over the course of '26 and how relevant is the closing of the mobilezone transaction to support that journey. The second question is on waipu.tv. I mean you have seen an improving momentum in Q3. So the first question would be how much of that is driven by lower headwinds from the O2 shift. And you flagged high confidence in a good finish to the year. Can you also quantify your expectations here? And do you expect this momentum to stay as strong as in Q4 entering 2026? Robin John Harries: Yes. Thanks for your question. Regarding the impact, so we could already experience the impact in Q3. So far, in Q3, we only did 1 campaign. It was a short campaign, was 2 weeks brand campaign. So I mean, it's just like 1 month out of 3 months. So therefore, the impact is not so big. But if you just isolate this campaign, and if you look at the visit uplift, it was very strong. The conversion rates were very strong. We improved the user experience on the website for klarmobil and also the sales numbers. This was a very successful campaign. And we just started the second test in October. And also, again, a small test. That's how we do it. Yes. First, we shoot with bullets. And then with cannonball balls. At the moment, we are still in the stage of shooting with bullets. So we do small tests, but they are already very promising. And yes, so also for the plan for next year, we then scale their investments, but they are performance based. That means that it's not that we are burning money. If we scale the investments, this will be also lead directly to more sales, so positive impact. And at the moment, we just do the first test with klarmobil. As I mentioned, we are preparing the freenet.de domain, will be done beginning of next year. And then we will also scale and freenet together with klarmobil. So most of the impact will come next year and also this year, but also for Q4, we are -- I mean, if you improve the conversion rates on the website, you'll see directly a positive impact because visits are rather going up. End of the year, we have some nice campaigns. And then it's -- at the moment, it's a little bit, but most of it, you will see in the -- over the course of next year. This was your first question then you asked for mobilezone. I mean, mobilezone, they -- it's still not closed. I haven't checked their conversion rates. And so their return on ad spend, how they do it. If you look at top line numbers, you can see that they are very successful. They have strong brands, Sparhandy is a strong brand, Deinhandy is a strong brand. They -- I think they do a very good job. They have good -- they have a good performance. And yes, after closing, we will look into how we can benefit from it. I'm sure that there are synergies. If you look at allocating resources, if you look at positioning of brands and all that stuff, this will be, I think, healthy for us and for the market. Regarding waipu.tv, there was -- still impacted by the end of the partnership with O2, yes -- old O2 users are churning. But even though we are growing and if you look into Q4, we anticipate that there will be a much stronger growth than in Q3. This will, I think, a strong quarter. There is -- I mentioned that they just started campaign for the strong starter package, then we have some campaigns where we bundle it together with mobile plans. This also makes a lot of sense. Then there's a Black Week. We are quite confident that we will see a nice subscriber uplift in Q4. Operator: And for the moment, the last question is from Simon Stippig, Warburg Research. Simon Stippig: First one would be, I wonder about your long-term guidance, 2028 or your long-term aspiration in 2028. Because certainly, by your acquisition of mobilezone and Germany segment, you should get a bump in growth. And you also mentioned the marketing contracts. Longer term, you could cancel in 2026 as I understood it. And then additionally, you expect from your campaigns quite some growth in the next year and beyond, hopefully. But on your presentation, you kept your longer-term aspiration in 2028 unchanged. So can we deduct anything from that? Or will you review that in due course? And then secondly, tied to that is the financing of the transaction. You mentioned you will or you will debt finance it and you have a bridge loan in place. But then you will receive around EUR 150 million in H1 2026 from the CECONOMY sale of your stake. And will you then lever up a little bit from your 0.5x net debt to EBITDA currently? Or do you intend to use that cash for financing the transaction. And lastly, I saw until the end of October, you bought back EUR 60 million in shares. Will you continue to buy back shares until the end of the year and then you stop or will you continue to purchase back shares until you have fulfilled the full volume of your EUR 100 million. Ingo Arnold: Yes. Thanks a lot for your questions. I think, yes, I think maybe in all levels, the long-term guidance could be different, and this is normal during the years. But I think what is important for us at the moment is that we stick to the whole amount to the EUR 600 million of EBITDA, for example. So we stick to the guidance 2028. I think we -- earlier or later, yes, we have to recalculate the levels and have to decide if it could be even more than EUR 600 million or if there could be changes between the levels and between the effects. But from our point of view, the most important thing is at the moment that we stick to the guidance. And yes, definitely, we will recalculate it during 2026. And then we -- maybe I think we have not decided when we give an update to the guidance 2028, but I do expect it for 2026, whenever in 2026. And then I think we -- all your points are correct. But I think this does not change the big picture for now or this does not make it less probable that we reach the guidance, it makes it even more easier to reach the guidance. So therefore, I think during 2026, we have to think about it internally. We have to -- have our discussions and then we will come back to you and to the market definitely. Then you asked about financing of the transaction. We use a bridge loan, which has a duration of 12 plus 6 plus 6 months. So we are not in the hurry to refinance it at the moment. But we do also have some promissory notes due in November. So what I would expect for the first quarter is a transaction with promissory notes where we refinance our debt. And yes, there's the chance that we partly repay the debt by the EUR 150 million. What we could get from CECONOMY, and we hope that we will get it during the first half of the year, and this will only change the volume of promissory notes, what we would do. So at the end of the day, there will be a slight up on the leverage. This is what I would expect. If we spend EUR 230 million on the one hand and if we do get EUR 150 million on the other, there is a slight increase, but I think this will not change the world. Concerning the share buyback, yes, you are correct. We spent something like EUR 59 million at the moment. So nearly EUR 60 million. And we announced during the year that we will pay at least the EUR 60 million, which was the cash overhang from 2024. So we spend it now. I think we will look into the cash flow development during -- until the end of the year. If there will be some room then we would invest more. If there is no room, then we would stop the program at EUR 60 million. But I think this is not clear. We have no final decision. We will decide based on the cash development in the fourth quarter. But I think we have done the EUR 60 million. So from today's point of view, I would not expect any additional share buybacks during the year. Simon Stippig: Okay. Great. And maybe if I can one follow-up on the bridge loan. Could you tell me the conditions of the bridge loan, like what you're paying there and interest costs? Ingo Arnold: I think they are relatively lower than what we pay in other instruments at the moment, but this is -- it is difficult to say what the margin on a bridge loan is because I think this is typical for a bridge loan that in the first 6 months, you pay much lower rate than an average market rate. And if you use it for longer, then it's getting more expensive. So I think the main information is that at the moment, it's much cheaper than what we pay on our outstanding promissory notes. Operator: And the last question is from Dhruva Shah, UBS. Dhruva Shah: Just a couple on waipu.tv. So it's clear that you expect an acceleration into Q4 of around 180,000 net adds to meet the EUR 2.2 million guidance for the end of the year. But one bigger picture question is just how do you see the competitive environment in the IPTV market? And then perhaps more specifically, if a large part of the growth you expect is going to be driven by the lower ARPU entry-level products or the bundling with klarmobil, how do you weigh up the balance between financials or ARPUs and volume in that unit going forward? Robin John Harries: Thanks for your question. And the competitive environment, so we believe that the product is superior. So when you look into ratings, reviews, when you test the product, it's really a fantastic product that makes a lot of sense, yes. And I think it's one of the best, maybe the best product in the market. Also, when you look at growth rates, I think it's outgrowing competition. It's really strong, yes. So therefore, I'm not afraid of any competition in the German market. I believe if we do our job, so there is no reason why we should not grow. And in terms of -- the offers at the moment is a start-up package. So -- but there is also a clear path for upselling. That means that we want to make it easier for people to switch from the old world to the new world, to experience the product, make it easy. And so therefore, it's also a product where you don't have or the channels is something where you can get to know the product. And then later, after a certain time, we will show you the -- like the entire world, the entire product you can experience it. And if you like it, you would have to pay more. So -- and I mean, I think it's normal for advertising for and promotions that you go out with reduced pricing. That's the same in the mobile world, but then you need smart upselling. I think we are quite good in it. And then there are also convincing arguments why you should do the upselling. So therefore, yes, it's -- and this is something that we have been doing throughout the year. There were always promotions and campaigns. Nevertheless, you can see that profitability went up quite nicely. And this is something that we are -- that we believe will also happen during the course of next year. We will further grow the customer base. We will further grow profitability and generate more EBITDA. So there, we are fully on track and absolutely convinced about the product and don't fear any competition in the market. Operator: And if there are no further questions from the audience, I would like to hand back for closing remarks. Robin John Harries: Yes. Thanks for attending our earnings call. So as we've said, we are very pleased about the quarter. We are confident about the outlook for '25. We are excited about '26, many, many initiatives. We have a very motivated team, open mindset. They show a lot of courage, they want to explore new opportunities. It's really -- it's a lot of fun. It's a very good vibe, good spirit here. And I'm very confident that we will keep delivering. So therefore, thanks for your time and looking forward to the next call.
Operator: Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the third quarter of 2025. We would like to inform that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. [Operator Instructions]. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation. João Fernandez de Abreu: Hi, everyone. Thank you for attending our third quarter call results. Let me start with the highlights of the quarter, which most of the figures was quite aligned with what we planned for the quarter. But I'd like to highlight a couple of things. The first one, it's send to the team in Pine Bluff, our congratulation for the process of turning around the business. So as you saw, we have the first positive EBITDA result for the quarter for Pine Bluff, and I think this is the new trend for the business. So the team over there is doing a great job. So we are very glad about what we have achieved at this time. And -- but the most important one here regarding the highlights is the cash cost. So we are glad to having the chance to keep the trend of reducing our cash cost. This is something that we're going to keep working, of course, not only for the next quarter, but also for the next couple of years, so we still see opportunities to keep gaining efficiency to gaining productivity. And this is an area that is under our control, and this will be in the next 2 years, our main focus. So reducing the total operational disbursement, it's absolutely key and will be the first priority for the organization here in the next 2 years. So this is something that is under our control, and we understand that we don't need to expect or to live a different cycle of price to do the job that we have been doing. We must anticipate ourselves to make sure that we bring to the organization any kind of opportunity to give -- to keep efficiency and productivity in our business. The consequence of that, it's, of course, deleveraging the company, which is absolutely a priority for us. So having the chance to deleverage the company even on a low cycle of price, it's something that we believe and that we want to keep doing, and not waiting, do you know, different cycles in terms of price to focus on deleveraging the company. We believe that we can do that even on scenarios as the one that we are living right now, okay? So that's my highlight. That's the main message. So now I will hand over to Fabio that will cover the Paper and Packaging business. Fabio Almeida Oliveira: Thanks, Beto. Good morning, everyone. Please let's turn to the next page of the presentation. Our third quarter results were highlighted by strong sales volumes in all markets in our first quarterly positive EBITDA for Suzano Packaging. We have had stable operations in all our mills with lower cash costs versus previous quarter in Brazil and also in the United States, with lack of annual planned shutdowns. Our third quarter volume marks the highest quarterly volume for our Paper and Packaging business unit in history, even faced very challenging paper market conditions. Print and write demand, including imports in the Brazilian market according to IBA, declined by 7% in the first 2 months of the third quarter compared to the same period of last year. However, domestic producers outperformed imports with a more moderate 4% decline and a 29% drop in imported volumes. The overall contraction in demand was primarily driven by the coated paper segment, which had benefited from additional demand during the 2024 election period. Demand for cut size and uncoated papers remained relatively stable. Turning to the international markets served by the company. We see that despite the structural reduction for print and write in mature markets, uncoated paper grades, our main export product performs better than the other grades. On the negative side, there are continued negative effects of economic headwinds and uncertainties related to the ongoing trade war. In Europe, demand has been more sensitive to those trends, reducing 6% on the year-to-date, while in North America and LatAm, demand for uncoated wood-free continue to be stable. Now looking at paperboard demand. In Brazil, we saw a 4% demand decrease in the first 2 months of the Q3 compared to the same period of last year. Sales from domestic producers dropped only 1%, while imports shrunk minus 14% in the same comparison period. In the U.S. market, data from the American Forest and Paper Association show SBS shipments have grown 5.9% on a year-over-year basis, while inventories have grown 17% on the same basis. This is mainly due to the ramp-up of a new SBS machine in the second quarter of the year. Yet, according to FP&A, our operating rate for SBS producers grew 3.4 percentage points versus Q2, reaching 86.5% albeit below historical levels. Looking at Suzano figures, our sales volumes were higher on a quarter-over-quarter and year-over-year basis. Our export volumes in Brazil remained strong in the period. Better sales performance in Brazil quarter-over-quarter reflect demand for uncoated and cut size while on the year-over-year reduction in Brazilian sales is led by the coated paper segment. Suzano packaging volumes recovered from the maintenance outage and increased 7% versus the previous quarter. In terms of pricing, prices from sales in Brazil reduced 2% on a quarter-over-quarter due to seasonality and product mix, but were 2% higher on a year-over-year basis. Prices on other external markets suffered by our Brazilian operations, reduced 6% quarter-over-quarter and 10% year-over-year, reflecting challenging market conditions across all regions as well as FX effects. Prices in dollars for Suzano packaging grew 2% quarter-over-quarter, reducing 1% in reais due to FX effects. Our EBITDA has reached BRL 542 million in the quarter, an 11% increase quarter-over-quarter and a 10% decrease year-over-year. On a quarter-over-quarter basis, we have had improvements in our cash costs in Brazil and also in the U.S., higher sales volumes and on the down side, lower prices in our export markets and unfavorable exchange rate. On a year-over-year basis, the decrease in EBITDA is mainly due to lower export prices and exchange rate. This is our first positive quarterly EBITDA for Suzano packaging. Looking ahead to Suzano's Paper and Packaging business performance, we have planned maintenance outages in Limeira and Suzano mills in Q4, which would have an impact on costs. During the Limeira outage, we will finalize the implementation of a series of improvements at the mill, which will upgrade the site's sustainability attributes and reduce its pulp and paper cash costs moving forward. Ex outage, we expect costs to be stable in the next quarter for all our paper operations and sales volumes should increase in line with the historical seasonality for the period. We expect a stable sales prices in Q4 and better regional mix due to higher sales volume in the Brazilian domestic market. Suzano Packaging EBITDA will continue to improve in Q4 and beyond. Now I'll hand over to Leo, who will be presenting our pulp business results. Leonardo Grimaldi: Thanks, Fabio, and good morning, everyone. Let's now turn to our pulp business unit, where I'd like to share some highlights for the third quarter. The early July announcement of potential 50% tariffs from Brazilian pulp exports to the U.S., which could compromise the midterm continuity of pulp flows into this market and its customers introduced an unprecedented short-term turbulence in the market. This uncertainty affected logistics streams and reduced visibility for market participants regarding near-term dynamics, which contributed to a deterioration in sentiment and triggering a further drop in pulp prices in China to sub-500 levels. Prices in Europe and North America follow the same downward price trend with the usual lag. As the quarter evolved, when Brazilian pulp was included in the U.S. exemption list, the restored tariff-free access allowed operations to stabilize and ease commercial risk. It's worth noting that although the potential new U.S. tariffs on Brazilian pulp would likely be neutralized over the medium term given the tendency of global pulp markets to rebalance through interconnected trade flows, the initial reaction from pulp and paper participants underscored market sensitivity to trade policy signals. As usual, in pulp cycles, the sub-500 price point triggered a strong buying activity from Chinese customers, including integrated paper producers who also secured significant pulp volumes during the quarter. Our order intake levels in China were abnormally high throughout the quarter, generating backlogs of deliveries, which persist to this day as our sales to the other regions in the world were executed as previously planned for the quarter. We have effectively sold all our production volumes during Q3, keeping our inventory stable in line with our commercial strategy. Our invoice volumes were, however, impacted by our announced production curtailment, which started in July in the last 12 months. We have announced 3 rounds of price increases for all markets starting August, which are being implemented as we speak, but still not yet reflected in our third quarter's invoiced prices due to the carryover effect on our higher-than-usual backlog, as well as the lagging effect in Europe and North America. Looking to the right side of the slide, despite strong volumes, a combination of lower prices in U.S. dollar terms and a less favorable FX resulted in a BRL 4.5 billion EBITDA for our pulp business unit, equivalent to 49% EBITDA margin. Now looking forward, I would like to highlight the following points. In China, following our strong sales performance in the previous quarter, October order intake also reached high levels with all of our customers confirming purchases with a new $10 price hike, including integrated paper producers who keep buying market pulp. As these orders were received or closed in the last days of October, you probably saw that, that's already reflected on today's index publication. Since September, paper and board production in China has continued to grow, driven by seasonally higher demand during this time of the year and supported by exports of coated paper, tissue and carton board that exceeded levels seen in the same period of 2024. In China, price increases were announced by paper and paperboard producers for November across most grades. Although this is still in the process of being implemented, these moves may indicate a turning point in paper pricing dynamics. Still on the outlook for paper pricing and pulp demand, September brought yet another shift for Chinese producers. Stricter regulations on imported recycled grades, which represent over 3 million tons of furnishing to this market, prompted domestic pulp producers to fill the gap using unbleached BCTMP and other mechanical pulp grades made from local hardwood, which has consequently driven up demand for local wood. In addition, wood chip demand in China is being fueled by the ramp-up of new integrated capacities launched since late 2024 as well as the restart of some of Chenming's operations. Despite uncertainties around local wood prices and its full market impact, these developments are expected to intensify demand in the coming months and further pressure wood chip prices. We continue to monitor wood cost dynamics in the region as rising demand for Chinese wood chips also supported by tighter recycled fiber imports points to a more favorable paper pricing environment and higher cash costs for Chinese market pulp and integrated paper producers. All considered, we expect that pulp prices will continue to move up from the current levels. During the next months, we will seek the implementation of the remaining part of our price increase announcement, meaning $20 on a net basis, which were still not implemented. Volume-wise, as we progress through the fourth quarter, we continue to allocate our targeted volumes across all regions with full confidence in closing 2025 as planned. On the supply side of the equation, it's important to notice that hardwood pulp prices have remained below the estimated cash cost of roughly $600 per ton for 13 consecutive months. According to a leading consultancy in our sector, over 15% of global hardwood market pulp production today is operating underwater, and softwood pulp producers are facing an even greater pressure. Zooming into Europe, producers have now enjoyed 1 year below breakeven levels considered their regional sales only, and we estimate that more than 25% of European capacity is currently unprofitable, all based on local delivery costs and the European price index net of rebates. As I have stated in multiple occasions, I view this scenario as completely unsustainable and believe that more significant supply side adjustments are likely to take place going forward. Still on the supply side, just this week, a major Brazilian competitor has announced further capacity swings to dissolving pulp, taking approximately 600,000 tons of paper grid pulp out of the market in '26 when compared to 2025, which should improve the S&D fundamentals for the upcoming months. With that said, I would now like to invite Aires to address our cash cost performance for the past quarter. Aires Galhardo: Okay, Leo. Thank you very much. Moving to next slide. The cash costs, excluding downtime in the third quarter came in at BRL 801 per ton, making a 4% decrease compared to the second quarter. The most significant driver of this reduction was the lower cost, the lower wood cost mainly due to improved wood quality, resulting in a lower specific consumption and operational efficiencies in harvesting and logistics. Additional contributing factors included lower consumption and price of key inputs such as caustic soda, chlorine dioxide and lime, reduced energy costs, especially for natural gas, driven by the decline in the Brent price and FX appreciation, which lowered the cost of dollar-denominated foods in local currency. When we compare to our cash cost to the third quarter in '24, the cash cost decreased 7%, reflecting gains from operational efficiencies, input cost reductions and scale. The key highlight was the broad contribution of Ribas units, which supported improvements across all cash cost components. The highlights of improved performance were wood costs, which saw the most significant reduction driven by shorter average ratios, better performance on the field and a lower diesel price, which scale gains also helping dilute indirect costs and lower input consumption, especially caustic soda and fuel oil, supported by operational improvements and fuel to gas conversion in the lime kilns at the Ribas and Imperatriz mills. Looking ahead, we are pleased to share that the cash cost production ex downtime, is already running below the BRL 800 per ton mark. This solid performance give us confidence that we will deliver in the fourth quarter '24-'25. The most competitive quarterly cash cost of the year, while also supporting a full year average close to the level recorded in fourth quarter '24. Now I hand over to Marcos to continue the presentation. Marcos Assumpcao: Thank you, Aires. Good morning, everyone. So I'll start with the leverage. Our leverage in dollar terms ticked up to 3.3x. Despite our net debt remained stable in the quarter, our EBITDA last 12 months declined mainly because of lower pulp prices. In terms of our net debt, as I mentioned, it remained stable on a quarter-on-quarter basis, and I would like to highlight that we continue to generate positive free cash flow throughout the quarter, and that we saw some nonrecurring events impacting our liquidity and leverage in the quarter, namely the wood deal that we did with Eldorado and also the premium we paid for the repurchase of the bonds of 2026 and 2027. These events totaled close to BRL 1 billion. In terms of liability management, we did a lot of different transactions with a highlight of the issuance in September of $1 billion new 10-year bond for Suzano issued at the lowest corporate spread ever for the company, and we also repurchased the bonds maturing in the short term, 2026 and 2027. The result of that is that we were able to reduce our short-term maturity risk, and we also were able to increase our average terms of our debt from 74 months to 80 months without changing the average cost of our debt, which remains stable at 5%. Moving to Slide #8. We highlight the healthy hedge portfolio that we have at this point with a put option of BRL 564 and a call option above BRL 650. Our total portfolio is at $6 billion. And if we were to -- if the BRL remains stable at BRL 532, which was the level of the closing of the third quarter, we would have a positive cash impact of nearly BRL 2.5 billion in the upcoming 2 years, including the fourth quarter, with the impact of positive BRL 800 million in 2026. Moving to the next Slide #9. We would like to reinforce our guidance for CapEx for 2025 at BRL 13.3 billion, which implies a CapEx of BRL 2.9 billion in the last quarter of the year. Now I would like to hand over to Beto for his final remarks. João Fernandez de Abreu: Thank you very much, Marcos. A couple of things that we understand that it's absolutely key to send as a final message regarding the next couple of quarters. So looking ahead, as I said, we will keep focusing the whole team in the cash production cost, not only for the fourth quarter, but we understand that, that must be attendance in the way that we manage the business, and this is dealing with something that we control to be prepared for any kind of scenario in the long term. So that's the first thing. The second one is that we have a couple of investments that we made in the last, mainly a couple of 2 years. As I mentioned, Suzano Packaging. There's a new tissue mill in Aracruz that just start up and also keep working in the progress to the closing of the JV with K-C. So this is an investment that we have made that we must keep working to gradually improve performance in packaging, in Aracruz, but make sure that we will extract the values and the efficiency that we mentioned when we signed a JV with K-C. So having said that, the focus is extracting value from the investment that we have made already and not putting other initiatives on the table. So how to summarize this is, focus on what we control. We keep reducing cash cost and also making sure that we will extract the value from the investment that we have been making. Having said that, I will open for the questions. Operator: [Operator Instructions] Our first question comes from Caio Ribeiro with Bank of America. Caio Ribeiro: So I wanted to dive into a little bit more detail on your view on the dynamics of wood chips and softwood in the Chinese market specifically. So first of all, I wanted to ask you if you've noted any meaningful changes in terms of the prices of domestic wood chips in China as a result of all of the supply additions that we've been seeing coming from Huatai, Nine Dragons, and in particular, Chenming's announced resumption, right? And whether that has had any meaningful impact in your perception on the marginal cost of production of pulp in China? And then secondly, in terms of softwood, right, clearly, the dynamics for that fiber have been weaker in comparison to hardwood with prices dropping, while hardwood has been on a recovery track. And our perception is that this has largely to do with an abundance of this type of fiber, right, softwood in Chinese markets as a result of higher domestic production. So I wanted to ask whether you've seen any meaningful changes there in terms of domestic producers in China perhaps reducing softwood output as a result of the recent drop in softwood prices, and whether that incentive from customers to switch from softwood into hardwood is still present, or if there have been any changes there given that reduction in the spread between both fibers? Leonardo Grimaldi: Caio, this is Leo here. Thank you for your questions. Regarding wood chips, yes, we have seen an uptick in the prices, not only of the Chinese wood chips, but also of imported wood chips in this last 2, 3 months. Imported wood chips on a BDMT basis have increased almost $10, which would generate roughly an effect of $20 in the cash cost of bleached hardwood production, while Chinese wood chip prices as per our monitoring has increased from $25 and in some cases, $40, and that's always a double effect, approximately on the cash cost of production. So your assumption is aligned with ours that yes, this will create an effect in an increasing cash cost of Chinese producers, both of market pulp and also integrated paper and packaging producers, which we are seeing that are now and more intensely pushing for paper price increases. I believe obviously, this is a consequence of higher costs in their season, and that should support the S&D fundamentals for hardwood for the upcoming months. Regarding softwood, yes, indeed, it's weaker. It seems to be trending in the opposite direction than hardwood for the past months, especially in China. I think there are 2 effects. First is the availability of the unforeseen softwood chips at a very competitive price, in some cases, at the same price as hardwood chips since the beginning of this year due to the infected wood and the policy to try to cut and use this wood as soon as possible. We believe that this wood will last more 2 to 3 quarters in the market. And that is putting pressure on softwood both by some integrated players, now producing softwood in their system, and they used to buy it, but also having less -- putting -- leaving less space for softwood pulp. And the second factor, which I would like to call your attention is the fiber-to-fiber movement. Obviously, even with the gap that has reduced from over $200 to roughly $150, $160, it's a huge incentive still for fiber substitution. We see a lot of traction, a lot of action in China, many, many customers interested in seeking our support in this journey. So in terms of how can they be less and less dependent on softwood and more and more dependent on hardwood fibers like ours. So I think it's a double effect that is making the scenario for software producers a bit worse than what we see in hardwood today. Operator: Our next question comes from Daniel Sasson with Itau BBA. Daniel Sasson: My first question goes to Aires. Aires, if you could comment a little bit about your cash costs. You mentioned that you're running already below BRL 800 per tonne in the fourth quarter. But considering the deal you announced with Eldorado that -- and the TOD and that you are not that far from your expected cash cost level in 2027, according to our TOD, if there is room for additional improvements or lower cash costs in the medium term? I'm thinking more specifically about 2027, not to anticipate what -- any revisions you might make to your TOD, but to think if this cost-cutting trajectory is going to be somewhat linear throughout 2026 and 2027 or if you have specific events that we should see maybe in 2027 so as to drive your costs down? And my second question to Grimaldi. Thank you so much for the comprehensive backdrop that you viewed for pulp prices. Grimaldi, if you could just discuss a little bit about your expectations for the main topics to be discussed in 2 weeks at the London Pulp Week or in 1 week at the London Pulp Week -- last week, Chenming's stoppage was maybe the most important topic. And exactly, you mentioned in your speech that you're thinking -- that you are still hopeful or optimistic about price increases going through. Is there anything that changed over the past couple of weeks, so as to give you or to leave you more optimistic given that the industry was not able to absorb the price increase attempts in September and October, right? Is there anything that changed at all? Or if you could explain why you are optimistic or more optimistic now than you were in the past maybe 2 months? Aires Galhardo: Daniel, thank you for your question, Aires speaking. Considering the deal with Eldorado, we start to supply our facilities in Mato Grosso do Sul with this wood probably in January. Then we do not suffer any impact, just probably reschedule the sequence that we receive at the facility in the fourth quarter to rebalance consider this new volumes. But the main reason of this deal that give you our rationale to do this was that our reduced -- our consumption per ton of wood, consumption wood per tonne in the coming years. When we compare with your previous analysis, we are considering in the business case and with the first samples that we have of this wood, a reduction of around 4% the necessity of wood per ton in Mato Grosso do Sul. If you consider that we will supply on an average, 18 million cubic meters per year, we will need 4% and less for the coming years to produce the same amount of pulp. That's the rationale that you have to do this deal. We'll try to explain better in the Suzano days in the next month. Then the rationale to next year and the other one is to running always below 800 tonnes per quarter. Of course, we can be affected with some sched off downtimes that will affect in a specific quarter. But the idea that we have in our plans that our average will be below 800 tonnes per year. Leonardo Grimaldi: Okay. And Daniel, now it's Leo here. I'm going to answer the second part of your question regarding expectations for London Pulp Week. I think first, expectation, which is more and more clear is that this market scenario is completely unsustainable. And as we are going to a market that is a core of production of softwood, I think this tonne is even higher than what we see or sense when we're talking about South American pulp production. It's completely unsustainable, even if we consider European cash costs and sales into the European market. Again, as I stated in my speech, as per our calculations, more than a year already bleeding 25% of the local hardwood production. So this is unsustainable and the fact that the market is unsustainable as is, I think, will be one of the main factors being discussed during London Pulp Week. I also think that what will be a topic is the rhythm of unexpected closures. As I mentioned during the last call, we saw a very low level of unexpected closures in the first half of this year. And our line of thought is that all the instabilities around the world and geopolitical issues made some decisions not to be taken in the short term as many were on the wait-and-see mode to try to see what could be the scenario after there was a clear view on tariffs. As this is now clear, we see that the addition of this unsustainable scenario with a clarity in terms of tariffs will speed up the amount of unexpected closures, commercial downtimes that we see in the market. And in fact, as per our controls according to consultancies numbers, if we compare the unexpected closures of beach chemical pulp in the first half of the year, and just the 4 months of the second half of the year, meaning until October, there is already a 40% increase on disclosed unexpected closures. So our thoughts or our line of thought seems to be executing or seems to be happening as we speak. And we again believe much more has to happen under this very depressed pricing scenario. Now regarding your question on my optimism a quarter ago and today, I think my optimism level is slightly better now despite I was optimistic in the last quarter. Thus, the reason we have announced a sequence of 3 price increases. And the reason why we did that is because, obviously, we were monitoring order inflows in all markets and in China, more deeply even with the purchasing patterns of integrated paper producers, the amount of capacity on the water in the world as we speak, and this feeling of optimism now has been a bit upgraded, if I could put it this way, due to the fact that we're seeing a reversion in the cost of wood chips to Chinese producers. As I mentioned to Caio previously, we have seen this $25 to $40-ish increase on the prices of BDMT, meaning an impact of anywhere from $50 to $80 in the cash cost of Chinese producers who are using Chinese wood. And this obviously put pressures in the whole system and establishes a new grown for what they can accept or base their decisions in terms of timing that they buy market pulp rather than consume local wood as well. So it's my optimism increased a bit, I would say, due to the effect of this new scenario regarding regulations on recycled fiber, as I mentioned, and wood increase. It is, however, important to say that my optimism is somehow limited. We see gradual price increases, but under this oversupply scenario, unless something major happens on the supply side of the equation, my optimism is not as big as you can imagine. So I would just like to point this out. João Fernandez de Abreu: I'm sorry, just complementing the first question regarding the TOD that you asked. Just a remark here, we are completely committed with the guidance that we shared with the market regarding what we have to deliver by 2027 and confident that we're going to be able to deliver, okay? Operator: Our next question comes from Rafael Barcellos with Bradesco BBI. Rafael Barcellos: Beto, I wanted to use one of your highlights during your speech. I mean, congratulations for the results in your U.S. Packaging business. It's good to see that you are on track to keep delivering in this new business. And my first question is exactly about it. I mean, what can we expect in the coming quarters? Or do you have any sense of EBITDA contribution from this business for next year? And ultimately, what is the full potential in the long term for the business? And the second question, Beto. The second question is about Lenzing. If I'm not wrong, you can already exercise the option to acquire an additional stake in the company. So could you -- could you please share with us your overall thoughts on the investment? I mean, other than that, after roughly a year, I mean, what has changed in terms of how do you see Lenzing as part of your portfolio? João Fernandez de Abreu: Thank you very much. Yes, since October, we already have the option to execute if we want, as you know. We are not considering to use this coal in the short term. We're still with the team, analyzing all the trends, all the investment in further capacity in the business, mainly on dissolving pulp globally. This is a market that it's also facing a business environment in terms of competition, mainly in Asia, which we should further analyze. So I'd say that the best answer for Lenzing now is we will keep as it is with the 15% and keep analyzing the business and keep this study. There is no plan for using the coal in the short term. Regarding Suzano Packaging, as I mentioned, we are very glad to be anticipating, I would say, the business plan. Firstly, in terms of positive EBITDA after taking a business that used to have a negative EBITDA. A lot of initiatives have been implemented on the commercial side, on the procurement side, on the logistics side. On the logistics side, we have been able to take the advantage that we have a strong logistic operation in U.S. that's led by Leo's team in U.S. and there's our synergy on those negotiations to do all the logistics for the business. We were able also to adjust the team for the reality that we have in the company and in the market. I would say that it's still a lot to come. Fabio has a clear plan for the next 2 years, not only for generating positive EBITDA, but also generating the amount of cash that we are expecting for the business. It's a small business, as you know, but it's helping us a lot to understand the market, of course, to extract value from the unit, but also to understand what is for a company moving abroad. Having the chance to implement our principles in terms of management in a different future. I think we are also learning a lot in Pine Bluff that will help us on the K-C JV in the future. So I cannot disclose a number in terms of next figures, but I would say that we are very glad regarding what we have delivered so far. Operator: Our next question comes from Caio Greiner with UBS. Caio Greiner: My first question on pulp. I wanted to go back to that discussion on the long-term fundamentals that Suzano discussed during the Investor Day. I mean we've seen a significant amount of capacity additions in China in 2026, but pulp production in China still seems to be growing only gradually. Still, I guess, the market in general and investors have been really concerned about this idea of China becoming the dominant player in the industry. And again, I know you provided a deep dive on this during our Investor Day in 2024. So I just wanted to understand if there are any updates on that structural view being that maybe a tighter wood chip market as we already discussed, anti-involution ideas in China. So I guess the question is, since last year, have you become more or less concerned at the margin regarding the structural fundamentals for pulp? The second question on Kimberly-Clark and following up on this last topic. Just maybe Beto or Fabio, if you guys can give us an update of how the asset is performing. How -- if you have been able to dig a bit deeper into each asset that you're acquiring, if there's more clarity on the synergy potential, fiber-to-fiber potential? Or maybe if you got the chance to understand if there are any assets that don't really fit quite well into the portfolio that are likely to be sold. Anything that you could comment here would be really helpful. Leonardo Grimaldi: Caio, this is Leo here. I try to answer your question, not taking color out of our Suzano Day 2025 as we are planning to update completely the scenario that we presented last year, bringing insights on the verticalization effect of Chinese production in our hardwood market. And again, it's important to say that as we have local market intel teams in most major markets, China included, this anticipation of view of trend makes us, I guess, more prepared for any kind of reaction or action that we need to take in terms of what's coming ahead of us. So our view, I would say, is quite neutral at this time. I think the same trend that I have presented to you and to all of you during our last investors call is maintained. We see -- we still see this verticalization affecting our market. But as you mentioned, we are not seeing this pulp production yet growing. Obviously, when you put all these projects in a time line, still a lot of them, I think the effect we are going to see on a bit more short to midterm, the next 4 quarters, which has 2 ways of looking at this, right? The negative way is impacting, obviously, market fundamentals. And the positive way is a much bigger demand for local wood chips and a pressure that this could further pose on wood chip prices. And again, we have to monitor that. And as we speak and see what's going on is that this market prices that we still see, which are low, despite they're going slightly up from the 494 valley a few months ago, still is incentivizing many, many Chinese producers, paper producers, integrated paper producers to buy market pulp. And this is the reason why we see that pulp production is yet not growing or is not growing, while imports of pulp are booming in the market. You probably saw that hardwood pulp is -- the imports of hardwood pulp is growing more than 11% year-to-date to China. However, I would say that our view remains cautious, right? We are in a cautious mode, which obviously will depend on how we interact and see these moving parts in the wood chip prices in China. And also, as I mentioned, this completely unsustainable pricing scenario and how it correlates to cash costs around the world and will depend on supply side adjustments in the near term. João Fernandez de Abreu: Luis, do you want to jump in and I can complement? Luis Renato Bueno: Okay, Beto. Caio, this is Luis speaking. As we have already disclosed before, during the phase pre-signing, we have visited all the mills around the globe, and we were very positively impressed at that time with the conditions of the plants and also housekeeping and everything. So at this stage, we have received more information and have been talking to KC given the constraints that the process requires. And we are more positive with the initial estimates that we had. And as time goes by, we will have more time to fine-tune the estimates and to build a business plan for closing. So our idea is when we close the deal, we will have already a business plan for the coming 2 years with the right level of detail on which are the levers to generate value on the deal. João Fernandez de Abreu: Just to complement on that, we see the value creation in the business that we mentioned. It's very clear for us the elements that we have analyzed before the deal and maybe further elements that we will find, and we are already discovering. I would say that our main concern is not regarding the assets. If there's opportunity to optimize the asset, we will do it. If there's opportunity to optimize geographies, we will do it. This is something that usually is not in the agenda of a big multi-national, but we will consider portfolio management as if necessary. I would say that the main elements that we should take into account against not the assets, it's not the carve-out that we have to do, which is difficult. But it's putting 2 cultures to walk together with the same values, but having the ability to extract the best of each one. That's the main challenge that this organization have in this process. Operator: Our next question comes from Yuri Pereira with Santander. Yuri Pereira: I'd like to ask maybe if you have any information about the floods in Southeast Asia, if you see any impact -- any further impacts on wood prices in China, if you have any information, please? And regarding dissolving pulp, do you see more shifts like Bracell's one for the next year? If you can recap for us what's going on in the dissolving pulp market to result in this shift or if it's only low hardwood prices per se? Leonardo Grimaldi: Yuri, this is Leo here. I'm going to answer both questions. Obviously, floods have influenced also wood chip prices in the short term. I didn't mention it because obviously, this is very, very punctual and short-term-ish, first in the southern part of China. And now as you probably saw in Vietnam 2, 3 days ago where the daily rainfall was a record all-time high. But, yes, obviously, this is also influencing wood chip price and its dynamics. In terms of dissolving pulp, what we see is that today, prices in DWP is trending higher than the historic average of delta between hardwood and DWP over $250, and that's incentivizing this flex capacity to swing in that direction. So in this case, yes, we expect that possible new flex capacity moving or shifting from hardwood, which, as I mentioned, is unsustainable to dissolving is possible. Operator: Our next question comes from Lucas Laghi with XP. Lucas Laghi: I just have one, I mean, on CapEx. But could you please provide us an update on -- specifically on expansion CapEx. I mean, if we exclude the BRL 935 million expected from your 3 main projects, I mean, according to your latest presentation deck and considering the BRL 1.6 billion in the guidance for 2025. I mean, is it reasonable to expect that this line should reduce in the next year proportionally to this reduction on the 3 main projects that you guys are concluding this year? Or I mean should we expect Suzano to continue to approve new competitive projects like those ones already in 2026? And if you could also link your rationale for this -- the approval of this competitive related projects in terms of market conditions. I mean, it would be important as well for us to better understand how to think of this expansion CapEx line going forward? Marcos Assumpcao: Lucas, Marcos here. We will update the market with our guidance for 2026 CapEx by the end of this month. But I will try to give you a little bit of a trend, what we see in terms of CapEx. As you mentioned, we still had in 2025 disbursements for the Cerrado project. And we also had the conclusion of some growth projects that we undertook in 2025, namely the Fluff project at Limeira mill, which will start up in the fourth quarter. Also the additional capacity in tissue at Aracruz Mill and the new biomass boiler at Aracruz as well. So going forward, we should expect a declining trend in terms of CapEx for next year as we will have lower disbursements and also we'll have less projects in our pipeline. Operator: Our next question comes from Henrique Marques with Goldman Sachs. Henrique Tavian Marques: So just regarding pulp prices, I mean, Leo, you mentioned that pulp price situation is unsustainable. But at the same time, the pulp price cycle has been -- the hikes have been very gradual, right? So I think this is the main difference from what we've seen in other cycles. At the same time, we have APP OKI entering the first half of next year alongside other projects in China. So just to get a sense of where exactly do you see pulp price cycles in the future? Like do you think we are seeing a derating of this range of prices? Like in the past, I mean, we would usually see prices going above $700 per tonne in both cycles. And now the -- I think it's hard to think that we'll see prices reaching $700 again. So just wanted to get your sense on what exactly do you see these price ranges going forward? Leonardo Grimaldi: Hi, Henrique, thank you for this question. It's a tricky one to answer as obviously, it has several parts that are connected to our commercial strategy and are very sensitive in that case. But let me try -- and I'm going to give a lot of color in terms of how we are seeing the variables that can change this game in the short term and looking forward during our Investors Day. But in principle, they all originate from the fact that we have now been living a scenario where for several, several months the industry is bleeding, right? And several things could happen to change this scenario. First is, again, reintensifying of permanent closures. We have seen a decline in permanent closures in BCP during this year. Again, we suppose that a lot of that has to do with the uncertainties that the geopolitical and tariffs have created in the decision-making process of this extremely high cost and unsustainable producers that we see in the Northern Hemisphere. Second is the unexpected downtime rhythm going forward. Even though I mentioned that we see an uptick already in the 4 months of the second semester, compared to the first semester of this year, it's still low compared to previous years. For the same, we expect or we suppose for the same reasons of the one that I mentioned regarding permanent closures and all the uncertainties during these tariffs and geopolitical timing. This, again, is unsustainable and something should or could happen in that direction. Third point that could change these dynamics is the timing of the new projects being implemented. Today, we have official news regarding OKI, which are the same as you have. But obviously, all of this more challenging scenarios can stimulate different actions in terms of time to market of new projects. And in the same token, time to market of the verticalized projects in China or their ramp-up curves, right? So that is a variable that we have to follow very closely and could change completely the game as we look forward. And fourth and very important as we talk about verticalization in China and the impact it has on reducing demand for hardwood pulp. But there is a huge opportunity, which is what we see on the Western world. More than -- or 2/3 of the pulp produce in the world is integrated into paper and packaging production. Many, many old sites, old mills, which were the origin of paper production and board production are in Europe and in North America and persisting this trend or this pricing trend, we believe that these mills are unviable or unsustainable. So we believe a lot in the thesis of deep verticalization in the western part of the world as a consequence of what we're seeing in China as we speak. Operator: Our next question comes from Eugenia Cavalheiro with Morgan Stanley. Eugenia Cavalheiro: I wanted to explore a bit more what you're seeing as growth opportunities in the paper market in the U.S. And also on the profitability side, where do you feel like -- what level you feel like it's reasonable for the company to achieve? And how far are you from that right now? Fabio Almeida Oliveira: Eugenia, it's Fabio here. Beto, I can take that about the U.S. We're still a very small player here in the American market. We have 45% of the SDS market. So still plenty of rooms to grow. At the moment, what we are doing here, Eugenia, is focusing on our growth in foodservice. It's trying to diversify a little bit from the liquid packaging board market that we are concentrated, and it's doing well. Regarding business moving forward and our profitability moving forward, we cannot provide any color on that, but I would like to say that there's still lots of opportunities for us to improve in terms of costs here, and we're going to be addressing that in the next quarters and moving in the next year. João Fernandez de Abreu: Thank you, Fabio. Absolutely aligned with what we said in the beginning, which is focus on efficiency. So as Fabio said, a lot of -- still a lot of opportunity to improve portfolio and cost in the current facility that we have in U.S. And Eugenia, there is no further, let's say, inorganically alternative for U.S. in the short term at this time. So we are again completely focused on extracting the value from those assets that we have a prior already. We finalize the call here. And I want to remember that we have the Suzano Investor Day 2025 on December 11. So we will be great to have all of you with us. So thank you for attending the call. And the RI team is always available to clarify any further questions. Thank you very much. Operator: The Suzano S.A. third quarter of the 2025 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.
Helen Hickman: Good morning, everyone, and welcome to Global Fashion Group's Q3 2025 Results Presentation. I'm Helen Hickman, CFO of GFG, and I'm here today with our CEO, Christoph Barchewitz, who will join us for Q&A. Today, I'll provide an overview of our third quarter results and full year guidance. After that, we'll open it up for questions. Starting with a summary of our Q3 performance. Our NMV was broadly stable year-on-year with 0.4% decrease on a constant currency basis. Our gross margin improved by 1.3 percentage points year-over-year to reach 46.1%. Our adjusted EBITDA margin benefited from the gross margin expansion and disciplined cost management to deliver a strong 4.4 percentage point improvement year-over-year to a positive 1.6%. This marks our first positive adjusted EBITDA on a last 12-month basis for our current footprint. Let's take a closer look at our group KPIs. For over a year now, we gradually slowed the rate of active customer decline each quarter. In Q3, active customers declined 2.3% year-over-year to 7.4 million, driven by fewer churn customers in all regions. Order frequency increased 0.4% year-over-year to 2.3x, marking the first increase since Q1 '23. In Q3, we generated EUR 239 million of NMV, which is broadly flat from last year on a constant currency basis. The group's marketplace participation increased 2 percentage points to 39%, supported by ANZ's fulfilled by offering. Average order value rose by 1%, primarily due to price inflation, which was partially offset by reduced items per order. Orders declined by 1.4% year-over-year. We continue to experience FX headwinds this quarter from a significant impact of the Australian dollar remaining weak, down 8% year-on-year against the euro. This means we had a lower euro reported value for NMV, and average order value earned in Australia, our largest market. Moving on to revenue and margins. Our revenue decreased by 1.5% on a constant currency basis year-on-year. Our continued gross margin improvement resulted mainly from a higher share of marketplace and platform services across all regions. This flowed through to improved our adjusted EBITDA margin, and combined with cost reductions led to a strong 4.4 percentage point improvement year-over-year. Our robust year-to-date performance has resulted in an adjusted EBITDA loss of EUR 7 million, representing a significant EUR 20 million improvement versus last year. Importantly, we achieved a major milestone for GFG by reaching an adjusted EBITDA profit of EUR 2.4 million on a last 12-month basis. Now let's turn to our regional performance. Both ANZ and LatAm have continued their positive trends by delivering top line growth each quarter this year. ANZ NMV grew by 4.9% and LatAm by 3.8% year-over-year on a constant currency basis. LatAm also made return to active customer growth in the quarter. SEA remains challenged and a focus area for us to stabilize and turn around business. All regions delivered year-on-year improvement in gross margin. Now let's move to our cash flow for the quarter. Our normalized free cash flow improved to EUR 11 million year-on-year as it benefited from a EUR 7 million improvement in adjusted EBITDA and a EUR 6 million CapEx reduction in part to the completion of our 2024 OWMS project investment. We had EUR 6 million working capital outflow, which was elevated versus last year due to payables timing differences. Normalized free cash flow for Q3 was negative EUR 15 million. Looking ahead, Q4 is our largest quarter along where we seasonally generate strong positive cash flow. We continue to have a solid liquidity position with EUR 136 million of pro forma cash and EUR 85 million of pro forma net cash at the end of Q3. Pro forma net cash excludes our outstanding convertible bond liability and other smaller loans. Since the Q3 close, we repurchased EUR 6.7 million more of the bond at a discount. We remain open to considering all opportunities to strengthen our liquidity, including potential debt financing and repurchases of the remaining EUR 40.9 million of outstanding bonds. Now looking to the rest of the year. We have delivered on our expectations to be year-to-date. We are now narrowing our NMV expectation for negative 5% to positive 5% to negative 2% to positive 2% on a constant currency basis. This equates to around EUR 1.01 billion to EUR 1.06 billion. Given our positive trajectory on adjusted EBITDA and considering Q4 is our most important trading quarter, we expect to achieve our breakeven target and deliver single-digit euro million results of adjusted EBITDA for the full year. Our full year expectations that leases, working capital and CapEx remain unchanged. We will share our expectations for 2026 at our Q4 and full year results presentation in early March. We'll now open the call to your questions. If you'd like to submit a written question, please take on the speech bubble at the bottom of the screen. Thank you. Operator: [Operator Instructions] We will now take our first question from Anne Critchlow of Berenberg. Anne Critchlow: I've got a few questions, so I'll ask them one by one. First of all, on the level of inventories at the end of Q3. I just wondered how those compared to last year? And also, if you could comment on the composition of those inventories in terms of aged stock and stock being in the right place and the right time and so on. Helen Hickman: Yes, of course. So our stock in quarter 3 this year is broadly flat with where we were this time last year. With regards to quality, we are confident in the quality as we are heading into obviously our busiest trading season across all of our regions. And our aging profile is broadly the same as we disclosed at the H2 results on our aged inventory and for us, we define that as over 180 days being about 14% of our total stock. Anne Critchlow: 14%. And I guess, much depends on Q4. But with regard to normalized free cash flow for the full year, where would you expect to be compared to last year's EUR 42 million outflow at this point? Helen Hickman: So obviously, yes, I think you hit the nail on the head, because obviously, a lot depends on the coming couple of months with regard to that being our seasonal peak. But if we sort of go through the component parts, we obviously are guiding into a breakeven to single-digit positive adjusted EBITDA so that will give us a significant improvement year-on-year on our profit flowing through to cash. Last year, we did have significant inflow sort of over EUR 30 million on working capital. And we're saying that this year, that will definitely be muted and closer to sort of a breakeven. And then we've also given an indication with regards of what our leases will remain broadly constant year-on-year and our CapEx is running at about EUR 15 million. So all of those will then give us constituent parts to normalize free cash flow. Obviously, the quantum of the profit is the key moving items in there and the delivery of where we have over the next couple of months will define that. Anne Critchlow: That's very helpful. I've got a question on CapEx outlook for next year as well. So I understand that various systems investments have been completed now. Do you have a sense of where CapEx could come down to next year, please? Helen Hickman: I mean we'll obviously provide all of our next year guidance when we announce Q4 and full year in March. But I think it's safe to say we have no significant infrastructure projects on the horizon in the short to medium term. So our CapEx will definitely be concentrated around our internal technology CapEx, which again makes up the majority of the EUR 15 million this year. Anne Critchlow: Very helpful. I understand the new -- a question on Southeast Asia. The new Chief Executive has started only in September. But I think previously, you talked about focusing on the top 30 brands in Southeast Asia. So I just wondered if you have a sense of early thoughts on what the potential strategy might be first impressions and possible turnaround. Christoph Barchewitz: Yes. Thanks, Anne. I'll take that. So we -- as you say, we have our new CEO for the region in the seat since September. So it's obviously early days for him. But what his mandate is and the objective obviously is to continue the turnaround actions we initiated already quite a while back. The activities we focused on both on the commercial side, so you mentioned the top 30 brands and really curating the assortment more narrowly around the 4 categories and the most relevant brands. That is continuing, and it's also yielding results. So we see better results in the bigger brands than we see in the longer tail, and that's obviously part of the deliberate strategy of discontinuing along the long-tail assortment. And then also on the marketing side, we're seeing some progress in terms of both our efficiency, which protects our bottom line to some degree in this turnaround as well. So I think we're broadly on track with the turnaround action. We don't expect the significant change in direction. And from all I know we -- I would definitely be very confident in the leadership team in place now there, which is driving all of these actions. So I think, as always, these things take a little bit of time to come through. The one that has the longest kind of period is obviously the buying activity since we have quite a bit of forward commitments. We don't think we're in any way overcommitted, and we've brought down our commitments for this year relative to where we were at the beginning of the year quite substantially. And we're taking a cautious approach for our retail buying and concentrating that on the largest brands for 2026. And I think as you know, we have a very large share, over 50% of our business in the region coming from marketplace. And so from a balance sheet and risk management perspective, we are in a quite favorable position there, and that will also protect cash and help us manage profitability overall. Anne Critchlow: That's pretty helpful. So you mentioned the share of marketplace giving you some protection. Does that confirm your sort of view in patience in turning this around? And how many years do you think you would give it until you might consider an exit from that region? Christoph Barchewitz: Yes. I think -- I mean the -- while we're obviously not pleased with the top line trends and the double-digit declines we've not seen for quite a number of quarters is not where we want to be in and there's many factors that we've also covered in the past calls that affirm that. But I think we see definitely a core base of the customer and a core assortment that is very relevant and that is an attractive business to pursue. One thing we don't talk about as much that I think is also very important is we have a quite sizable B2B business in the region, which helps us on the overall financial profile. And so when you look at the last disclosed regional EBITDA we have is LTM for June this year, and that was under EUR 1 million negative on EBITDA. So it's not like despite all the challenges on the top line we are improving on the gross margin side, and we are managing costs, be it marketing investments and other variable costs, but also the fixed cost base very, very carefully to make sure that the overall, let's say, financial burden on a group is within a manageable range. And we expect that to continue in that way and then obviously improve in the course of '26 and '27. Anne Critchlow: Just got 3 more questions, but I wondered if anybody else wanted to have a go. Operator: And we will now take our next question from Russell Pointon of Edison. Russell Pointon: A couple of questions, if that's okay. First of all, great to see the narrowing of the guidance range for the NMV. That implies obviously -- some good things are not coming quite through as quickly and perhaps there's less negative on some side. So could you just talk about what is a little bit better, what is a little bit worse to narrow that range? Interesting that ANZ and LatAm, the revenue -- the annual revenue growth will decline in Q2. And the second question was in terms of the gross margin, it's mainly mix, which is driving that improvement in gross margin. So therefore, retail margin is flat. So could you just talk about some of the drivers to that retail margin, please? Helen Hickman: Yes. So let me take your first question, Russell, with regards to guidance. So we have been broadly consistent throughout the year and considering we are hitting at that midpoint. So if you think about Q4, we're minus 0.4% and year-to-date, the group we're 0.1%. So given some of it is actually more mathematical in the fact that we've now only got a quarter of trade left. And whilst it's our largest trade to then be reaching the extremities of potentially plus 5 and minus 5, we've been over a quarter worth of trade would have actually made the quarter performance beyond aspiration and terribly bad on the other end. So the narrowing is a reflection of the passage of time and to the fact that to date, where we are at 0. And actually, we still within the quarter, have a relatively large range even to hit the plus 2 for the year minus 2 for the year. And we wanted to maintain that breadth because as you know, it is our most critical, it's also hugely competitive time of the year. So we need to see ourselves to manage that. You're right with regards we've continued to see the growth in LatAm and ANZ. LatAm has come off a little bit compared to where we were at quarter 2. Some of that has been driven by the sort of the change in season and it being seasonally very cold when we're not -- traditionally, it would have been much hotter in Brazil. So some of our winter inventory running out. But on the flip of that, that whilst we're still disappointed with it, obviously, we're seeing a reduction in the decline in Southeast Asia. So hopefully, that covers the way around the top line. With regards to margins, so yes, with regard to our 1.3 increase, again, there's a variety of components. But we're seeing trading margin increase predominantly in LatAm and Southeast and -- LatAm and Australia and some of that driven by actually reduced discounts on a year-on-year basis. This year -- this quarter, sorry, marketplace participation has had a key driver in that 1.3% increase as we've increased our overall participation by 2 percentage points and also was still relatively small. We've also seen a year-on-year increase in our platform services, which has also contributed quite strongly to the gross margin increase in the quarter. Operator: We'll now take our next questing from Antonio, NuWays. Antonio Perez: Could you provide us a little more color on the main cost drivers of the improvement in adjusted EBITDA, please? Helen Hickman: Yes. Of course, Antonio. So they're in line with some of the cost drivers that we've spoken about. So looking around fulfillment efficiencies and capability around picking, scheduling, batching, we've done a lot of work with regards to delivery and improving some of our -- times of our delivery carriers. We have had a continued review of our organizational structures, which we've been speaking about for many quarters, so sort of year-on-year, we're about 10% down in total headcount as a result of organizational design and restructuring. We've even reviewed all of our tech contracts, so it's really a mixture of efficiencies in our fulfillment, cost savings with regards to people and structure, all of our sort of G&A contracts, whether that be tech or more general G&A and also being disciplined around reviewing our leases and we've come out of a couple of more expensive sites, office sites, et cetera. So it's very holistic both operationally and more sort of G&A focused. Antonio Perez: That's super helpful. I have two more questions, if that's okay. What's the short-term plan to turn around Southeast Asia? Is there anything in particular you have in mind that could have a good impact? And also, is there -- maybe this was also asked before, but do you have a time horizon in mind? Or maybe is there a certain point, a certain decision point in which divestment could become an option? Christoph Barchewitz: Yes. Thanks, Antonio. I'll try to address that. So I mean there isn't a silver bullet, obviously, in these types of turnarounds in terms of one activity that would drive all the financial profile we'd like to see. So the challenges that we're facing, we see as really at the core of the activities of the business. So on the one hand, that is the commercial side, the assortment that we're offering, the level of relevance, exclusivity and competitiveness of the assortment. We've had a very broad assortment to cater to different price points, very different audiences across the region. Obviously, between Singapore customers and Indonesian customers, there's many, many differences in their interest, their spending power, their fashion trends, et cetera. But what we're trying to do and have already executed quite a bit on in the course of this year is to really sharpen and focus on the big brands that resonate basically across the region and generally with our global brands as well. So if you look at the side of the app, you will see very familiar global brands has been highlighted as the most relevant assortment. I think Helen has also talked about the freshness of our inventory. We have had -- because of the historical performance sometimes challenges with just too much aged stock. And obviously, that impacts the relevancy to the customer. So bringing in as much newness as possible on the retail side where we do the buying, but also working very closely with the marketplace partners to make sure that the stock that is available for sale on the marketplace side is of the current season, most relevant stock, which has not always been the case. So that's the supply side, if you want where there's much more to be done where we're making some good progress relative to where we were a year ago. And then the other side, on the demand side, what we're trying to move to is a much stronger focus on higher-value loyal customers and really growing share of wallet with those customers. So what that will eventually mean is that we will have a shrinking customer base, but hopefully, a higher spend per customer for the remaining base due to higher frequency and partially also higher price points that those customers are buying. And so we've adjusted our CRM, our VIP program and other things to really focus on that customer side and that demand side. So also, I would say of the two sides of the equation that we're focused on, our operations are very efficient and work well, and we don't have significant issues. There's always room for improvement, but it's not a substantial issue. And our tech is also stable and reliable and not a significant issue in this turnaround. And then the last point I'll add to this is the B2B business where we are serving brands to support sales on the dot-com, and that is something that we will continue to focus on and try to also broaden the customer or the partner base to have a larger number of meaningful partners that can also then leverage the spare capacity we have in the fulfillment centers in the region in a better way. So while we want to turn around the top line of the B2C business, getting a bit more volume from the partners on the B2B business can help with the overall financial profile. And so at this point, we don't have any intention of divestment or anything like that. As always, in any business, we will always reconsider and look at options that present themselves, but fundamentally, we want to improve the core dynamics of the business, and we are confident that we can do that with the team in place, the learnings over the years and also our track record of growing the business in ANZ and LatAm after some challenging periods in those markets post-COVID as well. So I hope that gives you a bit of context of where we're going here. Antonio Perez: This is super helpful. If there's still room for one question, I would like to ask you, in terms of seasonality we -- or I know that Q3 is usually weaker compared to the high peak quarters due to Ramadan or to the holiday season in Q4. But it was this Q3 a normalized weaker Q3, so to say, as usual? Or it was more pronounced or even better? What did you see? What were the trends for the quarter? Christoph Barchewitz: Yes, that's a good question. So you're completely right on the seasonality, and I think one thing always to call out that the holiday period and Black Friday, 11/11 are fixed in the calendar, although even there the day of the week that these events fall on, we see as usually a bit of an impact on how a year turns out or a simple trading period turns out. Obviously, on a Ramadan season, we have a change in the calendar every year. And so it moves earlier in the year, every year. So that seasonality we've obviously seen this year in particular, that the cutoff between Q1 and Q2 in Southeast Asia having an impact. Coming back to Q3 in your question, we have had no abnormalities on a year-on-year basis or any hard or soft comps that would be material. Yes, there's always some details around certain actions, certain events in the market when exactly did a certain campaign fall in the calendar, but big picture, I would say this is a fairly normal quarter that we've seen. Antonio Perez: Maybe just thinking about your last answer to the strategy in Asia. You told us that the continuous focus is to target the core customer base, the loyal, high-value customer base. But we've seen that the, for example, the turnaround efforts in customer numbers in LatAm and Australia and New Zealand have paid off with successful marketing campaigns. Can we expect as well a significant marketing effort to drive or to reconnect or to capture this or engage better with this core customer base? Or will it be more on the price side or the offer side? Christoph Barchewitz: Yes. Thank you. Great question, actually. So we definitely see an opportunity and a need to reinvest into our brands in Southeast Asia. We have very high brand awareness. But I think we clearly need a refresh of what the brand stands for, for the customer. From a timing perspective, we only want to do that when we feel like we have all of our capabilities and our assortment lined up to exactly deliver that. So simply speaking, if we're still going through clearing a lot of a stock it's probably not the right moment to go with a brand campaign that is focused on business, exclusivity, the best global brands, et cetera. So we need to bring that in balance. And that is definitely something that is on the horizon for 2026. And we have seen, in particular, with the "Got You Looking" campaign in Australia that, that can really make both existing customers perceive the brand in a new and different way and also bring back a lot of churn customers or bring new customers to the platform and certainly as a business that's now 12, 13 years old, 14 in some markets, we have had continuous need of reinvigorating the brand and articulating to customers of what the brand stands for. And so this is on the cards for 2026. Don't expect a big one-off investment that goes materially beyond our existing marketing budget or so, but we may have some quarters in which we put some extra marketing investment in and that may delay some profitability improvements by the business. Operator: We'll now take the follow-up question from Anne Critchlow of Berenberg. Anne Critchlow: I've got about 5 questions, please, if that's all right. So just a follow-up on Southeast Asia for background understanding, Do you target different products between the different country sites? So Singapore versus Indonesia, for example, or do you put everything on all of the sites and basically let the customers filter it down themselves? Christoph Barchewitz: Yes. Thanks, Anne, that's a really good question. So this is part of the complexity of Southeast Asia because it is not fully up to us. So the principle we try to apply is all brands, all assortments across all markets. That's the ambition level. But then when you go into the next level of detail, we run into the brands very often having different setups. So a given brand may have a distributor in Indonesia, have a subsidiary in Philippines and have no presence in Malaysia. And so in Philippines, we may be able to have trade on marketplace; in Indonesia, we have the distributor trade on marketplace. But for Malaysia, we need to buy in the stock. So these complexities are a big driver of challenges in the region. If you word it more positively, when you build those capabilities of actually operating across multiple geographies, multiple business models and multiple partners for the same brands, that is a moat that is not that easy to crack and to replicate in the market. So we have the ambition of having all stock and all products available, but we run into the degree of restrictions and preferences of the brands that make it different. And then from a consumer perspective, we obviously have different preferences. And even within the same brands, different products, different price points may resonate. So to give you an example, as you know, the big sports brands will be in our top brands, they may be contributing significantly to sales in all markets, but when you double-click into what products are selling, there may be slightly lower price points in Indonesia and in Philippines and higher price points, for example, in Singapore, in terms of what the customer is actually buying, and we need to obviously reflect that in the assortment that we offer. So there's definitely a significant degree of complexity around that, which we think has some structural impact on all players around gross margins and inventory efficiency in the region, but we're not trying to use that as an excuse. We definitely want to do better in how we manage our commercial activity. I hope that gives you some context. Anne Critchlow: It does. But just to be clear, in a particular country, for example, a brand may say that you mustn't show the customer's product for that brand. Is that correct? Or do you just put everything on all of the websites? Christoph Barchewitz: No, it depends on the relationship and the contractual agreement with the brand. So the brand will say, okay, if you're buying this from us, this is only for sale in Malaysia because in another country, we have a local distributor who has an exclusive right to that market. And so you need to work with that distributor in that market to have new products on the platform. So there are these restrictions, and we -- as you can imagine, we're always pushing against those or can trying to partner to kind of maximize sales for our brand partners across the region, and we will be much more comfortable taking inventory risk when we can settle the product across the market. On balance, the vast majority of our assortment is regional. But when you go into the nuances of what sells and the restrictions behind it and the business model of how it is implemented, it is not only a regional assortment. Anne Critchlow: Understood. That's really helpful. I've got a question about social media, but also now agentic commerce. So from the two channels that, in theory, threaten online aggregators, but also two channels that you can work with. So I just wondered what your approach was here? And where you think this is headed for the industry? Christoph Barchewitz: Yes, very exciting topic. I think we -- so one of the big benefits here is we've been at this for many years, and we've seen evolutions of both for the customers they are -- in terms of the platforms they're using, what type of engagement they have. You were obviously trying to be in sync with the customers. And so that has led us to be more active on TikTok, et cetera, et cetera. So in terms of the platforms, we're obviously agnostic, and we're going where the customers are and that's very important. From an agentic perspective, this is emerging, and it's going to be very exciting and interesting. I think we are very well positioned given that we have a long history of making sure that our assortment, the brands we carry, the content that is on our platform is very visible historically on SEO with especially Google. Perhaps, the same kind of applies in this new world. So obviously, we're learning, there are many things where it's a bit foggy and it's not clear where that lands. But I think we feel very, very comfortable that we can adopt this. And again, one benefit we have with our footprint is that by and large, a lot of these things play out first in other geographies. So if you think about the rollout of certain features in some of the global AI platforms, they usually start in the U.S. and then kind of roll out abroad in some cases in China and then roll out into other geographies. And so we can get the insight of what the impacts are and how to work with it and then give an early adopter in our geography. So we feel pretty comfortable that on balance, this is upside for us and not downside. Anne Critchlow: Really interesting. And I've got a question on tariffs, of course. And just an update on tariff impacts, if you would, either in the supply chain or from the consumer perspective. Helen Hickman: Thanks, Anne. We've been consistent in talking about this in previous questions that we're not seeing anything of significance, we haven't in the past, and there's nothing to note now across our relationships with our suppliers or customer sentiment in our region. So obviously, it's an ongoing dialogue with our suppliers, but there's nothing to note on and nothing that -- nothing of wide concern. Anne Critchlow: So second to last question on the competitive environment in various regions, just wondering how that's trending with regard to, say, Shein. And also perhaps the growing importance of secondhand, how does that affect your markets? And then any insight into consumer behavior and sentiment generally would be interesting. Christoph Barchewitz: So yes, Anne, I'll try to cover that. That's a very broad question. But I think -- so on Shein and the broader, let's say, low price on fast fashion side, there isn't really any significant new development. We've moved our assortment upwards quite substantially, and we're definitely seeing more the competition playing out between the different platforms being fashion specific or general merchandise that are offering those lower price point, largely unbranded products. So there's very, very intense competition in Brazil around this, also in Southeast Asia, obviously. So in that sense, nothing new for us, and we don't see any change in the impact to us from that side. Sorry, what was the second part of your question? Anne Critchlow: Just if you could give an insight into consumer behavior generally ANZ versus LatAm, for example? Christoph Barchewitz: Yes. So ANZ's consumer sentiment is reasonably okay. I think we see people focused on big campaigns and big events and maybe sometimes rolling back a little bit in between. So the promotional activity and the competitive intensity around that is quite high. But as you can see from the gross margin, we're able to manage that and very healthy position around our inventory. We know from some of our competition that they may have a bit more overhang on the inventory side and then that obviously drives the pricing behavior. The big campaigns or seasonal sales is just underway at kind of kicking off these days. So we'll see how that plays out over the 4 to 6 weeks. But generally, I would say the consumer is there, but knows there's going to be deals and is kind of looking for those deals, and I think that's fairly consistent. Obviously, we always try to push further on our exclusive product with our own brands and also exclusive third-party brands or lines from third-party brands and kind of differentiated that way our loyalty program is now fully launched in the region, and that's very exciting, and we think this is going to be a driver of getting more of the wallet share from our higher value customers and really getting people who maybe currently are buying, let's say, 4, 5 times a year to give us another 1, 2 or 3 purchases every year. So that's a big focus to feel pretty good about that. And then LatAm, I mean, some of the headline indicators recently have been more negative in terms of consumer sentiment. But then at the same time, when we look at the industry more broadly, we do see some growth. So it may not be clearest of pictures there and the reporting season for Q3 that gives us better visibility on some of the fashion players is underway right now. So I think we see that and maybe to comment on Colombia, that has been in the news from a geopolitical perspective a lot. And certainly, that has a degree of influence on what's happening in the market, but we've been executing very well on that market. And I think as we highlighted also at the Q2, Colombia is growing better or in line with Brazil. So very pleased with that performance in particular. Anne Critchlow: Very helpful. And then the final question from me is just on fulfilled by. If you could talk a bit about the margin structure? And how that basically benefits the gross margin? Because I think as many players fulfilled by is largely logistics and really quite low margin. So just wondering how that works and also how it's progressing? Helen Hickman: Thanks, Anne. So fulfilled by obviously is part of our wider marketplace offering with our marketplace partners, so as you would imagine, we have a higher commission rate with those partners to actually be able to manage their inventory and delivery and fulfillment within our existing infrastructure. So where we see the benefit is obviously we are firstly utilizing some potential excess capacity within our fulfillment center. We then obviously get many more benefits for our customer with regards to more seamless deliveries, especially if they're ordering maybe a retail product and marketplace product, actually, that's the pick and packing delivered at the same time. There's also the efficiency with that with regards packaging. With regards to our sort of profile. So we're most advanced in our Southeast Asia region with regards to fulfilled by offering. It's now very much a growth engine in Australia. The implementation of our OWMS system at the back end of last year actually opened up and facilitated fulfilled by to make it much more easy for our connect business and our brand partners in Australia and whilst it's on our pipeline in Latin America, it's relatively nascent but again, a growth engine for '26 and beyond. Operator: We have no further questions in queue. I'll now hand over for webcast questions. Helen Hickman: So two questions from Dan Curtis on the webcast. First, Netflix recently said Brazil, CIDE tax had a big impact on their results? Does the [indiscernible] face similar learn exposures to that 10% tax on overseas payments? Yes. I mean what I'd say is [indiscernible] has got quite different exposure to Netflix with regards to our mix of payments et cetera, is different compare something like the Netflix licensing where that licensing content from offshore. So it's not something that high on our radar, but we're super confident that all of our cross-border supplier payments are managed within existing intercompany and transfer pricing rules and obviously, we're compliant with all taxable countries. The next question, how do you see an increase in referral traffic from customers via AI chatbots? And if so, do those convert materially better than traditional SEO traffic? Christoph Barchewitz: Yes, that's a good question. And I think we've touched on that briefly earlier. It's still a very small share of our traffic. I think what is very important is that our ambition, especially for our core existing customers is that the starting point for engaging with fashion is our app. And we obviously have now very high app share across the group. And so we want people really to start from the app either because they get a notification from us or they may get an e-mail from us that kind of pique their interest or because the natural go to place is the app. And then obviously, within the app, we want to drive a better and better discovery journey, leveraging AI and letting the customer engage in a somewhat similar but more relevant way than they would be on a generalist AI platform like chatGPT. So I think that's a focus area for us in particular. Then when it comes to acquiring outside traffic and new customers, certainly, this channel will play an important role, and we do see that it is a high intent channel relative to some others. But I think it's very early to say. And I think we also can't obviously tell at this point, what the types of customers are that are coming through this channel, generally, we would expect it to be early adopters probably a little bit more affluent than the typical customer, et cetera. So there will be some bias in that data. So we're monitoring that fully. Helen Hickman: Next we have some questions on M&A. To summarize, are we planning to pursue any external growth opportunities via M&A and what are our debt financing plans? Christoph Barchewitz: Yes. So we're not looking at any acquisitions or anything, at least not of any meaningful size in the context of the group. So -- and that's not a focus area for us. We're very focused on delivering, obviously, this year, profitable EBITDA and then continued improvement next year and improving cash flow situation as well within the balance sheet that we have. And I think we've been very clear around our financing that, obviously, we've managed the convertible liability very proactively over the last few years, given the change in circumstances for the group. And I think captured a very significant discount for our shareholders, and we will continue to manage all of our debt, including some of the smaller facilities we use for working capital bank guarantees and those types of things. And so there's no bigger plans here, but we always look at how we optimize our balance sheet and in particular, manage the seasonality in our business, which, as you all know, is quite strong with significant cash out in Q1 and significant cash in, in Q4. Helen Hickman: That is all the questions. Thank you all for joining today. If you have any further questions, please reach out to the Investor Relations team directly.
Operator: Good day, everyone. And welcome to the TELUS 2025 Q3 Earnings Conference Call. I would like to introduce your speaker, Robert Mitchell. Please go ahead. Robert Mitchell: Good morning, everyone. Thank you for joining us today. Our third quarter 2025 results news release, MD&A, financial statements and detailed supplemental investor information were posted on our website earlier this morning. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zainul, Navin, Jason, Tobias, Hesham. Briefly prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the U.S., including in our third quarter 2025 and our annual 2024 MD&A. With that, over to you, Darren. Darren Entwistle: Thank you, Robbie, and hello, everyone. In the third quarter of 2025, TELUS delivered another period of strong customer growth and financial performance, powered by our team's relentless focus on operational excellence. Our results showcase the compelling value of our comprehensive bundled services across mobile and home solutions, and we're doing that in a complementary fashion with the strategic rollout of TELUS PureFibre connectivity to homes and businesses nationwide. We're delivering far more than connectivity. We're empowering Canadians with transformative digital experiences, including AI-powered smart home energy solutions, including cutting-edge tech-enabled health care and well-being services and as well comprehensive security offerings at the dispositions of our client. These offerings are revolutionizing productivity and enhancing quality of life for our customers. Indeed, this quarter, we achieved an industry best 288,000 total mobile and fixed customer additions. Our close to 21 million customer connections reflects an industry-leading 5% growth as compared to the same period a year ago. Furthermore, our sustained focus on delivering exceptional client experiences continues to drive leading customer loyalty metrics. This was demonstrated by our industry best postpaid mobile phone churn of 0.91% this quarter as we progress through our 12th consecutive year below the 1% level, truly a hallmark of this organization and our culture. Looking at our financial results, we achieved solid and resilient TTech EBITDA growth of 3%. In mobile, we drove healthy phone net additions of 82,000 and leading connected device net additions of 169,000. These results were supported by our ongoing focus on profitable margin-accretive customer growth. This is once again evidenced by our consistent industry-leading customer lifetime revenue, underpinned by our industry best churn result, which remains clearly the hallmark of the TELUS organization and the financial results that we derive from it. Let's turn now and take a look at wireline. TELUS delivered another quarter of industry-leading total fixed customer additions. Indeed, we have consistently delivered positive wireline net additions every year since the third quarter of 2010. This is a remarkable 15-year track record in that regard. This included an industry best 40,000 Internet net additions underpinned by our leading PureFibre offering. Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis continues to differentiate us from the competition in a way that is relevant to customers. Turning to TELUS Health. We continue to execute against our global growth strategy, generating revenue and adjusted EBITDA growth of 18% and 24%, respectively. Moreover, we've now extended our reach to over 160 million lives covered on a worldwide basis. This global scale of our TELUS Health footprint stems from a variety of factors, including smart, targeted strategic investments. It comes from continuous product innovation with a digital and AI thesis. It comes from broadening our sales channels with strong cross-selling execution that is paying off for us, and it comes from disciplined cost optimization through technology integration and synergy realization. Importantly, these factors are all solidly anchored in our customers' first promise. Our LifeWorks integration has now delivered $417 million in combined annualized synergies, $329 million from cost efficiencies and $88 million from successful cross-selling strategies. Notably, this is nearly 3x above our initial target of $150 million that we set when we first acquired LifeWorks in September of 2022. Across our B2B portfolio, we have a potent story of differentiation and diversification. We are the market leader in Canada in respect of IoT, private wireless networking and 5G solutions. Moreover, we have a leading cybersecurity practice that is at the forefront of how AI is changing the cyber threat and cyber protection landscape. Over the years, through a thoughtful and cohesive data-centric strategy, we have significantly and successfully built high-value diversified lines of business. These global business verticals include TELUS Health, TELUS Agriculture & Consumer Goods and of course, TELUS Digital. This has enabled business resiliency through the diversified portfolio approach whilst providing global scale and diverse sources of revenue and EBITDA. Notably, at the end of October, we completed the acquisition of TELUS Digital, making a significant upward move on our data and AI competency set, and this marks a significant milestone in the strategic evolution of our organization. We expect this integration to generate approximately $150 million to $200 million in annualized cash synergies and will deliver the $150 million within the 2026 financial year, and that will be driven predominantly through operational efficiencies. Let's make sure we can do here what we did on the LifeWorks synergy realization front. The synergies coming from the privatization of TELUS Digital include accelerated digital and AI transformation. They include smart business simplification strategies, and they include strategic cross-promotion of our industry-leading product portfolio and services. This will further strengthen our financial performance and yield significant shareholder value creation. Our well-established AI-enabling capabilities across TELUS will continue to be an integral part of our business and increasingly critical to our success. These capabilities are driving materially better outcomes within our organization. And in turn, TELUS can be leveraged as an innovation lab as a product creator, as a testimonial to commercialize these capabilities to support our external customers on their own AI journey to win in their respective markets. Indeed, the opportunity at TELUS is substantial. Combined across TELUS, our AI-enabling capabilities are approaching $800 million in revenue in 2025. This is expected to increase to approximately $2 billion by 2028, representing an annualized growth rate north of 30%. Notably, this is composed of solely external client revenue, and it excludes other parts of our global B2B portfolio such as health and agriculture and consumer goods. Supporting this growth are 4,000 dedicated professionals and AI engineers delivering digital products and solutions that help clients transform their businesses and to do that transformation at scale. One component of this growth is our September launch of Canada's first sovereign AI factory. This firmly establishes TELUS' leadership position in this space as we have ready today, the infrastructure and compute ecosystem to help Canadian businesses broadly deploy AI. We are the first North American service provider to become an official NVIDIA cloud partner, utilizing our state-of-the-art data centers to support customers and partners such as OpenText, League, EY, Accenture and Railtown, to name but a few, who immediately benefit from our sovereign AI compute solutions. TELUS is providing the secure sovereign foundation our country needs to create made in Canada solutions to accelerate growth and to advance our competitiveness in the global digital economy for generations to come. To wrap up, our Q3 performance reflects the strength of our core operations and the power of our differentiated strategy. The reliability of our results demonstrates our team's dedication to delivering superior customer experiences across our industry-leading wireless and PureFibre broadband infrastructure and technology. Our substantial network investments enable positive social and economic outcomes for Canadian communities nationwide whilst continuously enhancing our operational performance, our financial results and our customer satisfaction. Moreover, these network investments are powering Canada's digital sovereignty through our pioneering and leading AI infrastructure and technology. And as we look ahead, we are positioned for sustained success, underpinned by ongoing EBITDA expansion and disciplined capital deployment that together generate substantial free cash flow growth for our organization and our investors. Our strong financial foundation supports our industry-leading dividend growth program where today, we increased our quarterly dividend at a moderated rate of 4% to $0.4184. This is reflective of our ongoing commitment to delivering sustainable shareholder returns. Furthermore, we continue to progress considerable deleveraging initiatives. Notably, we remain on track to achieve our leverage target of 3x by 2027, whilst at the same time, stepping down and importantly, eliminating our discount dividend reinvestment plan. In September, we closed our transaction with La Caisse establishing Terrion as Canada's largest dedicated wireless tower operator. This unique partnership will enhance wireless connectivity for Canadians whilst unlocking significant value for TELUS shareholders by strengthening our balance sheet, accelerating our deleveraging program and providing another growth vector for TELUS to leverage. The team is working hard to quickly operationalize Terrion, which already has 3,000 wireless sites across the country. Moreover, it's begun construction of its first multi-carrier tower in the Nanaimo, BC with more planned in the months to come. Finally, in closing, with Remembrance Day approaching, I would like to offer on behalf of the entire TELUS organization, my heartfelt gratitude to our veterans here in Canada and around the globe. These brave individuals, including my own father, Desmond, who served with the Royal Canadian Navy in the Second World War, demonstrate immense courage to preserve the rights and freedoms of all Canadians. I hope you join me in wearing a poppy as we pay tribute to those who serve and who continue to serve so that we and our future generations can enjoy a better life. And on that note, I'll turn the call over to Uncle Doug. Doug French: Thank you, Darren, and hello, everyone. Mobile network decreased slightly, consistent with the second quarter at 0.6%. This performance reflects mobile phone and connected device subscriber growth and 9% increase in IoT revenue, offset by lower mobile home revenue -- or ARPU, sorry. ARPU continues to improve, declining 2.8% in the quarter, a 50 basis point improvement sequentially. We continue to see improvements quarter-over-quarter across new activations, rate plan changes and customer renewals, reflecting our ongoing efforts to mitigate network revenue pressures. Fixed data revenue grew 1% year-over-year, making us the only provider to report positive growth and making our 19th quarter of that positive -- positivity. Within Consumer, data revenue increased by 4%, driven by a 6% increase in residential Internet revenue, reflecting continued customer growth and higher ARPU alongside higher security and automation revenue. In business, fixed data declined with variability from year-over-year events and customer contract changes. This was primarily offset -- this was partially offset by continued small -- growth in small and medium businesses, leveraging our differentiated and diversified portfolio of solutions. TTech adjusted EBITDA, excluding Health increased by 2% alongside a margin expansion of 210 basis points to 43.4%. These results were driven by our consistent emphasis on profitable growth alongside our ongoing focus on cost reduction and our increased adoption of TELUS Digital solutions, resulting in meaningful competitive benefits. In Telus Health, operating revenues and adjusted EBITDA grew by 18% and 24%. This growth was driven by global business acquisitions, including Workplace Options as well as organic growth in payer and provider solutions, reflecting strong performance in collaborative health records and recurring revenue in electronic medical records and virtual pharmacy solutions. TELUS Health adjusted EBITDA margin expanded 60 basis points to 17.1%, slightly lower than Q2 as we begin post-acquisition and integration work associated with Workplace Options. Looking at TELUS Digital segment, operating revenue grew 5% with solid performance across many industry verticals. Across the service lines, we continue to see strong performance in our AI and digital solutions. However, pressures on TELUS Digital's profitability persist with adjusted EBITDA margin at 11.1% for the third quarter. We remain focused on mitigating the operating margin pressures while making targeted investments in customer quality and planned initiatives to transform our operations through tech enablement and greater efficiencies globally. Near-term synergies of the TELUS Digital privatization include the elimination of public company costs, lowering borrowing costs as we leverage TELUS' stronger credit position and the operational efficiencies as referred by Darren. These digital -- TELUS Digital remain a segment presented in our financial statements to the end of 2025. We'll review TELUS Digital as a segment and provide more update when we release our Q2 results in February of 2026. On a consolidated basis, net income in the quarter of $431 million and EPS of $0.32 were higher by 68%, primarily driven by the gain on the purchase of long-term debt in respect of our tender process that closed in July 2025. On an adjusted basis, net income of $370 million decreased by 10%, while EPS of $0.24 was down 14%. Capital expenditures, excluding real estate declined by $16 million or 2%, driven primarily by the elimination of certain -- by the completion of certain projects for wireless and fiber networks, in addition to our continued investments in AI. Overall, capital intensity was 12%. That was an improvement from 13% in the prior year and continues to lead the industry. Free cash flow of $611 million increased by 8% compared to the same period a year ago, driven by TTech EBITDA growth, lower capital expenditures and lower contracted wireless volumes. Looking at our guidance for 2025, our target for TTech operating revenue, including our Health segment, is expected to be at the lower end of our target range of 2% to 4% with variability on mobile handset equipment revenue as we go into a high-volume fourth quarter. Importantly, all other targets remain unchanged. These targets demonstrate the resilience of our business and the effectiveness of our operational execution. Following TELUS Digital's completion of privatization, we begin to execute our integration plan. The guidance that we previously issued for TELUS Digital will no longer be relevant and will not be updated for the rest of the year. Turning to our balance sheet. The average term to maturity of our long-term debt stands a little over 13 years, and our weighted average cost of capital is 4.61%. Our leverage ratio has improved to 3.5x, a decrease of 20 basis points sequentially from the second quarter of 2025. The improvement was driven by the cash received as a result of our partner, on Terrion, and as we -- and we did the repayment of the TELUS Digital credit facility in the third quarter. We anticipate leverage in the fourth quarter to increase slightly as we pay for the TELUS digitization -- TELUS Digital privatization. We remain on track to deliver our leverage ratio of approximately 3x by the end of 2027, while thoughtfully stepping down our discount on our dividend reinvestment program beginning in 2026 with a full removal by the end of '27. Our financial position will continue to strengthen and we will continue to drive shareholder value throughout 2025 and beyond. We'll continue to focus on EBITDA growth, moderating capital intensity as we progress to our target of 10% robust free cash flow generation and our active asset monetization program, including securing partners when appropriate for TELUS Health and TELUS Agriculture. With that, Robert, back to you. Robert Mitchell: Thanks, Doug. Karl, we are ready for questions, please. Operator: [Operator Instructions] The first question is from Maher Yaghi from Scotia. Maher Yaghi: Great. Maybe a first question on wireless and the second one on Terrion. So Doug, you mentioned in your prepared remarks how ARPU has improved a little bit sequentially. But can you give us maybe an overview of what you think will need to happen to return to growth on the ARPU front. And maybe just some views on the outlook for churn. You're running at a low churn, but it's starting to -- we saw a slight increase in the quarter. Maybe just what's driving that behavior just on the wireless. And the second question on Terrion is how should we think about the capital needs for the business going forward? Are you looking to transact and acquire towers. Or it's just going to be building new colocation towers in different parts in Canada. And maybe the accounting of how we'll see the cash flows from that business flowing into your free cash flow calculation? Darren Entwistle: All right, Doug. Go ahead. Second on the last one, you're the Chair of Terrion. So we'll do Terrion on and then maybe pass to Zainul for ARPU. No, I think you should do it all. Go ahead. Doug French: All right. So on Terrion, I think the best way to describe it is, yes, we are looking at acquiring towers where appropriate to do so, and that could be either outright purchases and/or partnerships on bringing more partners into our overall partnership. We will continue to build, and we have a densification of our network and building our capacity, as even Darren highlighted, some of the new ones that we've already started. Cash flow out of the gate, any of the build costs are coming out of Terrion. And so any distributions that would be coming out of Terrion would be net of that CapEx. And so as we consolidate Terrion into our books, you will see 100% of the CapEx and then you'll see a lower distribution. And as we define our free cash flow definition into the future, we will make sure that, that is very clear on the ins and outs as you see that in both pieces. So I think that will be very clear and it will be transparent when you see anything of materiality. Terrion has only been in play for 2 months, so there has been a minimal impact this quarter. On ARPU growth, I think it's going to be the continued hard work that we see from the team on step-ups and the prices that we're seeing on new acquisitions as well. We've seen a little bit better on device subsidy as well. But as we get into the fourth quarter and you see Black Friday and back -- Christmas, specials that will come in, in any -- and say, aggressive specials could obviously slow that down. But I think it's momentum. Once it's through your base, it's going to be slow and steady back on the way out. And so, so far, good momentum, but I think it's to be determined that if that holds or not as we move into the fourth quarter. And so I think that would be my best assessment. Darren Entwistle: Just 2 top-ups on that. Given that we don't entirely control our own destiny on the ARPU front, I think it's important that we continue to improve our profile on unit cost to serve. So you've seen us make some good progress there getting into the double digits on the cost reduction front. I think we need to keep going down that particular path and lower our unit cost to serve. And that's one of the attractive aspects of having TELUS Digital now fully in the fold so that we can leverage AI technology to really drive down unit cost to serve within our consumer and our B2B wireless operations. And then the other thing that is a great antidote to ARPU pressure as we hope for better days ahead is product bundling. We've got the best product portfolio in the industry to the extent to which we can increase our product intensity in our customer relationships through progressive bundling, that's going to give us a holistic outcome with the client in terms of overall economics that's extremely appealing. Maher Yaghi: And just to be clear, Doug, on free cash flow, any distribution that Terrion is going to be making to its equity shareholders will be deducted from your free cash flow calculation? Doug French: We're going through that as we speak, but it will be transparent of where it is. But it will be how we assess the capital item because when you think through the capital item as well, we're not paying for 100% of the capital. We have to consolidate it. So I need to make sure that, that is very clear on both the capital that we're accountable for and then the distribution, but we'll make sure you see the net on both. Operator: The next question is from Jerome Dubreuil from Desjardins. Jerome Dubreuil: The first one is on the partner build model. If you can please discuss the implications from a financial standpoint. Maybe I'm just throwing ideas out there, but maybe the margin profile is going more toward a wholesale model, but lower CapEx. Is this the right way to think about it. And if you can discuss the different return profile of owners' economics versus the partner build, please. Doug French: So just on the fiber side, I assume that's the partnership you're referring to. The economics are that we would end up either signing a lease for, call it, a dark fiber lease and/or we take a community as it's built, and it's our initiative to ramp up and scale it. And so the economics are based on I would say, similar to what you would see on any third-party fiber lease or fiber wholesale arrangement. And the third party is making their money just as we would if we were wholesaling our fiber to someone else. So it's a very similar structure. And we just have a couple of different scenarios out there of how we lease, but it would be a fair market value for what a lease arrangement would be on any kind of fiber transaction. Zainul Mawji: And overall, our goal is to ensure that when we're leasing or when we're renting fiber on a wholesale basis, the return, the total economic return is equal to or better than the economic return that we derived historically from our own fiber build in Western Canada. And the reason why we've set that Axiom and think that it's doable is clearly we have much greater scale today on the fiber front. So we should be better positioned to seize those economies of scale. We have better technology deployed than what we had historically during the fiber build time in the West from 2014 to 2020 that improves both operational efficiency and operational execution. And we have far more products. When we started to build fiber in the West, the revenue returns were very much around Internet and TV. Now our business still has the Internet and TV components, but we have the security component. We have smart home automation. We have smart home energy services, so on and so forth. So again, leveraging the limitless bandwidth of fiber. We're also looking to secure economies of scope by creating new services over that rented fiber and getting a better return than what we did originally on our own build activities. Jerome Dubreuil: Second one for me is, can you please provide clarity on the, I think you call it AI-enabled revenue going from $800 million to $2 billion. If you can discuss maybe what are those lines of business? Is this replacing other existing revenue? Or is there kind of a direct line of revenue here that's going to be going from $800 million to S2 billion. Darren Entwistle: Okay. Let me tackle that. And then if you want to have a follow-up for additional detail, we can go there. Looking at the base right now at the $800 million level. That base in terms of the question that you're asking is comprised of a variety of revenue sources. They include SaaS solutions that we're providing. They include our cloud solutions. They include the myriad of Gen AI applications that we have developed both within TELUS proper as well as within TELUS Digital. They include our data annotation business, and they will include -- it's very minor right now, but it will grow to be major prospectively our sovereign AI GPU compute solutions. We like the position that we're in here because we are extremely unique in that TELUS controls the entirety of the AI compute ecosystem. And that is significantly differentiated from our North American peer group. So it's all in-house at TELUS, whether you're talking about AI inferences, whether you're talking about AI models or whether you're talking about AI training. And we would believe in terms of what supports our revenue going forward that our holistic in-house solution aided and embedded by our partnership with NVIDIA creates a series of superior attributes that's going to drive the revenue model progressively in terms of getting from that $800 million to $2 billion. And so when you look at these components, number one, I think we are fairly unique in that we explicitly qualify in terms of a desired Made in Canada sovereign AI solution consistent with the white paper that the federal government has just published. And I got to believe that, that is deeply relevant. I also believe it's important in terms of revenue generation as to where the government is going to place their business be it at a federal, provincial or municipal level because that's going to be the qualifier on the RFP. The other thing that I think is distinct about us and our relationship with NVIDIA and our strategy of going from $800 million to $1 billion is that we're taking a modular build approach. You can look in the papers this morning and then look back historically. There's an Oklahoma land race to build infrastructure. And then 2 weeks later, people are worrying, "oh, this is going to be a bubble, and we're going to have overinvestment and too much infrastructure, and we're not going to be able to move the inventory." And it's oscillated back and forth in that regard. We think whilst the supply and demand component is still getting figured out. Our modular build approach is the right way to address the market opportunity, but do it from a responsible CapEx investment point of view. The other advantage of the modular build rather than big bang is that we can continuously take advantage of improvements in chip technology, leveraging again our NVIDIA relationship. And as the chips continue to get better, we're not locked in on a bulk basis with last-gen technology. We can leverage next-gen technology. And that makes a difference on compute power, but it also gives us advantages in areas like power consumption and cooling, which are, of course, nontrivial as it relates to their importance. And because we control the entirety of this ecosystem, I would imagine your next question is, well, if you're going to go from $800 million to $2 billion, what's the margin? Well, I'll tell you, the margins are, a, attractive and they're more attractive to the organizations that control the totality of the compute ecosystem from inferences, models all the way through to the training capability component. And so that's an exceedingly attractive aspect for us. And we don't have to share our economics with a myriad of partners that have to buttress our solution because of our capabilities to do it in-house, aided and embedded by TELUS Digital. From a specificity point of view and going from $800 million to $2 billion across those product lines that I've just articulated from SaaS all the way through to the sovereign AI component. As it relates to the sovereign AI component, we're forecasting that by 2028, we will be circa 25,000 GPUs supported by 50 megawatts of power. And our model will be a cluster as a service model. It's a rental model on a per GU basis within the cluster construct with a dollar charge on a per hour basis. I'm not going to get into pricing on this call, but you can work through the economics as to how big that will be on a revenue basis and how attractive it can be on a margin basis given the control of our ecosystem. And then the other big area that we see contributing to the $2 billion that I think, again, is entirely unique to TELUS, almost fortuitously so, if you will, but we will lead the world in the combination of customer experience and AI. We will lead the world in the fusion of AI with CX on the client experience front. And we will be developing AI capabilities from bots to specific copilots for lines of business to both help TELUS and our external clients leveraging the developments on the back of TELUS in terms of humans in the loop, aided and embedded by copilot capabilities across specific lines of business that drive better selling outcomes, better service outcomes along with lower churn, better agent training outcomes that really support a superior client experience in terms of growth, service as well as the economics because of the AI contribution to the human performance factor and will drive this contribution right through to the agentic level as well. And we expect that to be a big source of growth on a go-forward basis because we already have a huge client base, a legacy CX client base within the TELUS Digital organization where we have well over 650 clients, some of the world's largest organizations that are crying out for a CX AI transformation strategy and for us to help them along that particular journey. And so that's the color on the $2 billion in terms of specificity and where it's coming from. Operator: The next question is from Vince Valentini from TD Cowen. Vince Valentini: Darren, great answer. And you're right, you would have predicted that the next question may have been margins, but close after that would be CapEx to achieve the $2 billion, especially when it comes to the sovereign AI factories. Can you talk a little bit about how much you have to invest and clarify to us that this definitely still fits within the 10% CI target that you have? Doug French: So yes, it would still fit into our bucket. Based on the module approach that we talked about, we see this as a very digestible but strategic and well laid out plan over the next few years. And I think because we already have the land, we already have the data center infrastructure set up in both the East and the West, it will allow us for that easier transition. Zainul Mawji: And I think the other attractive aspect of the modular build approach as it relates, Vince, to your question on cash flow, we'll be able to recycle the attractive margins that we make on GPU utilization and recycle that back into the funding of the next module and bringing new GPUs online. And so it's a philosophy or a mentality that we will eat what we kill, leveraging off the progress that we're making and the inventories that we're building. Vince Valentini: Okay. Sorry, did you say earlier that there's potentially partners involved with the build as well too, though, so it may not be all on your balance sheet. Maybe I misheard you in your opening remarks. Doug French: We're looking at partnerships as well as our own data centers. So looking at opportunities that would allow for even further expansion as required. And so I would say, yes, we are looking at partnerships where applicable, and it would go well beyond our just our Kamloops and our Rimouski data centers. Vince Valentini: Okay. And if I can ask one other follow-up, just to clarify something. Your lease costs -- or lease principal payments came down 20% year-over-year. It's nice to see. But can you explain, Doug, like how that happened? And is there any way that that's related to Terrion and leases for towers moving to a different subsidiary or something? Doug French: No. It was just -- and we can get more detail after, but it's -- we've restructured some of the leases, and it's actually under the benefit of free cash flow. So we're trying to manage our cash flow more effectively, and that was the whole move. Operator: The next question is from Drew McReynolds from RBC. Drew McReynolds: Maybe one question on sovereign AI from my perspective. Are we going to see this ramp-up in revenue here through the fixed data services line? Does it kind of spread out through other lines just in your financials, just so we can kind of understand the moving parts there? And then secondly and separately, can you just speak to some of your success you're getting on Internet and the broader kind of product portfolio in Eastern Canada. Do you see any differences in terms of what you're able to do in the West versus what you can in the East. And just maybe an update on where you're getting more success on the product intensity portfolio and where there's more wood to chop in terms of commercialization? Zainul Mawji: Maybe I'll kick it off and hand over to you, Doug. Where you can look for the manifestation of the revenue created on our sovereign AI factories is twofold. You'll see it within our TELUS Business Solutions organization, and you'll also see it within TELUS Digital. And we would intend in February to give additional guidance on how we'll report TELUS Digital as a business segment. On top of that, we will provide additional ad hoc disclosure, so you'll be able to assess the process that we are following and the yield that we're getting off the sovereign AI factory and the GPU investment. So we'll give you clarity into that specifically. Doug French: And within some of the product reporting between fixed data and others, you'll get even more insights as well of where that's showing up. On East-West, on loading. We've seen good loading across the board, and it's both East, both West and then business within the small business area is contributing to those Internet loads. And on a bundled basis, we are seeing obviously a little bit more bundling still in the West, but gaining momentum in the East. Operator: The next question is from Stephanie Price from CIBC World Markets. Stephanie Price: I was hoping you could talk a little bit about your strategy on device financing and how that's flowing through to the TTech service revenue? And maybe more broadly, how you think about TELUS' positioning in the wireless market at this point? Doug French: I couldn't hear the first part, what was it. Darren Entwistle: Device financing. Doug French: Device financing. So device financing is really the flow-through on the balance sheet. So you'll see it build up over that 2-year period. Where the -- how it hits your P&L will be depending on how much of a handset subsidy you give. And the handset subsidy then is prorated between upfront hit and an impact on your ARPU based on an allocation from the accounting rules. So it takes the fair market value of the handset, the fair market value of the monthly recurring revenue and allocates it to both. And so you'll see from a cash flow perspective, lower handset financing, obviously, is impacting positively on cash flow. And then what goes through your P&L is really only impacted by whether you give a subsidy or whether you make a margin. And that's what you would see in our financials on any quarterly basis. Stephanie Price: Okay. And then just as a follow-up, TELUS has announced they're an MVNO partner for Cogeco's wireless launch and BC recently announced a fiber expansion into Alberta and BC. I understand financial details aren't disclosed, but hoping you can give some color on the financial profile versus the TTech segment? And what kind of impact we can expect to see from this over time. Darren Entwistle: Take it away. Doug French: Yes. So on the Cogeco one, it's all going to be based on roaming. So we will get that through roaming revenue, and it will build as their volume grows, and it'd be at a wholesale rate, a commercially driven wholesale rate. I think on the Bell side of reselling in the West, I think the -- as we've highlighted, we are obviously supportive of competition. And the wholesale revenue that you get comes at a higher margin, and you don't have the success-based capital, but you don't get the product intensity. So you would have a fast payback, you'd be earning margin and really good margin right upfront. And then you would not have that success-based capital, so it would take pressure off the capital number concurrently. And there's a good chance these are customers that we would not have gotten, so it is a net benefit to us. So over time, you could build up a base just like wholesale and wireless, and it is high margin, and it's contributing, obviously, to our P&L. But from a customer experience perspective, we still want to obviously win in retail and our bundling and our product superiority will continue to compete well there. Robert Mitchell: Thanks, Stephanie. Karl, we have time for 1 more question, please. Operator: The final question is from Matthew Griffiths from Bank of America. Matthew Griffiths: I was wondering if you could maybe just talk a little bit about the outlook for health. I know the growth has been strong this past quarter, partially helped by the acquisition. But just if you could make some comments on like the underlying performance that we could assume going forward, just help on the modeling front. And then on the comments about -- you gave a lot of information on the AI topic. So I don't really want to open that up too much. But you made the comment about government versus enterprise and that government seem well positioned given their position paper that they would be buyers. I mean is your starting assumption in that $2 billion revenue target sort of heavily weighted towards government adoption of these services with maybe a lag to enterprise? Or are you assuming sort of just an equal adoption across the kind of those main buckets of customers? Darren Entwistle: Yes. So the answer is the latter, a wider distribution, not anchored on the government front. It would include government, but equally or even more broadly, enterprises would include start-up organizations that would want to be able to leverage the compute access that we can provide. You could think about research opportunities. It really is a broadly distributed portfolio of customers that we would be going after. And there's aspects of exploration as well. We've got the capability. Let's see how it develops related to market need along the way. And because we've done it on a modular basis, we can be agile and responsive. But the answer is no, it's not anchored on government. Navin, do you want to maybe speak a little bit about the view on health prospectively from a growth point of view? Navin Arora: Yes, I'd be happy to. Thanks, Darren, and thanks for the question, Matthew. I would say we're seeing good acceleration in the health business in terms of operating revenue. So we saw that improve to 18% in Q3, and that obviously was helped by a full quarter of Workplace Options this quarter. And when I look ahead, I see some strong organic growth in the business, both in the employer and Payvider business, and we're seeing that because of strong churn performance and as well as really strong sales bookings. So as an example, the employer business, sales bookings are up 72%. Clinics are also up 44% and the Payvider business is up 18% all year-over-year. And so that bodes well for that revenue coming online in the future. And when we think about the WPO integration, not only are we seeing good organic revenue growth from that part of the business, what we're also seeing is their really strong operating model is driving EBITDA margin expansion as we migrate more and more of our former TELUS Health operations onto the WPO case management system. And so we're expecting even further improved churn, improved stickiness through customer experience, the opportunity to really drive improved product intensity tied to that improved experience. And then as I said, improved margin contribution from that business. And then also prospectively, we really like the global footprint that we've developed and the markets that we're playing in have very strong growth opportunity. And as products like EAP, employer well-being services, employer well-being platform, capabilities and the gamification of well-being, mental health capabilities, as those capabilities continue to improve in terms of importance in those markets, we're going to ride that market growth wave tied to that. So feeling very good about that. And then maybe the last thing I'll close with is on the Payvider side, we've seen some very good organic growth coming from deals tied to Platform as a Service, our data capabilities and our ability to monetize the analytics coming from the data, and we're starting to see strong growth there. We also sold our largest pharmacy management system deal recently. So feeling very good about the prospects of continued growth in the health space. So with that, I'll pass it back to you, Darren. Darren Entwistle: Okay, Robert. Robert Mitchell: Okay. Thank you, Matt, and thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups. And with that, back to you, Karl. Operator: This concludes the TELUS 2025 Q3 Earnings Conference Call. Thank you for your participation. Have a nice day.
Operator: Good day, and welcome to the Topgolf Callaway Brands Third Quarter of 2025 Earnings Conference Call. [Operator Instructions] Also, please be aware that today's call is being recorded. I would now like to turn the call over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead. Katina Metzidakis: Good afternoon, and welcome to Topgolf Callaway Brands Third Quarter Earnings Conference Call. I'm Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Joining me on today's call are Chip Brewer, our President and Chief Executive Officer; and Brian Lynch, our Chief Financial Officer and Chief Legal Officer. Earlier today, the company issued a press release announcing its third quarter 2025 financial results. Our earnings presentation as well as earnings press release are both available on our Investor Relations website under the Financial Results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. Please review the safe harbor statements contained in the presentation and the press release for a more complete description. With that, I'd like to turn the call over to Chip. Oliver Brewer: Thank you, Katina. Good afternoon, everyone, on the call, and thank you for joining us. Starting on Slide 3 of our investor deck. I'm pleased to report that in Q3, our total business exceeded expectations in both revenue and EBITDA with revenue up year-over-year in both our Golf Equipment and Topgolf segments. This performance was driven by excellent market conditions, along with solid execution in our Golf Equipment business as well as by an outstanding consumer response to our value initiatives at Topgolf, where we continued the impressive traffic growth that began midyear, especially in the 1- to 2 bay portion of our business, which in turn set up an all-important transition to overall positive same venue sales for the quarter. This performance, along with the trends we've seen in October, makes us increasingly confident in our strategic direction and supports the increased full year guidance we're providing today. I'd like to thank the Topgolf Callaway Brands teams for their dedication and commitment to delivering these results. Moving to Slide 5 and our segment performance highlights, starting with Golf Equipment. Overall, we continue to see strong performance in our Golf Equipment business with Q3 revenue up year-over-year despite less new product launch volume in this year's quarter. And importantly, excluding the impact of tariffs, this is the third straight quarter of underlying gross margin expansion, a testament to our proactive efforts here and the excellent work being done by our teams. Market conditions overall remain excellent. The U.S. market is up 2% year-to-date based on National Golf Foundation's manufacturer shipment data, but up an impressive mid-single digits on Datatec sell-through reports. And Q3's data was stronger than the year-to-date data on both of these measures. This was supported by continued strong participation and interest in the sport. Rounds played are up 1.4% year-to-date despite being down earlier in the year due to a wet and cool spring, with rounds played continuing to outpace playable hours, a trend we've seen all year. Market conditions are also up in Europe and the U.K. while in Asia, Japan is down slightly year-to-date and Korea is down low teens. Turning to our brand and market share performance. We gained share slightly during the quarter and had a particularly strong quarter in golf ball, with August delivering an all-time high U.S. share of 22.6% across both on- and off-course channels and 23% at on-course. On another positive note, according to Datatec's Summer 2025 Attitude and Usage Report, Callaway has retained its position as the leader in innovation and technology for the sixth consecutive time. According to the same report, this leadership position also helped drive further improvement in our overall brand rating. I remain confident in our brand strength as well as our product development pipeline. On the product front, our Elyte Triple Diamond Driver was recently ranked #1 in Golf Digest test of spin consistency. This important performance attribute shows off how we utilize our leadership in AI capabilities to deliver an important performance advantage. And this ranking MyGolfSpy’'s naming the Elyte Triple Diamond Driver their most wanted of 2025. On the golf ball front, the Chrome Tour Triple Diamond golf ball was also named the longest ball in MyGolfSpy’'s independent testing. Lastly, in the putter category, after entering the zero tore category midyear, we're now already launching our second generation of this putter type, a product called TRI-HOT, which differentiates in this new and hot category by providing a zero torque or toe-up design, but requiring less shaft lean via a more forward hoszle placement. This design innovation is, in our opinion, superior to other zero-torque putters because it's easier to align and requires less setup adjustment from golfers. All of these are small but important wins for our product and brand. We relish these wins because the cornerstone of our golf equipment strategy is delivering what we call DSPD or demonstrably superior and pleasingly different product. On the tour front, last month, men's world #4 Xander Schauffele captured his 10 career PGA TOUR title at Baycurrent Classic in Japan. And Jeeno Thitikul continued her strong season with a win in Shanghai, further solidifying her position as women's world #1. In summary, our Golf Equipment segment continues to perform strongly, supported by positive market dynamics. Our Golf Equipment segment revenues were up in the quarter and are up slightly year-to-date. This is despite more competitor product launches in early 2025 and lower new product launch volume from us in the second half of this year. On the profitability side, we are up year-to-date due to our margin and cost initiatives, but down slightly in the quarter due to the impact of tariffs, which, of course, have become more impactful recently. We remain excited about the direction of the Golf Equipment category and our brand. In the Active Lifestyle segment, excluding the Jack Wolfskin business from results, our revenues were approximately flat for the quarter with operating income down a little due principally to the impact of tariffs in the quarter. TravisMathew continues to do better than the market overall with revenues in the quarter approximately flat year-over-year. The brand continues to benefit from growth in its women's category. The Callaway brand in this segment was also approximately flat for the quarter, with market share gains in Japan apparel offsetting soft apparel market conditions in both Korea and Japan. Turning to tariffs. Across our products business, we had an incremental tariff expense of $12 million in the quarter, and we continue to forecast approximately $40 million for the full year. Given that the new tariffs were phased in during the year, along with the FIFO nature of our inventory, the impact will unfortunately increase meaningfully going forward, assuming, of course, that the current rates hold. We intend to mitigate as much of this impact as possible via efficiency improvements, pricing and vendor negotiations. This is an ongoing process and a key initiative across our organization. As part of this, we recently implemented a reduction in force of about 300 positions. As we look forward in this environment, with continued positive demand but likely higher product costs, I don't see further headcount reductions as appropriate. However, we're going to have to continue to be very attentive to overall cost management and margin initiatives and delivering DSPD product that stands apart in the marketplace will be more important than ever. Thanks to our long-term commitment to R&D and innovation, we feel optimistic about our ability to do this. Turning now to the Topgolf segment. Q3 results exceeded guidance for both revenue and EBITDA, including, as you'll see on Slide 7, an all-important transition to positive same venue sales of a little more than 1% for the quarter, driven by continued positive momentum in traffic. The big news here is that the 1- to 2-bay primarily consumer portion of our business that makes up 80% of annual revenues has transitioned to positive same venue sales growth overall with Q3 traffic up high teens and same venue sales in the quarter up 2.4% for this segment. This was driven by the continued consumer appeal of Topgolf, which, as you can see on Slide 8, is ranked #1 in both fun and atmosphere by 100x, coupled with our new value initiatives, principally Sunday Funday and half off golf Monday through Thursday, both of which were implemented midyear. I couldn't be more pleased with the immediate and significant response to this strategic repositioning. I believe the consumer insight and execution here was just terrific, and the clear results bode extremely well for our future outlook. We will be continuing these value initiatives for the foreseeable future while also working on further optimizing our marketing and continually introducing new reasons to visit Topgolf. Focusing on frequency for a moment, we have already seen improved results year-to-date based on the successful launch of our summer fun passes, and we are now in the early stages of implementing a new membership or subscription program we call PlayMore. Turning to our 3-plus bay business, which is primarily driven by events. While we continue to experience declines here, we have begun to see a leveling off in this portion of our business. This can be seen in both our actual results and our leads. We also have several initiatives planned during Q4 to further improve this performance, including per player pricing, dedicated marketing and online booking capabilities for 3 to 4 bay events. Looking more deeply at the balance of the year, we expect same venue sales to be approximately flat year-over-year for Q4, resulting in same venue sales of down mid-single digits for the full year. As a reminder, Q4 same venue sales are disproportionately impacted by our 3-plus bay business, which has historically been approximately 30% of the sales mix in this quarter and are even more heavily weighted towards the end of the quarter due to holiday parties. On the digital front, we continue to roll out our new Toast point-of-sale system. Where implemented, this system has improved speed of service, which in turn drives improved labor efficiency and spend per visit. We expect Toast to be in a little over half of our venues by year-end and all venues by end of Q2 next year. During Q4, we will also be piloting both pay and Bay and mobile ordering for food. We are optimistic that these will deliver further gains in efficiency and spend per visit when scaled in 2026. Moving to profitability. Our venue EBITDA margins remained strong at just over 33% in Q3, around flat year-over-year despite the increase in our value offerings. We maintain our expectation of EBITDA margin contraction for the full year, though we are trending to be on the better end of the guidance of down 100 to 200 basis points year-over-year. Given the strategic move to drive more value, we believe this demonstrates outstanding execution. And importantly, we remain confident in the potential for significant future upside. New venues continue to open well and deliver strong economic returns. We're on track to open 4 new venues this year with our third opening just last week in Woodbury, Minnesota and the fourth scheduled to open in New Braunfels, Texas in December. Lastly, on the leadership front, we are in mid-process on our Topgolf CEO search. I'm pleased with the interest in the position and the quality of candidates. Additionally, the current team is performing well in the interim, and I remain confident in their ability to do so. A special call out to Erin Chamberlin, Topgolf's COO, who is now serving as Interim President. And also a big thank you and well done to the entire Topgolf senior leadership team for stepping up during this period of transition. In conclusion, Q3 was an excellent quarter, highlighted by the fact that both the Golf Equipment category and our brand remains strong as well as Topgolf's continued momentum in driving traffic growth, including a positive same venue sales performance in Q3 and an improved outlook for the balance of the year. These results support us raising our guidance for the full year. I also want to reaffirm that we remain committed to the separation of Topgolf and are fully engaged in that strategic process. Lastly, we continue to believe that our strategic direction, coupled with the solid execution that we are delivering will unlock even greater value for our shareholders and allow both businesses to thrive independently. Thank you, and over to you, Brian. Brian Lynch: Thank you, Chip, and good afternoon, everyone. As a brief note on today's call, I will be discussing our financial results on a non-GAAP basis and excluding the impact of the Jack Wolfskin business, which we sold in the second quarter of this year. With that said, we're pleased to report another strong quarter with third quarter results exceeding our expectations and guidance. Consolidated revenues were $934 million, a 3% increase year-over-year. This revenue growth was led by increased revenue in both the Topgolf and Golf Equipment segments. Q3 adjusted EBITDA of $115 million decreased $4 million year-over-year. This decrease is due to $12 million in incremental tariffs in our core business. Moving to segment performance. In Golf Equipment, Q3 revenue increased 4% year-over-year to $305 million, reflecting a 4% increase in Golf Clubs and a 6% increase in Golf Balls. Golf Equipment Q3 operating income of $23 million decreased $4 million year-over-year due to $8 million in incremental tariffs, which was partially offset by our gross margin and cost savings initiatives. In Active Lifestyle, Q3 revenue was $156 million, approximately flat as compared to Q3 of 2024. Operating income decreased $4 million to $14 million, primarily due to $4 million in incremental tariffs. As a reminder, these comparisons exclude Jack Wolfskin results. Moving to Topgolf. The 4% increase in Q3 revenue to $472 million was driven by the addition of 6 new venues since last year and a 1% increase in same venue sales. Topgolf operating income of $31 million increased $3 million year-over-year, while adjusted EBITDA was roughly flat at $84 million. Switching gears to balance sheet and liquidity. Our available liquidity as of September 30, 2025, increased $391 million to $1.25 billion due to $424 million of increased cash compared to the third quarter of 2024. This increase was primarily attributable to $270 million of cash from operations this year, the approximate $290 million in proceeds from the sale of Jack Wolfskin as well as improved working capital and lower net CapEx, partially offset by investments in the company's business. At quarter end, net debt was $2.23 billion compared to $2.54 billion last year. This decrease is primarily due to the increased cash. Excluding venue financing debt, which is essentially capitalized rent related to our Topgolf venues and including the convertible debt, our REIT adjusted net debt was $665 million, down $435 million year-over-year as a result of the increased cash. Net debt leverage improved to 3.8x from 4.6x, driven by the higher cash balance. REIT adjusted net leverage, which includes rent and interest payments, improved to 1.4x from 2.4x. We remain comfortable with these leverage levels. Our inventory balance decreased $98 million compared to the end of Q3 2024 to $569 million at the end of Q3 2025, primarily due to $108 million of inventory being included in the sale of the Jack Wolfskin business. Turning to our outlook, which can also be found on Slide 9 of our presentation. We are raising our full year 2025 revenue guidance to a range of $3.90 billion to $3.94 billion, up $60 million at the midpoint. We are also raising our full year adjusted EBITDA guidance range to $490 million to $510 million, up $40 million at the midpoint. This updated guidance reflects better-than-expected Q3 results and improved outlook for the balance of the year, including an improvement in Topgolf same venue sales outlook as well as continued cost management initiatives, which will partially mitigate the impact of the incremental tariffs, which are estimated to be approximately $40 million for the full year 2025. Turning to Topgolf. We are revising our full year same venue sales guidance to down mid-single digits. As a result, we are raising our full year Topgolf revenue guidance to a range of $1.77 billion to $1.79 billion, up $40 million at the midpoint. We are also raising our full year Topgolf adjusted EBITDA guidance to a range of $295 million to $305 million, up $20 million at the midpoint. As a reminder, this outlook accounts for the negative impact of Topgolf transitioning to a retail calendar in addition to the leap year impact in 2024, which together leads to a loss of 4 days of sales in 2025. This change is expected to create an approximate $20 million headwind to revenue and a $10 million headwind to adjusted EBITDA. With regard to CapEx, our outlook for Topgolf's net CapEx is approximately $120 million and approximately $40 million for our core business. We continue to expect to be free cash flow positive at both the total company and the Topgolf in 2025. Now turning to our outlook for the quarter, which can be found on Slide 10 of our presentation. In Q4, we are forecasting consolidated revenue of $763 million to $803 million versus $810 million in Q4 2024, excluding Jack Wolfskin. This estimate reflects the following: the impact from the move to retail calendar and sale of the World Golf Tour game or WGT for short, partially offset by revenue from new venues. The equipment launch timing and normal ball retail inventory management ahead of new Chrome launch in 2026, partially offset by improved market conditions. We estimate Q4 adjusted EBITDA to be in the range of $13 million to $33 million compared to $83 million in the prior year, excluding Jack Wolfskin. As previously discussed, the year-over-year comparison is impacted by several headwinds in 2025. These include incremental tariff expense, the year-over-year increase in cash incentive compensation accrual compared to a reversal of accrual in Q4 2024, incremental Topgolf stand-alone costs, the impact of lower 3-plus bay revenue and year-over-year variances in items such as property tax and insurance and the impact from Topgolf calendar change in sale of WGT. In conclusion, we are pleased to report strong third quarter results that reflect the resilience and adaptability of our businesses. The encouraging performance in our Golf Equipment and Topgolf businesses, coupled with strategic cost management and our strong liquidity has positioned us well for the remainder of the year. We were pleased to be able to raise our revenue and adjusted EBITDA guidance, highlighting our confidence in the strength of our business moving forward. While we acknowledge the challenges ahead, including the impacts of ongoing tariffs, our operational initiatives and commitment to delivering value for our shareholders remain steadfast. We appreciate your continued support. With that said, I would now like to turn the call back over to the operator for Q&A. Operator: [Operator Instructions] And our first question here will come from Eric Wold with Texas Capital Securities. Eric Wold: So a couple of questions, I guess. First off, on the Golf Equipment side, I guess, given the demand that you're seeing, the strong demand that you're seeing for Golf Equipment with on-course participation, I guess, how much pricing power do you feel that you have on equipment, clubs and balls as you move into '26 to offset tariff pressure? And do you want to go down that road? Are you seeing competitors raise prices and do you feel that's a path you think you can take? Oliver Brewer: Eric, Chip. That's a good question and something that there's no clear answer on at this point. We've seen over time that the Golf Equipment category enjoys a passionate consumer and a wealthy consumer. So we do not believe that we're highly price elastic. And there's obviously healthy market conditions right now. So both of those go on the positive side. What I've seen over time is that the ability to raise price has been there, but it's dependent on how what we call DSPD or differentiated the product is. So as the product gets better, your pricing power gets better. And so we're going to have to see how that unfolds. Without a doubt, given the tariff situation, if these are the final rates, we will take a look at pricing. And we'll have to be strategic about that. But on new products, along with the higher product costs, pricing will be part of our equation for mitigating the tariffs. Eric Wold: Perfect. And then just the final question kind of on Topgolf. Now we're kind of through the summer and you've seen kind of the reaction and improvement in visitation from the value initiatives. Maybe give us some sense of kind of the trends you've seen in kind of time at the bay and kind of how your ability to kind of book, shorter periods has impacted time at the bay and kind of -- then also what you see in terms of food and beverage attach rates kind of as the summer has played out? Oliver Brewer: Sure. Obviously, really pleased with the reaction to the value initiatives, the continued strength of the experience scores at Topgolf. Traffic has been up mid -- high teens candidly. And so we're winning share and I couldn't be more pleased with the reaction. One of the initiatives that they put in place was some variability on bay timing, so being able to book bays in smaller windows, so within an hour, 1.5 hours' time, not just 2 hours on the reservation system. That has been impactful. I wouldn't call it the most impactful of all the initiatives, but it has a positive response and certainly meeting the consumer where they are on that front. And then on the food and beverage side, we are trending up. If you just try to isolate the food and beverage same venue sales, it's up. It's got a couple of different factors going on, but it's being driven by the traffic and no real change in trend. We've also been able to initiate some new offerings in the food and beverage sector, platters and such, which have been well received. There has been a continuation of the long-term trend of alcohol attachment, but no change in that trend. So food and beverage has been a positive for us as it relates to the quarter and pleased with it. Operator: And our next question will come from Simeon Gutman with Morgan Stanley. Simeon Gutman: My first question, it's on the business connected to the consumer. Can you talk about sell-through this quarter, not just sell-in or to the best you can? Anything that signals the consumer behavior is changing? And then related to that, it seems like '26 is going to be an important year for new launches, connecting any changes in behavior now to how the launch season could go early part of next year? Oliver Brewer: Sure, Simeon. We've seen excellent results in the golf segment, more or less all year, but strengthening in Q2 and then even stronger in Q3. It started the year with a little bit of a wet and cold spring. But as that transitioned, rounds played have been up and sell-through trends have been candidly terrific. And you've seen where the sell-through trends are higher than the sell-in trends. So a little bit of a destocking going on out at retail as well, which is also a net positive. The consumer just is very engaged, very healthy right now. And as we look forward, we're not really getting into estimates for 2026 at this point. But the strength of the consumer throughout the summer and through current has been quite positive. We've seen a long-term trend of strength around golf. So I feel really good about that. Simeon Gutman: And then as a follow-up, the width of Q4, the profit range, what don't you know about tariff today? Because you've taken mitigating actions, you have some sense of what it's going to cost. Is the width more related to Topgolf variability or the equipment business? Can you talk about the things that are in your control versus things that you left a little leeway with? Oliver Brewer: Sure. I'll let Brian comment on it. I'm not sure that we -- it's not intuitive to us that we have a particularly wider than normal range in terms of any of our metrics for Q4. Obviously, a fairly diverse business. So there's some level of range that is required there. But -- and there's tariffs, we -- there's no significant degree of uncertainty in the tariff. We're more and more comfortable with our understanding there as we move forward. So no -- nothing there to speak of. Brian Lynch: That's right. That's the -- this is the normal range we give for this time of year. So there's really no -- nothing different than normal here. Operator: And our next question will come from Matthew Boss with JPMorgan. Matthew Boss: Great to see the progress. So Chip, on health of the golf industry, what are you seeing from new entrants to the sport today? And could you speak to the market share opportunity you see into next year if we're thinking about clubs relative to balls with the new Chrome launch on tap? Oliver Brewer: Yes, sure. Again, the health of the golf business is excellent. So really pleased with those trends. We don't really have hard data right on new participants, but we'll see some trailing data over the next few months as their report will come out, but it will be trailing data. But all indications are is that the participation is continuing to move positively. Visits to Topgolf is a leading indicator. And obviously, visits to Topgolf are quite strong. There are other strong new entrants and growth categories around off-course golf. The new -- the package set business is still quite strong. So by all indication, participation is continuing to grow, although I do not have hard data and the consumer is good. In terms of market share opportunities, we're not going to get into 2026 estimates at this point. But as I always am at this point in time, I feel good about our product and our brand. We've had steady growth in the Golf Ball category. We had a very strong Q3 market share-wise in Golf Ball, which bodes well for the brand strength. And as you mentioned, next year will be a premium ball launch. So we're looking forward to that, and I look forward to talking to you about the new product and that opportunity in February. Matthew Boss: Great color. And then, Chip, at Topgolf, on the inflection to positive same venue sales in the third quarter, could you break apart the 700 basis points of sequential improvement? Maybe elaborate on trends or what you're seeing in October? And then just any update on potential strategic alternatives? Oliver Brewer: Okay. I got to jot these down. We're going a couple of different ways here. So the -- what we saw in Q3 was really during the quarter, an acceleration of what we talked about at the end of last quarter where the value initiatives were rolled out and started to resonate with consumer. We saw significant growth in traffic. We saw 1 to 2 bay inflect to positive and 3-plus bay, although still down, has moderated. And those are great trends, and they ended up with a positive quarter which obviously is very important for us, and we're excited about. October results have been fairly similar to what we saw in Q3. So same type of result, positive for 1 to 2 bay. Traffic, same kind of positive traffic that we saw in Q3 and 3-plus bay, although still down, moderating. So October on trend with Q3. It's worth calling out, Matt, that as you look at Q4, the mix of 3-plus bay goes higher for us. So 3-plus bay is 30% of our volume in Q4 versus 20% for the full year. And as such, you just have a weighted average that is -- plays itself out in Q4, not really forecasting a change in trends there. We see positive trends that have been sustaining. And then I think your last question was on the Topgolf process. And we're continue to fully engage in that and committed. We continue to evaluate both a spin and a sale. Unfortunately, no update on timing at this point. The timing was impacted by the CEO transition, but I feel good about that process. And it's probably also worth mentioning that the improved results and outlook should be positive for value creation, whatever the final outcome is. Operator: And our next question will come from Arpine Kocharyan with UBS. Unknown Analyst: This is [indiscernible] dialed in on behalf of Arpine Kocharyan. Could you talk through the puts and takes of how we should think about same venue growth for Topgolf into next year and whether there is any type of pricing or better mix versus more volume that's baked into your current thinking? Oliver Brewer: Sure. I'll try to do that. Obviously, pleased with the inflection, and we continue -- we're going to continue to lean in on these value initiatives. We're in the early innings, we think, of repositioning the consumer's perception of price at Topgolf. There's a chart in the presentation deck that shows that. We've made some progress, but a lot of progress to go. So the 1 to 2 bay traffic and value initiatives will continue. 3-plus bay is leveling off. We're optimistic that, that is likely to continue, and we also have some new initiatives there that we believe will be further impactful as that business proceeds. Those include per player pricing, 3 to 4 bay online and some dedicated marketing. We're implementing Toast and that has seen a positive impact both on margins and on spend per visit. We'll have a little more than half of the bays on Toast by the end of the year with all of them on for Q2. So that should have a positive impact on spend per visit next year. We're also starting to trial and we'll implement next year pay-inBay and mobile ordering, which should have positive impacts as well. We're introducing frequency programs. We introduced the summer, Summer Fun Pass. It was highly successful. We'll be leaning further into that, and we're now implementing a subscription program. It's very early, but we're -- we've seen a lot of other similar businesses have a lot of success with that. Ours is called Playmore and we'll be implementing that and optimizing that. We're going to continue to drive more optimized marketing. We've seen our marketing become more and more efficient as the new team there has gotten their hands on the wheel and implemented performance marketing and marketing that has resonated with the consumer. And then we're also going to continue to deliver new reasons to visit. That's new games, experiences. We did the football game this fall, and that will be part of our play mix as well. No specific call-outs on pricing at this point, but I hope I answered your question. Unknown Analyst: Yes. And a second one, how should we think about unit openings for Topgolf into next year, assuming plans for separation could take a bit longer? Oliver Brewer: We are planning 3 new venues for next year. Operator: And our next question will come from Anna Glaessgen with B. Riley Securities. Anna Glaessgen: I'd like to go back to the Topgolf comp inflection or same venue sales inflection, really good to see. Maybe anything you could share on the complexion of visitors maybe between new and maybe lapsed visitors versus the past and maybe that repurchase or revisit behavior maybe versus prior cohorts? Oliver Brewer: Sure. Anna, we've seen -- we haven't seen any real change in economic profile or demographics. We've seen that the uptick in traffic is 2/3 repeat visitors and about 1/3 new. So just an outstanding mix from our perspective. And in terms of actually moving the needle yet on our frequency, given our frequency is 1.5 per year, it's too soon to -- you wouldn't really see it yet, but you're seeing great consumer behavior and a mix of new and repeat and the reaction has been both immediate and definitive. Anna Glaessgen: Got it. And then thinking through the corporate event business in 4Q, while understanding that it tends to hit later in the quarter. Typically, what's your visibility? I would think, generally, especially around holiday events, people would want to have that booked earlier. So just trying to think through that dynamic and your level of visibility there. Oliver Brewer: Yes. We have a reasonable level of visibility on that now. So we've got a significant portion. We get in the ballpark just over half of them booked 30 days out. But there's still a significant amount that we'll be booking here in the balance of November and even through early December. So we have a good read on that and have put that into our guidance. Operator: And our next question will come from Noah Zatzkin with KeyBanc Capital Markets. Noah Zatzkin: I guess maybe just to kind of follow up on the corporate business. Nice improvement in Q3. Is that just a function of comps? Or was there other kind of corporate behavior changes that you'd point to or expect kind of going forward? Oliver Brewer: When you say Q3, you're just asking about corporate events in Q3? Noah Zatzkin: Yes, exactly. Oliver Brewer: Okay. Yes. So we just -- we've seen -- we took actions during the quarter and in terms of some marketing and changing how we're doing our sales organization structure and including repositioning some of the product during the early part of the year. And so I think some of that has been impactful. And I do believe that a significant part of this is also just a leveling out or, as you say, comps, but leveling of the overall market, which had declined, but is not going to be going away and will initially -- will eventually recover and be a strong opportunity for us. Noah Zatzkin: And maybe just one more. Any updated thoughts kind of heading into holiday around TravisMathew and how you're thinking about that business? Oliver Brewer: Yes. TravisMathew is a strong brand and an excellent business. The market overall in Athleisure has been challenged this year. We've outperformed that market. They've gained share over the last quarter. So I was pleased with their last quarter results and optimistic on trends going into Q4. But again, that's been baked into our guide. Operator: And our next question will come from Joe Altobello with Raymond James. Martin Mitela: This is Martin Mitela on for Joe Altobello. I wanted to quickly touch on the CEO search. I know I understand that you're kind of in the middle of the process here. But just trying to gauge how much time this new person in the role sort of need before the separation is ready to be enacted? Oliver Brewer: Yes. Martin, I don't know whether I have a specific answer on that. So we're not commenting on the time there. I think the most important thing is that we've got strong interest in candidates and therefore, feel very encouraged. And as well, the existing team is just doing a terrific job. So I couldn't be more pleased with both that process and how the existing team is being able to manage this period of transition. Martin Mitela: Understood. And just kind of quickly turning to tariffs. I understand you're not giving any formal guide for next year. You've offered a $40 million number for this year. Is there anything that you might be able to give us about what we should expect for 2026? Oliver Brewer: Yes. Sure, Martin. It's still obviously uncertain. But if the existing rates hold, it would be a little more than double this year impact next year. Operator: And this concludes our question-and-answer session. I'd like to turn the conference back over to Chip Brewer for any closing remarks. Oliver Brewer: Well, thank you, everybody, for dialing in. We appreciate your interest and look forward to updating you again in February when we can talk a little bit more about 2026 and including new products. So look forward to that. Have a great rest of the year and holiday period. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good morning. This is the Chorus Call. Welcome to the presentation of the financial results as of 30 September 2025 of Ascopiave. [Operator Instructions] The chairman and CEO of Ascopiave, is now going to give the illustration. Nicola Cecconato: Thank you, everyone. Thanks, everyone. Page 2, consolidated results as of 30 September 2025 compared to 30 September 2022. Let's go to slide page 2 of Ascopiave results and [indiscernible] structure as of 30 September 2025. The slide [indiscernible] includes the group's corporate structure as of 30 September 2025. If it should be noted that scope of consolidation has been simplified compared to the first nine months of the previous period due to a number of extraordinary transactions finalized at the end of 2024. On 31 December 2024, the reorganization of the subsidiaries active in the gas distribution and renewable energy sector became effective for statutory purposes. Through a series of merger and demerger transactions, the Group's activities in the natural gas distribution sector merged into two companies, one operating in the Northeast, one in the Northwest. Specifically, the group companies [indiscernible] AP Reti Gas North S.r.l. were merged by incorporation into subsidiary [indiscernible] and at the same time, the [indiscernible] merger in [indiscernible] from [indiscernible], the group's other distribution companies, [indiscernible] were merged by incorporation into [indiscernible] following this operation, from [indiscernible], which changes company name to [indiscernible] paid out a partial and proportionate demerger in [indiscernible] on the same date, the merger project by incorporation of the company Asco Renewables became -- effective as Asco EG S.p.A., which took the name Asco Power S.p.A. [indiscernible] merger transaction that took place took effect for statutory purposes as of 31 December 2024 and for tax and accounting purposes as of 1 January 2024, while [indiscernible] demerger transactions took effect as of 31 December 2024. On 16 December 2024, and effective 31 December 2024, Salinella Eolico S.r.l. changed its company name to Asco Wind & Solar S.r.l. On 9 May 2025, Ascopiave acquired 9.8% of the share capital of Asco Power S.p.A., becoming sole shareholder. Effective 31 May 2025, Cart Acqua S.r.l. was merged by incorporation into Ascopiave S.p.A. In December 2024, Ascopiave exercised its put option on 25% of the capital of EstEnergy S.p.A. and the transfer of the share took place on 24 June 2025. On 1 July 2025, the transaction for the acquisition of the [indiscernible] of 100% of the newly formed company, AP Reti Gas North S.p.A. the company that took over certain business branches previously owned by Unareti S.p.A. and LD Reti S.r.l. [indiscernible] in the gas distribution business in the provinces of Brescia, Cremona, Bergamo, Pavia and Lodi and these operations became effective. Page 3, slide 3, changes in the consolidation perimeter and disposals of shareholders. The slide summarizes the impact of the main extraordinary transactions on the economic and financial [ engagements ] shown in the accounting documents. Consolidated income statement for the first nine months, slide page 4. In the first nine months of 2025, the group realized revenues of EUR 183.9 million, excluding an EBITDA of EUR 115.6 million and a EBIT of 72.3 million. The net balance of financial income and expenses was positive at EUR 15.6 million, an improvement of EUR 23.2 million compared to the first nine months of 2024. This change is mainly explained by higher dividends paid by investing companies, in particular, by the dividend of EUR 22 million distributable by EstEnergy prior to the sale of shares. Income from companies consolidated using the equity method, which amounted to EUR 0.3 million, refers exclusively to the consolidated profit accrued by the Cogeide S.p.A. which showed a negative change of EUR 7.8 million compared to the first nine months of 2024. It should be noted in the 2024 financial year of Cogeide and the [indiscernible] by Ascopiave 25% of the [indiscernible] the economic [indiscernible] group [indiscernible] pertaining to the group after 30 September 2024, while there is no accounting entry in the 2025 financial year. Taxes allocated in the first nine months of 2025 weigh on the income statement by EUR 12.3 million. The tax rate, calculated by normalising the pre-tax result of the effects of the consolidation of the companies Consolidated using the equity method, dividends received from investees and the capital gain realised from the Sale of the investment in EstEnergy [indiscernible] 36.1% as of 30 September 2024, to 33.1% as of 30 September 2025. Consolidated balance sheet, 30 September 2025 slides on Page 5. As of ended 30 September 2025, the group has EUR 1.551 billion in invested capital. Investment consists of [indiscernible] EUR 1,204.7 billion in intangible assets. EUR 55.8 million from the value of minority interest has [indiscernible] contributed and [indiscernible] EUR 25.7 million. EUR 53 million from other fixed assets EUR 54.7 million on the negative balance of working capital items and provisions to EUR 50.3 million from net invested capital in assets held for sale. [indiscernible] value of the 3% stake have in Hera Comm, the sale of which the Hera Group [indiscernible] on 8 October 2025 at a price of EUR 54.8 million. The intangible fixed assets shown under [indiscernible] amounting to EUR 1.247 billion, mainly consists of gas distribution networks and plants owned by the group, [ EUR 1.403 billion ], of which EUR 398.7 million is attributable to [indiscernible] consolidated as from 1 July 2025 [indiscernible] recognized following business combination of EUR 106.5 billion [indiscernible] equipment [indiscernible] real estate and the value of [indiscernible] plants. It should be noted that during the fourth quarter of the 2024 financial year, Ascopiave exercised its put option on the remaining shares of [indiscernible] for the 1 October 2024 [indiscernible] are recorded as of 30 September 2024 [indiscernible]. Shareholders' equity as of 30 September 2025 amounted to EUR 898.1 billion, an increase of [indiscernible] million compared to 31 December 2024. Net financial position was EUR 633.1 million, an increase of EUR 245.5 million compared to the end of 2024. The debt equity ratio was 0.71. Slide page 6, operating [indiscernible] distribution, Slide page 6. As of 30 September 2025, the group's distribution company has managed approximately 1.2 million users, which approximately 45,900 users of Ap Reti Gas North consolidated into the group in 1 July 2025, an increase of 55% compared to 31 December 2024. In the first nine months of 2025 income distributed through net worth EUR 1.044 billion [indiscernible] in gas [indiscernible] consolidation as of 1 July 2025, we distributed 74 million cubic metres in the third quarter of 2025. The group perspective, [indiscernible] power plant with an installed capacity of 84.1 megawatts. In the first nine months of 2025, electricity production amounted to 145 gigawatts, a decrease of 25 gigawatts, minus 14% compared to the same period of the previous year, the latter being characterized by significant rainfall. Revenues, Slide page 7. Revenues from the first nine months of 2025 amounted to EUR 183.9 million showed an increase of [indiscernible] determined by [indiscernible] consolidation perimeter by EUR 27.7 million, increased by EUR 0.3 million in gas distribution [indiscernible] revenues, the decrease in revenues from the sale of [indiscernible] from renewable sources of [indiscernible], an increase in revenues from energy efficient certificate EUR 1.9 million, an increase in other revenues of EUR 2.8 million. Gas distribution tariff revenues amounted to EUR 152.2 million and for an increase of EUR 29 million compared to the same period the previous year due to the enlargement of the scope of consolidation for [indiscernible] and to the relation of 2024 [indiscernible] operating costs and [indiscernible] 2025 on a like-for-like basis, EUR 48.6 million. Revenues from all generations from renewable sources amounted to EUR 17.4 million, decreased by EUR 4.1 million. Decreases mainly explained by the lower volume of energy produced. Slide Page 8, operating profit, other operating expenses. Operating income for the first nine months of 2025 amounted to EUR 72.3 million, shows an increase of EUR 38.1 million due to the [indiscernible] scope of consolidation, EUR 5.1 million, increasing gas distribution target revenues, EUR 9.3 million, a decrease in revenue from the sale of electricity generated from renewable sources, EUR 1.1 million. The decrease in amortization and depreciation, EUR 1.1 million, capital gains of EUR 26.4 million related to the [indiscernible] sales in net energy, EUR 0.3 million decrease in net operating expenses. Net operating expenses for the first nine months of 2025, the margins of EUR 50.9 million recorded an increase of EUR 7.6 million, driven by the change in the [indiscernible] revenue and cost items. Expansion on scope of consolidation, EUR 7.9 million. Low transaction fees remain [indiscernible] EUR 0.9 million, higher personnel costs, EUR 0.6 million, higher consulting costs, EUR 0.2 million of which EUR 0.2 million related to [indiscernible] higher cost for gas and electric utilities, EUR 0.2 million, low compensation to directors and [indiscernible] higher contribution for safety incentives, EUR 2.4 million, lower capital rate [indiscernible] costs, EUR 0.4 million. Other changes with a positive impact, EUR 0.3 million. Slide page 9, personnel. As of 30 September 25, the group has 721 employees, an increase of [indiscernible] compared to 30 December 2024. This increase is mainly explained by the consolidation of AP Reti Gas North as of 1 July 2025, which have 229 employees as of 30 September 2025. [indiscernible] personnel cost for the first nine months of 2025 was EUR 18.2 million, determined by [indiscernible] consolidation EUR 2.6 million; higher capitalized labor costs, EUR 1.6 million, EUR 2.2 million increase in current personnel costs, mainly due to higher cost of incentive plans [indiscernible] increases during [indiscernible] the contracting business provided for the national interconference and in part [indiscernible] recognition. Captain Expenditures, Slide page. Capital expenditures in the first nine months of 2025 amounted to EUR 60.6 million, an increase of EUR 9.1 million. Investments paid by AP Reti Gas North [indiscernible] consolidated since 1 July 2025 amount to EUR 4.3 million. Most of the technical investments related to the development [indiscernible] of gas network [indiscernible] amounted to EUR 31.3 million, of which EUR 12.2 million in connection [indiscernible] in network expansion [indiscernible] reduction plans. Investments in [indiscernible] amounted to EUR 8.3 billion. Investment in the [indiscernible] related to costs incurred for the maintenance and expansion of hydroelectric plant, EUR 3 million, for the construction of [indiscernible] plant, EUR 9.6 million and for the construction of other green energy plant, EUR 2.7 million. Other investments amounted to EUR 5.4 million related investments in land and buildings, EUR 0.9 million, hardware and software EUR 2.2 million, company vehicles, EUR 0.7 million an [indiscernible] EUR 0.4 million. Net financial position and cash flow, slide page 11. The net financial position, effective 30 September 2025 amount to total EUR 633.1 million, an increase of EUR 245.5 million compared to 31 December 2024. During the first nine months of 2025, cash flow generated financial resources of total of EUR 67.3 million; net investment, in tangible and intangible assets resulted in cash outflows of EUR 60.6 million, net working capital management absorbed resources of EUR 2.7 million. The group collected dividends of EUR 2.7 million from investee company not consolidated on a line-by-line basis. Shareholder's equity resulted in cash outflows of EUR 32.5 million [indiscernible] to shareholders. The purchase of equity investments resulted in cash outflows of EUR 472.2 million. The realization of Equity investments generated resources of EUR 234.1 million. Financial payrolls, slide page 12. Financial events as of 30 September 225 amounted to [indiscernible]. The loans are 60% variable rate and [indiscernible] average cost of debt in the first nine months of 2025 was 3.11%. I have concluded my presentation. Now it is Q&A session. Thank you. Operator: [Operator Instructions] First question from Roberto Letizia. Roberto Letizia: Good afternoon, everyone. Thank you for the presentation. Can you give us an update about the annual growth, RAB growth on annual anal basis, taking into account new business acquisitions. consequent to the expansion of the network, how will your strategy be in consideration of all these new strategies and new business combinations that we have made? And if you have any M&A opportunities as of today, can you give us also and overview considering the new regulatory framework? Nicola Cecconato: Good afternoon [indiscernible] your first answer. The global RAB expansion of the scope of consolidation finalized as of 1 July 2025 is EUR 1.85 billion, so EUR 1.85 billion if RAB grows in relation to investments. We can -- there can be EUR 25 million, EUR 30 million on an annual basis. We are also evaluating other M&A operations big and small on a small basis and operations. we will be acquiring a distribution network, but on a small scale. If there are opportunities, we are able to seize opportunity. So we have an opportunity to grow. On renewable energy, our view is taking for granted since we have been consolidating on gas distribution. The renewables are not something but not a significant core business for us. But if there is indeed an opportunity that brings up, there is some disposal in the [indiscernible] companies, we could take advantage for further growth. Related to other M&A operations in gas distribution, [indiscernible] on the market. We have some small operations that will be following and if there are big operation, they will surely be entertaining as the proposals. Especially, there are some operators that want to leave the gas distribution business. Relating to regulatory legislation. It has been quite constant. Nothing unusual has been happening. Some decisions that were meant to be taken have been postponed. Operator: Next question is by Emanuele Oggioni or Kepler. Emanuele Oggioni: My first question is synergies. [indiscernible] mentioned, also in the press release. can you tell us what the target is going to be for 2026 in the field of gas and what synergies you envision in 2026? Then I have a question for you relating to [indiscernible] Have you had any negotiations with [indiscernible]? The last question is about the gas standards. For gas standards, has there been any change in the legislation on some business combinations, what is your opinion? And what do you envision? What do you expect for the year 2026? What are your best case scenarios for Ascopiave? Nicola Cecconato: Thank you. From the moment we made the major acquisition of the [indiscernible], we took a joint, an important leap forward with a significant increase in above the base and also in the number of [indiscernible] we started global reorganization of the company that we add locally and we drove ahead of the reorganization of the network. I see information technology network management network. They're not in a position to give you a very precise and exact quantification of the exact positive impact the operation has had on us for Ascopiave [indiscernible] merge into our assets to bear fruit -- are going to bear fruit in the coming years. But as of today, I cannot give you any exact figures. So when we enter these figures into the year-end balance sheet financial statements, we will be able to give an exact amount. In relation to Itau gas. Relating to the acquisition of Itau gas assets [indiscernible] decision, we are interested in [indiscernible]. This is a fantastic result for us. We will be having an extra from 27,000 to 30,000 BDR delivery points. So especially in the province of Padua, we will be able to consolidate and enhance the efficiency of our services. So if the number of users is not yet high, the operations are rather positive. Relating to gas standards, your last question. There's been quite a lot of movement not only [indiscernible] but also around operations relating to the various category of the trade association. We don't -- there is a proposal in order that to merge the ATEMs and there is a counterproposal, the counterproposal is also tried to extend the concession in retail for investment. So we feel if we go to merge the ATEM, this is, in our opinion, within [indiscernible] as a negative proposal on the operation because if there is a merger, there will be [indiscernible] the value of the ATEMs will shoot up from EUR 130 million to EUR 700 million. So the participation in the [indiscernible] there will be a selection. [indiscernible] a very strong financial capabilities will be favored but if we analyze other factors, there won't be a real competition. So there will be a monopoly because only one big player or two big players would be able to participate in this bid. There is no possibility for other small players in the situation of monopoly [indiscernible] there were just one operated [indiscernible] so all other local and small operators were wiped off so even all of us have to pay the fees, the major beneficiary was just one player. In this case, the tender is managed in a centralized level. And local players there is no benefits that trickle down to local players, but proposals that helps all the players in the power and gas distribution, it will be something that benefits all the territories and not just one big player. The positive situation that [indiscernible] will be that all small players have a share of the cake and not just one big monopoly. So the best solution would be that all players can beat in a gas standard. I hope I have been clear with my opinion. So this is not just the opinion of Ascopiave, it is widely believed by all the smaller operators. Emanuele Oggioni: I have a follow=up. You spoke of around 30,000 delivery points [indiscernible] what is the RAB connected to these delivery point? Nicola Cecconato: This was not included in the EUR 1.85 billion? Emanuele Oggioni: Yes, they were not included. Nicola Cecconato: The operation will [indiscernible] March 2026. Operator: Next question [indiscernible] Mediobanca. Unknown Analyst: Good afternoon. a follow-up. On Itau gas to [indiscernible] when do you expect the closing? And when is the cash out of these 30,000 redelivery points? Nicola Cecconato: The closing is in the stage for every March 2026 and the fee is confidential, it is a price on the RAB which is EUR 22 million but the exact fees are confidential. Operator: Next question is from Davide Candela, Intesa Sanpaolo. Davide Candela: On gas distribution, what you have just said on the strategy, would you be willing to leave the Northeast and enter regions of Italy? And in that case, how would you approach [indiscernible] just enter the two regions of Italy instead of staying just in the Northeast? Regarding the [indiscernible], do you have any news for us regarding these two areas? Nicola Cecconato: Relating to the growth in gas distribution. We are moving around gradually. We look for assets, which are adjacent to where we are where we operate because it is more feasible for us, more convenient for us to work in an area which is [indiscernible] where we usually operate but this doesn't mean we cannot -- we are not going to enter other regions in Italy. But of course, no doubt that now we are a local operator we are just in Italy. So as I said, we just want assets which are joining in the areas where we operate. Relating to collaboration with [indiscernible]. We have been working on some assumptions. We have been negotiating, negotiations have [indiscernible] slow. We have been analyzing new forms of collaboration that relate to the management, joint management some businesses and the possibility of collaborating. Operator: The next question is a follow-up from Roberto Letizia, Equita. Roberto Letizia: Considering the two option that you spoke about. In general, how strong is your balance sheet in order to support some extraordinary operations if the opportunity comes for you. How solid is your cash flow? Nicola Cecconato: We can [indiscernible] more or less the demand that we can invest. And then obviously, it's a step-by-step process [indiscernible] is what we can invest as of today without thinking of some extraordinary financial operations. Operator: There are no further questions. Nicola Cecconato: Thank you very much [indiscernible] and have a great day. Operator: This is the Chorus Call operator. We have finished the operation. Now you can disconnect your phones. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Greetings, and welcome to the Amphastar Pharmaceuticals, Inc. Third Quarter Earnings Call. [Operator Instructions] Please note that certain statements made during this call regarding matters that are not historical facts, including, but not limited to, management's outlook or predictions for the future periods are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the session entitled Forward-Looking Statements in the press release issued today and the presentation on the company's website. Also, please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance. We will also discuss certain non-GAAP measures. Important information on our use of these measures and reconciliations to the U.S. GAAP may be found in our earnings release. Please note that this conference is being recorded. Our speakers today are Mr. Bill Peters, CFO; Mr. Dan Dischner, Senior Vice President of Corporate Communications; and Mr. Tony Marrs, Executive Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dischner, Senior Vice President of Corporate Communications. Please go ahead, sir. Dan Dischner: Thank you, operator. Good afternoon, and thank you for joining Amphastar's Third Quarter 2025 Earnings Call. I'm pleased to share that the company delivered another strong quarter, underscoring the continued success of our vertically integrated strategy and steadfast commitment to science-driven innovation. Our performance this quarter was anchored by 3 core pillars: strong commercial execution, the strategic expansion of our pipeline and focused regulatory progress, all reinforcing our long-term growth trajectory. For the third quarter, Amphastar achieved net revenues of $191.8 million with GAAP net income of $17.3 million (sic) [ $17.4 million ] or $0.37 per diluted share. On a non-GAAP basis, adjusted net income was $44.6 million (sic) [ $44.7 million ] or $0.93 per diluted share. This performance was primarily driven by sustained momentum in our core products, BAQSIMI and Primatene MIST. BAQSIMI delivered $53.6 million in total sales, up 14% year-over-year. This growth was driven by seasonal demand and expanded sales execution through our partnership with MannKind sales force. Additionally, total revenue from Primatene MIST increased by 11% year-over-year, validating persistent consumer engagement in the OTC respiratory space as the product consistently sees a positive growth trend. Turning to our proprietary pipeline. I'm excited to highlight a significant expansion this quarter, fueled by exclusive in-licensing agreement with Nanjing Anji Biotechnology, securing U.S. and Canadian rights to 3 early-stage novel peptide candidates targeting high-growth markets across oncology and ophthalmology. The first candidate, AMP-105, is a first-in-class oncology peptide targeting tumor proliferation and metastasis, representing a novel mechanism of action with broad clinical potential. Early studies have shown anti-tumor activity across multiple cancer types. The second candidate, AMP-109, is a peptide-coupled docetaxel with improved selectivity and bioavailability, targeting lung, colorectal, gastric and pancreatic cancers. It is designed to reduce docetaxel-induced toxicity and has the potential to improve the efficacy and safety of current Taxane therapies. Lastly, the third candidate is AMP-107, which is a noninvasive eye-drop therapy for wet age-related macular degeneration and diabetic macular edema. Offering a patient-friendly alternative to injectable treatments and the potential to improve treatment adherence and quality of life. AMP-107 has the potential to be the first non-injectable [indiscernible] endothelial growth factor receptor or anti-VEGFR eye drop in a $9.4 billion market. These newly added assets broaden our pipeline beyond diabetes and complex generics, unlocking a combined market opportunity of over $60 billion. To capitalize on this growth, our U.S. manufacturing expansion will quadruple production capacity at our Rancho Cucamonga headquarters, strengthening operational agility and positioning us to capture greater value across our portfolio. Our investment in domestic capacity reflects a strategic commitment to resilience and scalability as we navigate an increasingly dynamic landscape. We are delighted to share that we are well positioned to reach our target of proprietary products comprising 50% of our pipeline by 2026. Shifting our discussion to our regulatory initiatives. We made meaningful progress this quarter, highlighted by FDA approval of iron sucrose injection or AMP-002, which is now commercially available as one of the generic options in the United States. This milestone expands patient access to affordable therapies while contributing to our revenue growth. During this quarter, iron sucrose injection generated total sales of $2.4 million. Beyond these launches, we continue to advance several high-impact regulatory programs across our portfolio. For our AMP-007 inhalation filing, we are on track for a launch in mid-2026, with the potential to be the first-to-market generic in a $1.5 billion addressable market. We're also pleased to report that our generic teriparatide product, AMP-015, is also on track for a launch in the first half of 2026. Additionally, our GLP-1 ANDA, AMP-018 is on schedule for a 2027 launch. The obesity and diabetes markets continue to attract significant competition. And as a result, we expect the commercial opportunity to be limited, and we will focus on maintaining cost and quality leadership in this space. And finally, our insulin aspart BLA or AMP-004, is moving steadily towards a launch in 2027. The recent approval of biosimilars in this space helps derisk the opportunity by establishing a proven pathway for market acceptance and adoption. Collectively, these programs position us to expand patient access and deliver sustainable growth across multiple high-demand therapeutic areas in the coming years. I will now turn the call over to Bill Peters, our CFO and Executive Vice President of Finance, for a more detailed financial review of the third quarter. William Peters: Thank you, Dan. Revenues for the third quarter increased slightly to $191.8 million from $191.2 million in the previous year period. BAQSIMI recorded its highest quarterly sales ever, growing $53.6 million compared to the prior year period of $40.4 million, and Amphastar assumed full commercialization responsibility globally at the beginning of 2025. Keep in mind that during the same period last year, Eli Lilly had BAQSIMI sales of $6.4 million. Therefore, total BAQSIMI sales for the period grew by 14%. Primatene MIST sales grew 11% to $28.8 million in the third quarter compared to $26.1 million in the prior-year period, primarily due to our increased marketing efforts. Glucagon injection sales declined 49% to $13.6 million from $26.8 million, primarily due to a decrease in unit volumes and increased competition and a shift to ready-to-use glucagon products such as BAQSIMI. Epinephrine sales decreased 12% to $18.8 million from $21.3 million in the prior-year period due to increased competition on our multi-dose vial product. This decrease was partially offset by an increase in unit volume for our epinephrine prefilled syringe as a result of increased demand caused by shortages from other suppliers during the quarter. Sales of lidocaine decreased 19% to $12.9 million from $15.9 million in the prior-year period, primarily due to a decrease in unit volumes as a result of other suppliers returning to historical distribution levels. Other pharmaceutical product sales increased to $64.1 million from $58.3 million, primarily due to a $4.7 million increase in sales of Albuterol during the period as well as $2.4 million in sales of iron sucrose injection, which we launched in August 2025. This increase was partially offset by a decrease in unit volumes of enoxaparin and dextrose, primarily due to increased competition. Cost of revenues decreased -- or increased to $93.2 million from $89.3 million, with gross margins declining to 51.4% from 53.3% in the previous year's period. BAQSIMI sales made by Lilly in the prior year were recorded under the transition service agreement with Lilly and were booked at 100% gross margin. With the completion of the transition to Amphastar, cost of revenue for all products shipped are included in this line, which negatively impacts margin rate. Additionally, pricing declines as well as a decrease in unit volumes due to competition for both our glucagon kit and epinephrine multi-dose vial products negatively impacted margins. Because of these trends, management implemented cost control measures across the business, mitigating the impact of pricing pressures. Selling, distribution and marketing expenses increased 28% to $11.5 million from $9 million in the previous year's period due to the sales and marketing efforts related to BAQSIMI, including the co-promotion agreement with MannKind as well as sales and marketing efforts related to Primatene MIST. General and administrative spending increased to $39.5 million from $14.8 million, primarily driven by a litigation provision related to a recent jury verdict in a civil case against the company. While we plan to appeal the decision, accounting standards require us to book provision for the full amount, net of applicable insurance coverage. Research and development expenditures increased 6% to $22.4 million from $21.1 million in the prior year period due to the $5.25 million upfront payment we made to Nanjing Anji Biotechnology to license 3 peptide products for our proprietary product portfolio. This increase was partially offset by a decrease in material and supply expenses. Nonoperating expenses decreased to $3.8 million from $9.4 million, primarily due to currency fluctuations. Net income decreased to $17.4 million or $0.37 per share in the third quarter from $40.4 million or $0.78 per share in the third quarter of 2024. Adjusted net income decreased to $44.7 million or $0.93 per share compared to an adjusted net income of $49.6 million or $0.96 per share in the third quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets and certain onetime events, including the aforementioned litigation provision that was recorded this quarter. In the third quarter, we had cash flow from operations of approximately $52.6 million. We used a portion of our cash on hand to buy back $4.9 million worth of shares. I will now turn the call back over to Dan. Dan Dischner: Thank you, Bill, for the update. In summary, Amphastar's performance this quarter reflects the power of our integrated strategy and our commitment to long-term transformative growth. We demonstrated enduring commercial momentum with strong performance from our leading proprietary products, BAQSIMI and Primatene MIST. We advanced our regulatory pipeline with the approval and launch of iron sucrose injection, alongside steady progress on our interchangeable insulin aspart BLA. Furthermore, we strategically enriched our proprietary portfolio with novel peptide candidates in high-growth indications across oncology and ophthalmology. These achievements underscore our unique combination of scientific innovation, U.S.-based manufacturing capabilities and deep commercial expertise. With a disciplined focus on proprietary product development and a robust R&D engine powered by our advanced technology, we believe we are positioned to accelerate into the next phase of sustainable growth and value creation. Thank you for your continued support and for joining us today. With that, we will now take your questions. Operator? Operator: [Operator Instructions] First question we have comes from Serge Belanger of Needham & Co. Serge Belanger: First one for Bill. Now that we're 3 quarters in for this year, any updated thoughts on your informal guide for a flat year-over-year top line and maybe more importantly, a double-digit growth for -- a return to double-digit growth for next year? And then secondly, on iron sucrose, you've now been in the market for a couple of months. So maybe just highlight or give us an idea of how big the opportunity can be for you, given the competition and your manufacturing capacity for the product. William Peters: Yes. So we still believe that we can get to flat this year based on some outperformance by BAQSIMI and Primatene MIST and some other factors. And then next year, what we're looking at is probably either high single-digit to low double-digit growth rates. So we'll talk a little bit more about that in the next call. And on iron sucrose, I think the best way to look at that is that we had $2.4 million this quarter, which is about half a quarter. And that's probably a good run rate for the time being on a go-forward basis. Operator: The next question we have comes from Dennis Ding of Jefferies. Unknown Analyst: This is [indiscernible] for Dennis. We would like to ask if there's any updates on 007. And what about the communication with FDA? Has the shutdown impacted that process at all? And also, would you like to comment on the FDA bandwidth to handle these applications, especially given the shutdown situation? Tony Marrs: Sure. This is Tony. For our AMP-007, we continue to have engagement with the agency on it. Given the nature of the combination and complex products like this, this is kind of the due course for these type of products. And as a result, we've aligned our guidance more precisely around the anticipated launch date, as you'll see there. And we've done this because we believe it offers a more meaningful and actionable reference point for the analysts. As far as the bandwidth from the agency, we have seen just slight delays in interaction, not necessarily directly related to any delays in products, just maybe taking a little bit longer to respond to questions. But this hasn't resulted directly to anything that we've seen as far as [indiscernible]. Operator: The next question we have comes from Jason Gerberry of Bank of America. Pavan Patel: This is Pavan Patel on for Jason Gerberry. The first on generic Venofer, maybe can you just speak to the competitive dynamics? Just wondering, why it seems like the competitor generic Venofer that's launched seems to have garnered a little bit more market share since the start of the launch? And what are the key pushes and pulls in working with these dialysis centers? I'm just trying to think through if there are any levers such as contracting or anything else that you can pull in order to increase the run rate headed into 2026. And then maybe as you look towards 2026, it sounds like high single-digit to double-digit growth is the new sort of commentary there. And I'm just wondering, is that baking in all of the pipeline assets that you've talked about in terms of AMP-007, generic Forteo, generic GLP-1 and insulin -- maybe not the insulin as [ pricing 2027 ], but is that all on a nominal basis? Or is there any risk adjusting that's going on there? William Peters: Yes. So for the iron sucrose question, so our goal is to launch it with a profitable price portfolio and hit points where we can have a nice margin on this. So we may not have gone as aggressively in some areas where there's some lower margin. Also, I think we were -- while we had some supply initially, I think that we were not we didn't have enough supply at the beginning of the quarter, but we were by the end of the quarter. But I still think the initial guidance I gave a little while ago, which was we were in for half a quarter, that's probably the run rate to look at on a going-forward basis. I think that's the best way to look at that. As far as the guidance for next year, we do risk adjust our guidance. But I will say that the insulin product and also the GLP-1, we've assumed that those do not launch until 2027. So they're not in the guidance for next year. Operator: The next question we have comes from Ekaterina Knyazkova of JPMorgan. Ekaterina Knyazkova: So just on the licensing you did with Nanjing Anji, just elaborate a bit more on what brought you to that portfolio of assets initially and just your level of excitement, both about the science and the potential commercial opportunity. And kind of a related question, but just on business development more broadly, just level of appetite of doing more deals kind of going forward and maybe your preference between doing something more with more clinical risk like you just did or something kind of closer to BAQSIMI that's more commercial stage. William Peters: Yes. When we looked at this opportunity in working with Anji and these products, this is something that's been a long -- part of our long-term plan, and that is to get more into branded products. As we've gone along over the years, we've had that toolbox that's been very effective for us, immunogenicity, preclinical animal studies, doing a lot of work in these early development has helped us considerably. And so when we looked at this opportunity, it seemed like a very good fit. All of the pieces were in place for us to be able to actually do the development of these type of products. Dan Dischner: And as far as business development on a going-forward basis, I would say that we're -- now that we have some early-stage assets and with some commercial assets, I think what we would be looking for primarily is either assets that are already commercialized or very late-stage R&D assets. William Peters: Now one other thing too, a level of excitement about these products. We're very, very excited about them. We've seen some early data for us on some of these animal models that it looks very encouraging for, as Dan had mentioned, some broad -- potentially broad applications for some of these cancer treatments. It seems very exciting for us to have. Operator: The next question we have comes from David Amsellem of Piper Sandler. David Amsellem: Two for me. One on insulin aspart, what's the competitive landscape going to look like in your view, once you're in a position to launch in '27? And how are you thinking about just the size of that opportunity and how impactful that could be to your portfolio? That's number one. And then secondly, on Primatene MIST, I noticed that your one Orange Book patent expires in '26. Are you expecting competition there? How are you thinking about exclusivity for that product? William Peters: As far as the insulin aspart goes, we do -- we had originally hoped that we'd be there first or second, but it's likely to be 3 or more competitors in that market. So -- but it's a large market and a lot of volume. So there's a couple of things going for us there, which are we make the API ourselves and we also make finished product ourselves. And with a large volume market like that, it's going to really help our cost structure to get another high-volume product like that out here will affect our overall cost structure. So we still see that as being a good market that we can have strong sales and it would be something that will move the needle for our company. So it's not just another launch. On Primatene MIST, yes, the patent for the current product does expire next year. Two things on that. One, we don't know of any competition, but generic competition, but not that there won't be because there always could be. But we also have been saying all along that we think it's unlikely that we get competition early on because of this product being -- because it's an OTC product, a lot of the sales will stay with the brand. So if there's a generic come in, we assume that the brand gets half the market anyway. Of the other half of the market, if there was generic, we would also launch our own generic version of it and probably capture half the generic market. So any competitor would be limited to 1/4 of the market, and it has to cut the price at half or more to get any of that market share. So we're talking maybe it's a $10 million, $12 million sales market, and it's also now not a high-margin product. So it's a low-margin product. So spending $10-plus million to get to that low margin -- low sales, low-margin product, we don't think is a great idea for most players. So we don't see that as being a big opportunity for generics. We think it's not the most likely target for generics to go after. And then secondly, we've also discussed how we are working on a follow-on product that has an even lower global warming propellant. And so we're working with the FDA right now. We've already filed one patent on that and are working on some others as we plan to get that product moving forward. We'll probably give some more information about timing of that next year. Operator: The final question we have comes from Ben Burnett of Wells Fargo. Benjamin Burnett: I want to go back and ask a follow-up question around the in-licensed products that you just got. I wonder if you could maybe just kind of map out for us sort of the market or the regulatory and development path? And is there -- are one of these is -- could one maybe be developed before the other or have a shorter path to market? Like how do you see sort of the timing there? William Peters: Yes. What I could say about this, these will be new chemical products. So these would be going through the routine new product, new chemical entity pathway from the agency. We do -- from a prioritization, we have some that we think might be a little bit easier than others. And it's kind of early for us to give any kind of prioritization guidance on that. On others, then it's going to be some animal studies that we'll have to do and followed by some human studies, obviously, kind of the normal pathway that you would expect. How much prioritization the agency gives in that remains to be seen. We're very encouraged by some of the early data, and we think perhaps the agency will, too, which will help expedite the approval process of that. But we're still early in it, and we're still kind of evaluating some of the preclinical data that we're getting, although we're very encouraged by it. Dan Dischner: And one thing I'd like to add to that is that this has been a plan of ours for a while. As we've illustrated in our presentation, our intent was always to get our pipeline to be 50% proprietary. So we've staffed up. We have the resources to work on all of these independently at the same time. And as we start hitting our stride with them, and we'll have a better outlook on how we'll report it and when we'll report it and what we'll report going forward. Benjamin Burnett: Okay. Great. And if I could just maybe follow up with a BAQSIMI question, I guess what is your estimate for kind of the share of the ready-to-use market that you have? And I think -- I feel like in the past, you've talked about the glucagon market as potentially expanding. Curious if you're still seeing that? And if so, kind of what are sort of the drivers of that? William Peters: Yes. So right now, depending on the month, we usually have between 55% and 60% of the ready-to-use market, and that's how we're defining that segment of the market. And we have said that the glucagon market is expanding. And going back to the data on that, which was when we purchased BAQSIMI, only 10% of people who were on insulin were getting a glucagon script filled. And at that time, the Diabetes Association recommended that every person who is on insulin get a glucagon script filled. We've seen that increase pretty steadily, and we're now up to 12% of people getting a glucagon script filled. So it has increased pretty significantly, but we think that there's a lot of opportunity for that number to keep increasing. Therefore, we're very excited about the long-term cash flows from this product and long-term growth of that product. We're still have our forecast of peak sales of $250 million to $275 million. So -- and we think that, that's very achievable. So we're still excited about this, and BAQSIMI is our #1 growth product for next year. Operator: There are no further questions at this time. I would now like to turn the floor back over to Dan Dischner for closing comments. Please go ahead, sir. Dan Dischner: Thank you, operator. Thank you all for joining us today. We remain excited about closing 2025 on a positive trajectory and remain focused on delivering innovation and value as we enter 2026. I look forward to sharing updates next year. Have a great day. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to Lundin Gold's Q3 2025 Financial Results Call. [Operator Instructions] This call is being recorded on Friday, November 7, 2025. I would now like to turn the conference over to Ron Hochstein. Please go ahead. Ronald Hochstein: Thank you, Natasha, and good morning, everyone. Thank you all for joining us today. I'm joined by Jamie Beck, Lundin Gold's new President and CEO; Terry Smith, Chief Operating Officer; and Chester See, our Chief Financial Officer. We're going to take you through our results for the third quarter of 2025. Please note Lundin Gold's disclaimers on this slide. This discussion includes forward-looking information. Actual future results may differ from expected results for a variety of reasons described in the caution regarding forward-looking information and statements section of our press release. Lundin Gold is a U.S. dollar reporting entity, and all amounts in this presentation refer to U.S. dollars, unless otherwise indicated. As many of you know, I've resigned as President and CEO of Lundin Gold yesterday to pursue another opportunity within the Lundin Gold. It is my honor to participate in this conference call and discuss Lundin Gold's third quarter results. It is also my privilege to formally introduce you to Jamie Beck. Jamie, a long-standing member of the Lundin Gold of Companies, and most recently, CEO of Filo is as of today, the new President and CEO of Lundin Gold. I have worked with Jamie for many years, including working together on the due diligence to purchase Fruta del Norte. I can't think of a more capable person to build on the legacy that began with the vision of Lukas Lundin back in 2014. James Beck: Thank you, Ron, for that generous introduction, but more notably for your decade of visionary leadership. It is my honor and privilege to formally step into the role of President and CEO of Lundin Gold today. I'm incredibly excited to take the helm at this pivotal moment. Ron and the team have built a world-class operation, and we are now entering a major growth phase driven by both continued operational excellence and exploration success. We will maintain the relentless focus on maximizing value at Fruta del Norte through optimization and efficiency built on a strong foundation of responsible mining. We will also aggressively advance our high-potential exploration pipeline, ensuring we realize the immense growth potential within this highly prospective district. We also remain unwavering in our commitment to returning capital to shareholders through our robust dividend policy and commitment of creating shared value in Ecuador. I look forward to working closely with our team and connecting with all of you, our investors and partners in the coming months. Now I'll turn the call back to Ron to continue with the quarterly results. Ronald Hochstein: Thanks, Jamie. This was another excellent quarter for Lundin Gold. We produced over 122,000 ounces of gold and sold approximately 125,000 ounces. Average grade of ore milled was 8.9 grams per tonne with an average recovery of 88.2%. Our mining and milling throughput both hit records and with our average mill throughput achieving 5,264 tonnes per day. With this production performance to date, we are reconfirming our revised guidance of 490,000 to 525,000 ounces. Record gold prices continue to drive our financial results, but they also have an impact on our costs. Royalties and statutory employee profit sharing are impacted by the gold price and are included in our cash operating cost and all-in sustaining costs. Our original guidance was based on an average gold price of $2,500 per ounce with our year-to-date realized price of $3,400, this translates to an approximate $90 per ounce increase in costs, a direct reflection of higher gold values. Despite these pressures, our cost performance remains strong with cash operating cost per ounce of $861 and all-in sustaining cost of $1,036 per ounce sold. This combined with an average realized gold price of $3,600 resulted in an ASIC margin of 71%. Supported by another quarter of strong operations and record gold prices, we generated $216 million in cash flow from operations and $191 million in free cash flow. This robust free cash flow enabled our Board to declare a total dividend of $0.80 per share, approximately $193 million, consisting of our fixed dividend of $0.30 and a variable dividend of $0.50 per share. We increased the variable component this quarter to reflect 100% of normalized free cash flow from the policies minimum of 50%. Chester will provide more detail on this shortly. On the exploration front, we've had another very active quarter. We recently released results on our copper gold porphyry systems at Trancaloma, Sandia and Castillo. And we continue to see this quarter emerge and this mineralized district continue to impress. Based on these recent results, we have further expanded the 2025 exploration program from an original 80,000 meters to a minimum of 120,000 meters. Our conversion drilling in FDNS is wrapping up for the year. Expansionary drilling continues, and our exploration drilling at FDN East also continues. We will be providing the results of these programs in the next couple of weeks. Our financial performance continues to improve. Compared to 2024, revenue was up 38% to $447 million. Net income hit a record high of $208 million, up 53%. Earnings per share also achieved a record high of $0.86, up 51% and free cash flow was up 5%. Our ASIC margin per ounce increased by 49% to $2,598 in Q3, reflecting our enhanced profitability. With that, I'd now like to turn the call over to Terry to discuss our operations in more detail. Terrence F. Smith: Thanks, Ron, and good morning all. Starting with safety. In Q3, we had a few first days and medical incidents that I would characterize as low potential for serious injury, and we continue to have a very low total recordable incident rate which is great. However, looking at some of our leading indicators, we did see an uptick in incidents that had serious potential, and we took the time to investigate these. We found some areas to improve, including some gaps in our training and procedures, a need to get better at recognizing hazards and behaviors like rushing or improvising work that contributed to these events. Working on leading indicators and improving as a result of where we want to be with our safety program, thanks to the team for their continued passion and commitment for safe production. Moving to our production performance. I'm pleased to report that we had another strong quarter, achieving both record mining and milling rates. Mill throughput averaged 5,264 tonnes per day showing consistent increases every quarter this year through successful debottlenecking of the mill. Mill recovery was slightly lower than the last quarter as we processed oxidized ore, which impacted flotation recoveries. As we look ahead to the last quarter of the year, I'd like to point out that we anticipate slightly better grades than Q3 but lower relative to the first half of the year per our current mine plan. Recovery is expected to be about the same as Q3. We also expect to see continued increases in mill throughput as we optimize the mine and mill to work towards our goal of averaging 5,500 tonnes per day in 2026. Finally, although we've already completed a couple of key projects this year, like a new batch plant, camp upgrades and an expansion to our diesel power generation system, you should expect to see our sustaining capital expenditures increase in the last quarter. This will be driven by the ongoing ramp-up of our fifth tailings dam raise, significant upgrades to our water treatment plant, mining equipment and other plan site infrastructure improvement projects. Before turning the call over to Chester, I wanted to highlight our progress on FDNS. In mid-2023, we made the decision to invest in 2 levels of underground development to support exploration south of FDN. Then the exploration team discovered FDNS back in Q2 of 2024 and subsequently announced a maiden inferred resource of over 2 million ounces earlier this year. We've been busy on the engineering front with Geotech, mine planning and metallurgy, while the drills continued turning on infill drilling through the year. We are on target to establish an initial reserve at FDNS in Q1 next year. This is remarkable progress and a testament to what our team can deliver. I'm looking forward to discussing this further next year once we complete our work. With that, I'd like to now turn the call over to Chester to discuss our financial results. Chester See: Thanks, Terry, and good morning, everyone. For the third quarter of 2025, Lundin Gold achieved revenues of $447 million from the sale of approximately 125,000 ounces of gold at an average realized gold price of $3,634 per ounce. This average realized price includes $3,446 per ounce of gross price received and a favorable impact of $188 per ounce mark-to-market on provisionally priced sales. Our income from mining operations was $305 million, a significant increase from the same period last year, primarily driven by the higher gold price. This strong performance translated to earnings of $208 million or $0.86 per share and EBITDA of $312 million. The continued strengthening of gold prices supported this quarter's cash generation. We generated $216 million in net cash from operating activities and $191 million in free cash flow or $0.79 per share during the quarter compared to $181 million or $0.76 per share in the third quarter of 2024. While free cash flow was up 5%, it's important to note that in addition to monthly corporate income tax installment payments, the company remitted $50.6 million to the government of Ecuador as a partial payment against its annual income taxes due in April 2026. This partial payment was completed voluntarily as a tax-efficient method to repatriate capital to fund dividends and to support the government of Ecuador. Excluding the impact of this partial payment, which will improve our free cash flow next year, our underlying cash flow was exceptionally strong relative to last year. We ended the quarter with a very strong cash position, $494 million, up from $349 million at the beginning of the year. We generated $665 million from operating activities, paid out $471 million in dividends and reinvested $67 million. With the continued positive outlook on gold prices, combined with our production and cost guidance, the free cash flow outlook for the company continues to look positive. Now turning to our capital allocation strategy and dividend policy. I am very pleased to announce another strong dividend for our shareholders. Following another quarter of strong free cash flow generation, our Board of Directors has declared a quarterly dividend totaling $0.80 per share comprised of our regular fixed dividend of $0.30 and a variable dividend of $0.50 per share. We exercised the flexibility in our dividend policy by setting the variable dividend at 100% of our normalized free cash flow remaining after payment of fixed dividends this quarter, which is well above the minimum policy threshold of 50%. This distribution totaling approximately $193 million is a direct reflection of our Q3 performance and strong future outlook. To calculate this normalized free cash flow, we made an additional adjustment this quarter. The early tax payment of $51 million made in Q3 has been spread equally across the last half of the year, subtracting $25.3 million in each of Q3 and Q4. This robust payout reflects our commitment to returning significant value to our shareholders, while maintaining the flexibility to invest strategically in our long-term growth initiatives. For a more detailed discussion of our dividend and financial results, I encourage you to read our MD&A. Now I'd like to turn the call back over to Ron. Ronald Hochstein: Thank you, Chester. I would like to point out a significant milestone that we achieved in the company's history. With this latest dividend announcement, we will have returned approximately $950 million in total dividends, a sum that exceeds the $861 million in equity raised to acquire and develop Fruta del Norte. In other words, the project has officially paid back the entire original equity investment. Moving forward, every dollar of cash flow generated by Fruta del Norte, is essentially a net return on capital for our shareholders. This is a testament to the world-class quality of the asset. The team's focus on operational excellence, and focus on maximizing long-term value and continuing to turn -- continuing to return capital to shareholders. Now over to Jamie to speak to exploration. James Beck: Thanks, Ron. On the exploration front, we're excited to share some significant updates on our exploration and growth initiatives. Our top priority remains FDNS and our work here is twofold: growing the resource and increasing our confidence in the inferred resource. Our 2025 conversion drilling program has recently completed, and we are awaiting final assays while exploratory drilling continues. The discovery and rapid delineation of a multimillion ounce gold deposit is a remarkable technical achievement for our exploration and operating teams and demonstrates the high value potential neighboring FDN and importantly, we continue to see significant upside as the deposit remains open and is showing strong signs for further growth. Exploratory drilling on FDN East is also ongoing and is currently exploring the mineralization continuity in the central portion of this target. Similar to FDNS, it is in close proximity to Fruta del Norte, approximately 100 meters away and has high potential to add significant value to current operations as we continue to advance our understanding of the target. We will be reporting on FDNS and FDN East drilling programs in the next few weeks. Earlier this week, we issued a release highlighting our emerging copper gold porphyries. The results we reported confirmed the large scale potential of this system with our best grades to date, all found in very close proximity to the main FDN deposit. We are now actively exploring 3 compelling porphyries, Sandia, Trancaloma and Castillo. All 3 show immense potential and critically they all remain open in all directions with the potential for additional porphyry deposits to be found. At Sandia, our step-out drilling has confirmed a continuously mineralized zone that extends for nearly 1,000 meters along strike, is 500 meters wide and reaches 800 meters at depth. This has revealed a large mineral envelope that remains wide open. Significantly, we reported the highest grade times width intercept yet in our porphyry program, approximately 607 meters, a 0.59% copper equivalent starting just 21 meters below the surface. Moving to Trancaloma. Since its discovery earlier this year, drilling has defined a wide and continuous copper gold mineralized zone starting right at surface. This zone extends for 1,000 meters along strike, is 650 meters wide and goes down to 1,000 meters at depth. Like Sandia, a very large mineral envelope has emerged and remains open in all directions with special note to the 2 kilometers between Sandia and Trancaloma within that 5-kilometer corridor that have yet to be drilled. Finally, at Castillo, we made a shallow high-grade copper gold discovery, just 2 kilometers south of FDN with the intercept being approximately 224 meters at a copper equivalent grade of 0.71%. The mineralization is covered by only about 100 meters of overlying conglomerates, which is very favorable. This initial discovery strongly suggests the potential for additional porphyry centers to be found in the area. Back to you, Ron. Ronald Hochstein: Thanks, Jamie. In summary, as we revisit our 2025 objectives, the message is clear. We are delivering our core value of safety and environmental stewardship remains nonnegotiable supported by 0.20 total recordable injury rate year-to-date, which we will constantly strive to improve. Operationally, the plant optimization has successfully delivered a record Q3 throughput of 5,264 tonnes per day, giving us high confidence in achieving the 5,500 tonne per day average in 2026. This success supports our confirmed production guidance of 490,000 to 525,000 ounces. While unit costs are expected at the high end, this is a direct result of the impact of higher gold prices on our royalty structure. Our largest ever exploration program is firing on all cylinders with over 100,000 meters drilled to date. At FDNS, conversion drilling is complete, and we eagerly await the final assays which will feed into our initial reserve estimate anticipated early next year. Furthermore, the emerging potential at FDN East and the increasingly defined porphyry corridor, including Trancaloma, Sandia and Castillo, is exceptionally encouraging for future growth. Finally, we have significantly surpassed our initial capital return target, having returned and announced approximately $663 million to our shareholders year-to-date. In closing, we are executing on our production targets, demonstrating excellence in exploration and delivering substantial value to our shareholders. We look forward to carrying out this robust momentum throughout the final quarter and into 2026 and beyond. Before we move to questions, please allow me a final personal reflection. This is my last quarterly conference call. And after 10 years, it has been the highest honor and privilege of my career to be part of this exceptional story. The success we've achieved is truly a collective effort, and I want to offer my heartfelt thanks to the many people who made it possible. To our investors, and the analyst community, thank you for your commitment, your tough questions and your belief in our vision. Most importantly, to our employees and contractors, your dedication, ingenuity and passion for safety are the foundation of everything we do. And to the people of Ecuador, thank you for your partnership and for allowing us to operate in your beautiful country. Your trust is something we value above all else. Thank you all for joining us and joining me over the last 10 years on these calls. With that, we will now open the call for questions. Over to you, Natasha. Operator: [Operator Instructions] Your first question comes from Fahad Tariq with Jefferies. Fahad Tariq: On the gold recoveries, there was a comment made on the third quarter prerelease that there was maybe a room for improvement on gold recoveries. And I think on this call, unless I misunderstood, I think the outlook was maybe recoveries will be more or less flat in the fourth quarter. Just trying to get a better sense of whether recoveries can go even higher from these levels. Ronald Hochstein: Yes. Thanks, Fahad. As I mentioned in the script, we saw some oxidized ore in the third quarter, and that impacts our flotation recoveries and the efficiency of the circuit. This is all part of a real geometallurgy program where we're trying to understand where that material sits and how we can treat it differently in our plants, and we're making good progress on that. I won't bore you with all the technical details, but we feel pretty strongly that moving forward, we'll have better recoveries. We just can't foresee those arriving as early as Q4, but we will work hard on maximizing recoveries every day, of course. Fahad Tariq: Okay. That's clear. And then, Jamie, maybe just -- I know it's day 1 for you, but just thinking about the strategy for the company, just thoughts on what your area of focus will be, whether it's proving out the porphyry potential, external M&A? Any thoughts there would be really helpful. James Beck: Yes. I think this company is incredibly well positioned to be able to advance on a number of initiatives at the same time. First and foremost is I think maintaining operational excellence and the incredible work that we're doing at FDN and in country, and delivering that value back to shareholders, clearly excited about the work that's happening with exploration. And you can see that in our continued investments, actual increased investments. I think we talked about almost 50% more meters planned for this year than what we're originally budgeted for. I think on the M&A front, no real change to our strategy. We continue to be disciplined and patient, but we'll certainly be opportunistic should good opportunity present themselves. Operator: [Operator Instructions] Your next question comes from Don DeMarco with National Bank. Don DeMarco: Yes. And first of all, Ron, thank you for the kind words, and welcome to Jamie. So yes, I see it's another quarter where the high percentage of our free cash is paid out as a dividend. And as Chester mentioned, in Q3, the company elected to increase that variable portion to 100%. So what were the thoughts behind this increase? And is it viewed as a one-off? Or might this be a new norm if the quarter and the outlook remains strong? James Beck: Don, it's Jamie here. I think we'll evaluate this on a quarter-by-quarter basis, and always be willing to adjust that variable portion of the dividend up or down as we see needed. I think specifically this quarter, some of that is driven by sort of where our cash balance sits and keeping that at a comfortable level for us and also being able to return all of that free cash flow this quarter back to shareholders. So I think you can see that similar strategy moving forward. Obviously, growth initiatives or capital needs that perhaps change in the future could adjust our Board of Directors and management's thinking on how we would view that variable dividend going forward. But certainly, for the short term, I see that as being focus on continuing to return capital to shareholders. Don DeMarco: Okay. Yes, because, I mean, as I see it, there's somewhat competing objectives of building up your balance sheet to fund your growth strategy, you've got these great porphyry targets, that may require some development CapEx several years out and then returning the capital to shareholders. So is there a certain kind of cash balance target that you might be thinking about over a certain period of time in order to have that treasury in order to fund growth? James Beck: Yes. I don't think there's a magic number, Don. I think we continue to evaluate it, as I say, on a quarter-by-quarter basis as the porphyry exploration advances, and should we start thinking about putting some engineering studies around that and understanding what maybe capital needs, then of course, that would be a catalyst for us to think about how that cash balance potentially funds that future growth. I'd also say that the fact that the asset is completely unencumbered now allows us to look at what kind of capital strategy might be used for any future growth activities as well. So I think we're in a pretty incredible position to have lots of various options available to us should the need for additional funding arise. Don DeMarco: Okay. Great. And maybe just as a final question, and I'll pivot over to the porphyry targets. Both Sandia and Trancaloma are showing these large marine volumes. It's still early, but what's drilling showing you at this point in terms of the continuity of mineralization, maybe potential development approaches. And what might the timing be of a first resource estimate? James Beck: Yes. I think too early at this point in time to sort of put a pin in calendars around resource estimates. What we can say is that we are pretty encouraged by what we're seeing for potential continuity here. Again, I think I caution that it's still being early days. Sandia, we've got 2 holes into it effectively. And what we see is evidence on surface from soil sampling, evidence from the geochemistry, evidence that we're seeing through the drilling that there's really high potential for this to be quite a significant continuously mineralized envelope. But stay tuned, I think for results from the drill bit, that's the only way we'll truly find out what's going on. Operator: [Operator Instructions] There are no further questions at this time. So I will now turn the call over to Ron Hochstein for closing remarks. Please continue. Ronald Hochstein: Thanks, Natasha. And thanks again. As I said earlier, thank you all the analysts and investors for your continued support. And as I mentioned in the press release, the future is very bright. The company is in very good hands, and I'll be an active spectator going forward. Thanks, everybody, and have a great weekend. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone. Welcome to Exchange Income Corporation's conference call to discuss the financial results for the 3 and 9 months ended September 30, 2025. The corporation's results, including the MD&A and financial statements, were issued on November 6, 2025 and are currently available via the company's website on SEDAR+. Before turning the call over to management, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed upon such statements. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the quarterly and annual MD&A, the Risk Factors section of the Annual Information Form and EIC's other filings with Canadian securities regulators. Except as required by Canadian securities law, EIC does not undertake to update any forward-looking statements, such as statements speak only as of the date made. Listeners are also reminded that today's call is being recorded and broadcast live via the Internet for the benefit of individual shareholders, analysts and other interested parties. I would now like to turn the call over to CEO of Exchange Income Corporation, Mike Pyle. Please go ahead, sir. Michael Pyle: Thank you, operator. Good morning, and thank you for joining us on today's call. With me today is Richard Wowryk, our CFO, who will speak to our quarterly financial results, along with Jake Trainor and Travis Muhr, who will speak about our outlook for our 2 operating segments. Yesterday, we released our third quarter results for 2025, which were very strong overall. We set all-time quarter high watermarks for all of our key financial metrics, including revenue, adjusted EBITDA, net earnings, adjusted net earnings, free cash flow and free cash flow less maintenance capital expenditures. We also set highs for our basic and fully diluted share metrics for virtually all of our KPIs despite the fact that our share count has significantly increased during the past 12 months due to the redemption of 3 classes of our convertible debentures, coupled with the shares issued for our acquisitions. This demonstrates the performance of our underlying businesses. Subsequent to quarter end, we called our last remaining convertible debenture, which was originally due in 2029. And by the first week of December, we will have no convertible debentures in our capital structure. In short, our balance sheet is simplified, delevered and very liquid with total leverage near all-time lows. Rich will talk to the record financial metrics later in the call, but I wanted to delve further into the more significant quarterly highlights, along with some of the forward-looking remarks included in our 2026 guidance. The third quarter was the first period, which included the financial results from the highly strategic acquisition of Canadian North. The acquisition cemented our position as the foremost expert in Northern Aviation and the results during the quarter were consistent with our expectations. The profitability and the passenger cargo business of Canadian North are reasonably similar and will ultimately match that of Calm Air and our other air operators. As I previously communicated, Canadian North also has a large charter operation that flies on paved runways and utilizes 737 aircraft with a much lower margin profile than the Northern Air operations, which explains some of the outsized increases in revenues. The majority of the aircraft serving up the business are leased. And therefore, as these contracts wrap up, we will be evaluating that specific business component to assess its returns and see whether they meet our requirements. Taking a step back, the integration of the business is proceeding consistent with our plan that was developed during the due diligence process. The new long-term air services agreement provides future profitability and certainty as the contract is modified both up and down for aviation-specific inflation factors. Significant process has started in adjusting the cost structure of the underlying operations, including the renegotiation of [ supplier ] arrangements. Our other air operators and aircraft sales and leasing have been working with Canadian North to identify operating efficiencies along with the purchase of spare parts and engines to improve the reliability of the fleet long into the future. The inclusion of the 737 fleet provides Regional One an opportunity to attend 737 University, learning about the value of its parts and may provide it with another engine and parts business line opportunity in the future. Overall, I'm very happy with the progress made to date, and we expect by the latter portion of 2026, the profitability and free cash flow returns of Canadian North will meet our requisite requirements. The remainder of our Aerospace and Aviation segment had a very strong quarter. The second quarter did have some challenges associated with wildfire activity in Manitoba and Ontario. However, the load factors returned partway through the third quarter, and the underlying business was performing very strong during the quarter and as we exited the quarter. We remain very positive about each of the business lines within the segment. And our aircraft sales and leasing continued to see step-based improvement in their aircraft and engine leasing portfolio, and we made some significant investments into the fleet that we had signaled during the second quarter call. The business line also had a number of opportunities to sell whole aircraft and engines during the third quarter. Those large sales are generally at higher dollar values, but with lower margins than our traditional part business, and it provides further evidence of the demand for aircraft sales and leasing single-aisle turboprop and jet niches. Our Aerospace business continues to see significant demand signals, both domestically and internationally. We are at the intersection of a number of megatrends in Canada. The focus on meeting NATO defense spending targets, coupled with Northern sovereignty means there are tremendous opportunities for EIC as a whole. Our infrastructure in the North is second to none. And as we already perform ISR services for the federal government along the East and West Coast, we believe there are opportunities to expand these services into the North. We know that the government is facing human capital and infrastructure shortages. With our relationships with indigenous communities, coupled with our Northern aviation expertise and infrastructure, we believe that we are uniquely suited to provide a solution to the government. We are excited about this opportunity, along with the opportunities immediately before us with other countries. Our Netherlands and U.K. operations have positioned us as a global expert in ISR and countries are actively calling us to inquire about our services. The megatrends are also providing us with tailwinds in our other business lines. Focus on critical minerals, resources and precious metals is anticipated to drive demand for fly-in, fly-out services in our air operators, coupled with the demand for our Environmental Access Solutions business line as companies will be required to build access roads to protect ecologically sensitive areas. Furthermore, the focus on artificial intelligence and data center is driving demand within the transportation sector. Our North American electrical grid system requires significant maintenance, improvements and enhancements to handle electrification requirements of the future, whether it be from data center demands or from households or transportation. This is a tailwind for both our Canadian wood and U.S. composite operations in our Environmental Access Solutions business line. We continue to see significant demand in composite matting. We have effectively sold out all of our production into 2026 because of the demand of our best-in-class SYSTEM7-XT mat. We're in the final stages of selecting a location and are actively negotiating with a lessor for the installation of a new state-of-the-art plant. We anticipate the plant will be up and running in about 18 to 24 months and will require acquire an investment of approximately $60 million. The demand for composite matting is ever increasing due to its advantages over wood mats and transmission and distribution sector, coupled with increased transition from wooden mat users across the United States. Lastly, data centers and AI are also driving demand in our Precision Manufacturing & Engineering as we provide ancillary products, including cooling stainless steel tanks, [ hydronic ] load cell testing capabilities, chip racking and wireline services. We have been transparent that our Multi-Storey Window business continues to be the most challenged business line due to the impact of aluminum tariffs, deferrals in projects and our strategic decision to retain skilled workers and staff over the shorter term. We are still seeing elevated number of inquiries. However, developers remain uncertain in booking projects as they're awaiting government clarification on interest rates and anticipated reductions in development costs. Capital exists to develop these projects. However, the capital remains on the sidelines until these uncertainties further abate. The long-term economics demonstrate the need for affordable housing across North America, and we are seeing a shift from condo projects to apartments in Canada. We are still bullish on the longer-term trends, and we are seeing positive developments in certain markets across the continent. These challenges in this business line are included in our current financial results and are also included in our 2026 guidance. Looking back at the quarterly record results, these were generated while there continued to be significant uncertainty in various markets. However, EIC as a group of company is at the foremost of a number of emerging trends. When Adam and team buy companies, we focus on the sustainable niches and their management teams. Our secret sauce at EIC is maintaining the culture at these companies and unleashing the entrepreneurial spirit that made these companies successful prior to joining the EIC family. Because of that, I'm excited that our future opportunities as each management team is energized to execute on the many strategic opportunities that are before us. I will let Rich focus on the financial results for the operating segments. However, before passing off the call, I wanted to update you on contract opportunities. During the fourth quarter of 2024, we submitted our proposal to the Australian government for their maritime surveillance contract. We previously anticipated hearing the results of the work by the end of the third quarter as their May election delayed the bid evaluation process for a period of time. We have recently been advised that the evaluation process is not yet complete. As I previously commented, we believe we put together a very strong bid, and we expect to have as good a chance as any other bidder. Due to the timing of getting the assets ready for the contract to start in 2028, we still anticipate the government will have to make a decision by early 2026. As I mentioned -- as I mentioned, this contract would be a home run of sorts. However, in my prepared remarks, there are a number of other opportunities that would approximate the size of Australia. I'm happy to report that our second aircraft for the U.K. Home Office has been fully modified and has started flying missions in the fourth quarter. Flying with a strong tempo, we have received great feedback from the U.K. and other countries, who have utilized the aircraft. We crossed another milestone of being a $4 million -- $4 billion, I'm sorry, equity market cap during the quarter. As we continue to grow and tell our story, investors will see the immense amount of opportunity before us. We are still the same company. We'll be very disciplined in our acquisition and organic growth investments. I'm very proud of the progress made by our various teams, and I'm excited about the future of EIC. Due to the strength of our underlying results and per share metrics, we have made the decision to increase our dividend from $2.64 per annum to $2.76 per annum. This increase in dividend is consistent with our stated commitment to our shareholders to provide stable and growing dividend and is ultimately driven by the increases in profitability and free cash flow, along with our outlook for the future. The dividend increase of 5% continues to represent a lower proportion of our earnings as our earnings and adjusted net earnings grew by approximately 25% on a year-to-date basis and grew by 17% on a year-to-date basis -- on a per share basis. As such, less than 1/3 of the capital generated by this profitability was directed to increase dividends, thereby reducing our payout ratio. Lastly, the dividend protects the purchasing power of our shareholders due to inflationary effects held by all. The demand for our services and products is robust. Jake and Travis will focus on the outlook for our segments for the balance of 2025. However, before passing the call over, I want to speak about our 2026 guidance. We anticipate that our adjusted EBITDA will be between $825 million and $875 million for fiscal '26. This estimate is based on the portfolio of companies that exist today and do not include any new acquisitions, significant contracts or significant growth capital expenditures other than what exists today. We have a track record of executing on our strategic initiatives in the past, and we are confident in the future. I also wanted to reconfirm our guidance for 2025 with an adjusted EBITDA range of $725 million to $765 million with a bias to the midpoint of the range. I will now pass the call over to Rich. Richard Wowryk: Thank you, Mike, and good morning, everyone. For the third quarter of 2025, revenue of $960 million, adjusted EBITDA of $231 million, free cash flow of $171 million, free cash flow less maintenance CapEx of $88 million, net earnings of $69 million and adjusted net earnings of $76 million were all quarterly high watermarks for EIC's busiest quarter. Almost all of the third quarter per share metrics were also quarterly high watermarks, which is even more impressive when you take into account the additional shares that were issued over the past 12 months for the convertible debenture conversions and acquisitions. Revenue in our Aerospace & Aviation segment increased by $247 million or 57% to $680 million. Adjusted EBITDA increased by $46 million or 30% to $202 million. Revenue growth outpaced adjusted EBITDA growth due to changes in product mix at our Aircraft Sales & Leasing business, where they monetize certain large aircraft and engine sales during the quarter, along with the inclusion of Canadian North's charter revenue, for which adjusted EBITDA margins are lower than our Northern Air operators, passenger and cargo businesses. Looking at the Essential Air Services business line, the improvements were driven by a couple of key factors. The acquisition of Canadian North, increased demand, contract scope and price increases in our medevac contracts and improved load factors after the wildfires subsided and operations normalized. Our Aerospace business line revenues were consistent with the prior period, and profitability was slightly lower due to changes in product mix. Our Aircraft Sales & Leasing business line increase in revenue and profitability was driven by continued improvement in leasing activity and robust parts demand. We also saw significant increases in large asset sales compared to the prior period. As a reminder, those assets are generally lower margin and lumpier than our traditional parts business. Revenue in our Manufacturing segment increased by $3 million or 1% to $279 million. Adjusted EBITDA decreased by $6 million or 12% to $45 million. Our Environmental Access Solutions business line had increased revenues and adjusted EBITDA, driven by the acquisition of Spartan, which continues to have a significant demand for its composite mat. As previously discussed, the Spartan team is in the final stages of designing a new plant as the longer-term secular demands have demonstrated our need to increase capacity. In the Canadian market, we saw a decrease in adjusted EBITDA due to customer deferrals of projects into the fourth quarter and into 2026. As expected, our Multi-Storey Window Solutions business revenue and profitability decreased due to customer deferrals and related production gaps. Profitability was further negatively impacted by aluminum tariffs. We are continuing to see significant activity. During the quarter, we booked a number of projects. However, the geography and pace of bookings continues to be sporadic as there is developer uncertainty due to anticipated changes in government regulations and further clarity on interest rate environment, including mortgage rates. Our Precision Manufacturing & Engineering business line had another solid quarter from a revenue and profitability perspective. It was driven by customer demand across several industries, including telecommunications, technology, resource and data centers. Overall, net earnings were $69 million for the third quarter, which was an increase of $13 million or 23%. The higher EBITDA was partially offset by increased depreciation and amortization through the Canadian North acquisition, which was expected due to the significant asset backing and growth in capital investments made over the past number of periods. Earnings per share increased to $1.32 per share compared to $1.18 in the prior period. Adjusted net earnings were $76 million compared to $61 million in the prior year with an increase in adjusted net earnings per share from $1.29 to $1.46 per share. Free cash flow was $171 million compared to $136 million in the prior year. Free cash flow per share increased from $2.86 to $3.30 per share. Free cash flow less maintenance capital expenditures was $88 million compared to $81 million in the comparative period. Maintenance capital expenditures during the third quarter of 2025 were $83 million compared to the prior year of $55 million. On a 9-month basis, maintenance capital expenditures were $205 million compared to $142 million in the prior year. Q1 in the prior year was an anomaly on the low end due to the timing of maintenance events. The increase in the current year is due to 3 parts. First, the elevated maintenance capital expenditures at Canadian North, as we expected and previously disclosed. Secondly, the timing of events occurring. And lastly, the changes in policy based on utilization of aircraft and engines and aircraft sales and leasing as discussed in the first quarter, which saw us switch to a more conservative policy as fleet utilization increased. Growth capital expenditures during the third quarter were $128 million compared to the prior year at $93 million. The third quarter growth CapEx primarily related to Carson Air, the construction of an Ottawa hangar for Canadian North and the execution of growth capital purchases at Aircraft Sales & Leasing. We noted during the second quarter, a significant amount of deposits were made, and we executed on certain of those transactions during the quarter, which more than offset negative growth CapEx from the second quarter. From a working capital perspective, we had a recovery of approximately $3 million and investment of $37 million for the 3 and 9 months ended, respectively. Subsequent to quarter end, we collected 2 large receivables totaling approximately $25 million. We are actively managing our working capital and working with each subsidiary team to convert working capital into cash. Our corporation's aggregate leverage, assuming that the convertible debentures called subsequent to quarter end materially convert, would be 2.89x. Our aggregate leverage ratio remains historic lows and well within our target. We continue to have significant liquidity available to us. Our balance sheet is very strong and including cash on hand and the accordion feature within the credit facility, we have approximately $1.2 billion of capital available to be deployed. This allows us to execute on growth opportunities and acquisitions that are accretive and meet our disciplined financial metrics. Our view of leverage and our disciplined approach to acquisitions and organic growth investments have been constant over the years, and they will continue to serve us well into the future. Within our third quarter results, the preliminary purchase equation for Canadian North has been included. As discussed previously, the acquisition is significantly asset-backed. Preliminary goodwill that is recorded is entirely attributed to deferred taxes. Hard assets account for more than 100% of the purchase price. This level of asset backing drove depreciation up materially in the quarter. I will now turn the call over to Jake, who will provide an update for the 2025 remaining outlook for Aerospace & Aviation. Jake Trainor: Perfect. Thank you, Rich. Travis and I will once again split up the outlook section. I'll focus on Aerospace & Aviation segment, and Travis will provide context on our Manufacturing activities. Overall, we're expecting a strong last quarter of growth from a revenue and adjusted EBITDA perspective from our Aerospace & Aviation segment for several key reasons. The most significant driver is the acquisition of Canadian North. The Canadian North operations met our internal expectations for the third quarter, and we anticipate continued performance during the fourth. Our integration activities have been progressing in accordance with our plans and time lines. We should start to see further improvement in operating margins as we move into 2026. There will be further investment in maintenance capital expenditures on the fleet, including spare parts, engines and overhauls during the next few quarters. Secondly, we anticipate further strengthening of results due to growth capital investments made for the contractual wins announced over the past few years, including contributions from the U.K. Home Office second aircraft, which has started operations early in the fourth quarter. The operating returns associated with the fixed-wing Newfoundland & Labrador medevac contract operations will start becoming evident in mid-2026. Our Essential Air Services business line will see growth driven by a multitude of factors when compared to the prior Q4. The first and most significant will be the addition of Canadian North. We also anticipate strong load factors and growth across our network. And lastly, we expect continued growth in our medevac business because of strong yields, coupled with increased scope and price compared to last year. We have received 7 of the 12 new King Air 360s to date, with another aircraft expected in the fourth quarter. And we'll use the previous BC aircraft to redeploy through our other operations, including the Newfoundland & Labrador fixed-wing medevac operations, which will further enhance our returns. Offsetting some of these gains is the impact of continued labor shortages and supply chain challenges. We're not seeing a worsening of these dynamics. However, the challenges still remain specifically on aircraft parts and consumables. The Aerospace business lines revenue and EBITDA are expected to increase in the fourth quarter relative to the prior year, driven by the second aircraft deployed onto the U.K. home office contract and continued strong tempo flying for other owned ISR assets. Our aircraft sales and leasing business is also expected to experience growth as we start to lease out assets acquired during the quarter. When we deploy capital in this manner, it does take a period of time to ready the aircraft and enter into lease contracts with customers. Furthermore, we continue to see very strong demand for parts sales and whole aircraft and engine sales. The environment for aircraft sales and leasing remains robust. Taking a step back, I want to focus on the strategic benefits of Canadian North transaction for the longer term for EIC as a whole. We believe that the Canadian North infrastructure and aviation assets, coupled with our existing operations, provide us with a unique offering to meet the development needs of the North. As the Canadian government renews its focus on development and security in the North, EIC's comprehensive portfolio, including advanced aerospace capabilities, sovereign Arctic aviation, medevac solutions, defense-enabling infrastructure and in-country defense manufacturing as well as our extensive network of partnerships with indigenous communities uniquely position the company to lead and support these critical initiatives. We're having discussions with the government and our customers about how EIC can support them. We expect maintenance capital expenditures to increase for a number of reasons. Firstly, due to the addition of Canadian North, we noted that the first year returns are expected to be muted due to higher-than-normal maintenance CapEx expenditures required. When we negotiated the purchase price, we took into account the projected maintenance capital expenditures, and it ultimately was factored into our purchase price. Secondly, maintenance capital expenditures are expected to increase in line with increases in adjusted EBITDA for our Aerospace & Aviation segment. Additionally, increases in maintenance capital expenditures related to our Aircraft Sales & Leasing business due to continued strengthening of utilization in our lease portfolio and the impact of the more conservative change to the calculation of maintenance capital expenditures adopted in 2025. Lastly, this quarter's maintenance CapEx expenditures in Essential Air Services were below our internal expectations due to the timing of certain maintenance events. Growth investments in the remainder of 2025 include capital expenditures for 1 new King Air aircraft, which we used in the BC medevac contract. The remaining aircraft for this contract have been pushed into 2026 due to manufacturer delays. Regional One has placed deposits on certain aircraft assets and anticipate executing on aircraft and engine transactions during the fourth quarter. I'll now pass it off to Travis to provide some commentary on the Manufacturing segment. Travis Muhr: Thanks, Jake. We're anticipating continued growth in our revenues and profitability for the Manufacturing segment for the fourth quarter compared to the prior year. This growth is expected for 2 reasons. Firstly, we're seeing our customers normalizing the fact that uncertainty will continue to persist in the economy. However, investments and purchases will be required to maintain industrial capacity, and therefore, we anticipate the recognition of sales that were pushed from earlier in the year. The second is the continued strong results from Spartan in our Environmental Access Solutions business line as Spartan was acquired in early November 2024, and they continue to see significant demand for their products. All of the businesses within the Manufacturing segment continue to experience strong levels of customer inquiries. The impact of the tariffs has resulted in reduced business confidence, which has deferred customer investment purchase decisions throughout 2025. To be clear, we have not been directly impacted by the tariffs, except for the aluminum tariffs impacting our Multi-Storey Windows business line during the second and third quarters. The vast majority of our products that we produce are CUSMA compliant and therefore, the broader risk of tariffs relates to the declining business confidence and supply chain changes, which do take some time to effect. Our Environmental Access Solutions business line is expected to generate returns higher than the comparative periods for the fourth quarter. Spartan continues to experience very strong demand for its composite mat solutions, and we are anticipating that they will continue to sell out of their manufacturing capacity based on feedback received from their customers on their SYSTEM7-XT and FODS mats. Due to the strong demand for its composite mats, we are finalizing a location and final pricing to build a second state-of-the-art plant as discussed by Mike. We see long-term positive trends in the composite mat industry as the geographic and sector usage continues to expand and take market share away from the traditional wood mat industry in the United States. We've seen some deferrals in project start dates in Canada, and we anticipate those projects commencing in the fourth quarter and into 2026. We've talked a lot about our bullish view on the transmission and distribution sector as electric grids have to be expanded and hardened for the new electricity demands, whether it be from data centers, vehicles or homes. With the Build Canada mantra of the federal government and fast tracking of nation-building projects, we also see several tailwinds for the traditional oil and gas and pipeline business within that business line. As expected, our Multi-Storey Window Solutions business line, revenues and adjusted EBITDA will be lower than the comparative periods. The period-over-period declines are expected due to the heightened interest rates in 2023 and into 2024 that resulted in reduced project manufacturing for 2025. Secondly, for the projects scheduled for 2025, we anticipated margin pressures due to the type of projects booked, coupled with production gaps. We've integrated the manufacturing capacity in Canada by combining manufacturing facilities and have made the strategic decision to retain skilled staff during this downturn. We also highlighted that the business line was negatively impacted by tariffs during the quarter. As discussed in our reporting, we cannot alter the supply chains in the short term. In the longer term, we'll be able to mitigate the tariffs and optimize production. Quoting in Canada and the U.S. continues to be very active across several geographies. As discussed at last quarter's call, we were successful in booking well over $100 million of new projects across various geographies and project types within the business line. We remain very bullish on this business line as the longer-term fundamentals, which drive demand being an acute shortage of affordable housing remains very strong across several geographic regions in Canada and the U.S. This shortage has been highlighted by several government officials on both sides of the border. The Precision Manufacturing & Engineering business line is expected to improve from a revenue and profitability perspective for the fourth quarter compared to the prior year. We're seeing strength across various sectors, including telecommunications, technology, resource and data centers industries, along with sector tailwinds in the defense industry. We're anticipating growth capital expenditures to be incurred. So the growth capital expenditures in the Environmental Access Solutions business line will depend on the market dynamics. However, we do anticipate investments due to the demand expectations in 2026 due to the revised project start dates and anticipated opportunities. I'll now pass the call back to Mike. Michael Pyle: We're very encouraged about the state of our business. EIC lies at the intersection of a number of positive and sustainable tailwinds in the Canadian and global economy, which will drive our results long into the future. Our 2026 guidance represents the collective investments we have made in our business. However, to be clear, it does not include any amounts related to future acquisitions, new contracts or significant growth capital expenditures for new contracts. EIC will continue to be a company characterized by resiliency and stability as the core of who we are. We buy great companies and help unlock entrepreneurial power within those businesses. Thank you for your time this morning, and we would now like to open the call to questions. Operator? Operator: [Operator Instructions] And your first question will be from Steve Hansen at Raymond James. Steven Hansen: Team, frankly, it feels like there's a couple of ways for you to benefit from Canada's new focus on North, be it military or otherwise. How do we think about, though, the government overlay with all this and the timing? What I'm trying to understand is ultimately is like where do you think we'll start to see the benefits first and over sort of what time frame? Michael Pyle: That's a tough question to start the morning, Steve. We do the maritime surveillance for Canada on the East and West Coast. Canada has historically not felt the need to surveil the North. That's clearly changed. All 3 political parties in Canada have talked about the need for military bases and the need to look after the north. With our acquisition of Canadian North, we now have the infrastructure across Canada's Arctic to enable us to move very quickly to stand up maritime surveillance operations. We've met with the government. I would say that the discussions have been very positive. I would suggest that there's support across the government, whether it be in the PMO, the Defense Minister, the Procurement Minister or I think most significantly in the Canadian military. They acknowledge that they're stretched with all the other things they're doing, the future strike fighters, the Canadian -- the search and rescue planes. They can't take on a new project. And so the advantage we bring on this is we will bring them a service. All they've got to do is tell us how much and where. And so while it's difficult for me to make a prediction for a government, I think this is something that's actionable within weeks or months, not years. And so for us to be able to announce something next year, I think, is a reasonable time line. Again, this is dependent on the government. So we're not sure we're active working with them, but we're excited about the opportunity. And quite frankly, one of the things we love about it is we've built all the information technology conduits to deliver the data to the government and to the departments of the government. So our ability to stand this up would be much easier than, for example, when we went into the Netherlands or when we went into Britain, where we had to build that infrastructure or if we will win in Australia, it's really just a bolt-on in Canada. So the next year, I think, is a reasonable target to hear something on that. But the other thing I'd point out is it's much more than that. It's not just the IFRS. We're going to build -- we don't have anywhere to land the F-35s up North. We need to build runways. We need to build military bases. Well, as the people and professionals that are going to go into those communities, they're going to be coming in, whether it be on Calm Air if they're building in Rankin or in Canadian North if they're building in Yellowknife or building in [ Calvert ]. And so we're going to see part of the benefit of this through our scheduled airlines. You're also going to see it as more and more development of particularly critical minerals that exist in Nunavut. The charter operations to bring employees in and out of those are also going to be done through our bases and our dominant position in the North. I would like to say that when we started discussions with Canadian North over a year ago, closer to 2 years ago, we saw this coming with the movement towards a much greater investment in defense. But we did -- we saw it just based on the pure business, the pure stuff that we're used to doing for the last 50 years up there. The addition of this turns what was a good deal into a great deal for us. Jake Trainor: Steve, it's Jake. One other comment I'd make just outside of the defense and security initiatives by the Canadian government. You hear a lot of discussion in the budget about infrastructure and nation building. And again, we have very positive exposure, whether that's pipelines, whether that's port infrastructure, a lot of the building that's related to, let's call it, the nonspecific defense matters, we have positive exposure to. So again, we're feeling very good about a number of the initiatives and working with the Canadian government and obviously, the provincial governments as well. Steven Hansen: Appreciate the color. And hopefully, we can get going on building some stuff. Just one follow-up for me is just around the Regional One. It's been active. There's constraints in the system still, and you've made some additional investments there. Is that a business that will continue to have opportunities through next year? It sounds like the broader thematics there are quite strong, but I just want to get a sense for how your thoughts are into '26 on that business specifically. Michael Pyle: Yes. Regional One has become such a player in the markets it's in. Their growth in terms of whether it's parts sales, which are very predictable and reliable quarter-to-quarter, whether it's leases, which are also very reliable quarter-to-quarter or whether it's the stuff that's a little bit more lumpy like we had this quarter. Maybe I'll just touch on something here that our revenue in Regional One in this quarter was up about 70% year-over-year because of sales of full aircraft. And those bounce around. But the margins on those kinds of sales are lower. And so when you look at our overall margin profile for the whole company, margins aren't down in aviation. It's just product mix. We're selling -- in this quarter, we happen to sell more full aircraft, which have good profit in them, but they're lower margins than if I sell the plane in pieces. And so when you look at Regional One, don't extrapolate that kind of revenue growth, but the core EBITDA growth, which takes into account earnings in all 3 segments is going to continue to grow. Our market position is going to grow. And while I wouldn't promise you this for 2026, it will start there. The ability to trade in the 737 marketplace is coming. We just bought 20 years of data from Canadian North about the value of every part on those planes, and we're now selling parts to ourselves. Canadian North is taking Regional One to the 737 University, very similar to what we did when we moved into the Embraer portfolio about 10 years ago. You're going to see the opportunity for a massive amount of growth in the future in Regional One as we internalize the knowledge required to be a trader in the parts of the 737, and we'll use the business model that's proven so successful in Regional One over the last 10 years. I'd point out for the people who don't know, we bought Regional One in 2013, and it was doing about $16 million in EBITDA. We'll be close to 10x that this year and -- in Canadian dollars, and we'll continue to see that grow in the future. Operator: Next question will be from Cameron Doerksen at National Bank. Cameron Doerksen: I guess I want to have, I guess, a little more detail on the 2026 guide. I mean, obviously, you've got very good visibility. So I would say high confidence, not to put words in your mouth, high confidence in the low end of that range. I guess what gets you to the higher end of the guidance range? Like what has to happen with the various businesses to get you to that $875 million level? Michael Pyle: It's really -- the high end would be driven probably by acceleration in the Canadian environmental matting space. We see a whole bunch of very positive trends there. There's a super cycle beginning for matting with the things that need to be done for T&D work. And the T&D being the transmission and distribution of electrical power. So there's earnings power there. There's also massive earnings power sitting in the window business. The window business is essentially breaking even. It's not making a material contribution. That business will make $50 million plus just in a normal market, not in a strong market. And there's easily another $20-or-so million available in the Canadian matting business. So just those 2 things would take you above the top end of the range and continued improvement and wins in contracts because quite frankly, we fully anticipate winning things that aren't in the guidance we give. We try to be consistent in not guessing what we're going to win before we get it. And so to get beyond that, more contract wins, whether it be in ISR or in Medevac or even more charter work in our aviation business could push us up and beyond that. Richard Wowryk: And the other thing that Jake talked about in his prepared remarks is just the timing it takes between acquisition and deployment of certain leased assets at Regional One. So as that -- if you deploy those assets sooner than you expected, that would help. And as we've seen over the last 18 months, step-based improvements in our lease occupancy rates at Regional One, if you had continued improvement in that above what we're expecting, that would also drive you closer to the top end of the range. Operator: Next question will be from James McGarragle at RBC. James McGarragle: So just on the '26 outlook, you mentioned it doesn't include any M&A, any contract wins or any incremental growth CapEx. But you alluded to a lot of those things in the press release and in your prepared remarks. So just following up there specifically on M&A and some of Adam's comments in the press release. Can you just talk about what the pipeline looks like now and anything that we could expect early in '26 that could potentially represent some upside to the guidance you gave? Michael Pyle: Yes. I mean I'm really a little disappointed in Adam. We closed Canadian North, and he hasn't done anything since. So we'll get him off his ass and working again. And of course, being facetious. We've got a couple of interesting things cooking in aviation, things that are tangential to what we do. I think if we're successful, they would be kind of like the market's reaction to Canadian North, though that makes a lot of sense. We should have saw that coming. Nothing though, James, that like we're going to close in the next 30 days. We're busy working on a couple of things. We're excited about it, but nothing imminent. Richard Wowryk: I think the other thing that's super exciting for us, James, is when you look at the -- where our balance sheet is compared to where we were 12 months ago, we have significant capacity. Adam and his team do a really great job of finding really great deals for us, and we've positioned ourselves to be able to act on that quickly without needing to access the equity markets. Pro forma, our leverage is the lowest it's been in well over a decade, and we're very excited about the transformation of our balance sheet over the last 12 months and where that positions us to execute on the opportunities we see in front of us and the ones we hope we continue to uncover. Michael Pyle: And I think just one more thing as it relates to the balance sheet, James, I appreciate this is a very long-winded answer. But with the reduction in leverage and the continued growth of the business, I think that puts us in a strong position to tap the bond market in the future should we want further funding beyond our bank syndicate. The interest rates in the bond market are lower than what we pay. And I believe that we would be viewed as investment grade. So that's something we'll work on in the next year about getting that in place. But I would point out also that the strength of our performance has brought in international banks looking to join our syndicate, whether they be from the United States or even Asia. So our ability to grow the syndicate in line with our business is also there. So we're not dependent on the public debt markets to grow either. So I just -- it's a super exciting spot for us with our balance sheet because we have so many options to fund growth when the right contracts come, like an Australia win, like ISR for the Canadian government, those kinds of things, we're in a position where we can pull the trigger so fast. James McGarragle: And just to follow up, you mentioned ISR, obviously, the Australia, you talked about some opportunities in Canada and in the U.K. But can you just talk about the opportunity more generally? Because in the past, you've kind of flagged some other opportunities in Europe. So kind of where you see that going in the next couple of months and the next couple of years and how you're positioned to maybe potentially have some wins outside of that Australia deal, outside of some of the Canadian opportunities that you've spoken about? Jake Trainor: Yes, James, it's Jake. I can take that question. Again, 2 parts. First, there's opportunities with existing contracts. And in every ISR contract that we have, we're in discussions in either expanding scope or scale of those contracts in terms of duration. Secondly, we're in discussions and well down the path with a couple of European governments. One, I'd like to say that we're close. And again, as Mike says, when this comes out, hopefully announced, it will sit there in the markets go, well, yes, this makes sense. Absolutely. So we're excited about that. We're talking to folks in Southeast Asia as well. Unfortunately, the instability in the world drives demand for greater situational awareness and thus ISR activities globally. So we're well positioned for that, whether it's directly positioned with aircraft or with sales of our software system onto unmanned aircraft vessels, land vehicles. So again, we're excited about the opportunities broad-based across that sector. Operator: Next question will be from Matthew Lee at Canaccord Genuity. Matthew Lee: Maybe back on Manufacturing. Just it feels like margins have been a little bit lower this year than we're used to seeing, especially given the success in the high-margin mat business. And I'm not holding you to anything, but when you think about the medium term, where do you think the EBITDA margins of that business should be? And what has to happen to get there? Michael Pyle: I think you're going to -- over the medium term, you'll see material accretion in the margins. It's really going to come from a couple of places. When the leasing of -- or the rental of mats in the Canadian market expands towards the end of next year. That's a very high-margin business. And so you'll see that drive margins. And then the other thing, quite frankly, in the window business. Right now, it has 3 big challenges. One, the work we booked in a couple of years ago when it's soft is at lower margins; two, we're not efficiently running the plant at full capacity; and three, we're carrying people that we don't need based on today's level. So as that returns to normal, you will see us add tens of millions of dollars in margin EBITDA, and it basically flows through straight to the bottom line because there's no new capital required. And so that drives the top line, it drives increases in the margin line, and it drives the EBITDA line. Those 2 things will be the main drivers, I think. When things were tough, we to keep our people working, we took lower margin work in the window business, knowing what was going on in the industry, wanted to keep our production, and people have left the industry. So as this turns back up, there's going to be less players, and we're the best equipped one to deal with it. So -- and one of the things I really want to make sure people understand is EIC was built on the concept that not everything is going to be perfect at the same time. And so we're hitting targets. We're increasing dividends. I mean we had 17% increases in earnings per share this quarter, even with all the new shares from the conversion of the strengthening of our balance sheet with windows basically not in a position to help. That's not going to be the same all the time. I can tell you at the beginning of COVID, when the airline struggled, the window business carried us. And so you're going to see the improvement in the window business, some more growth in the matting business drive the margins as we go forward. And whether that's likely not early next year, but it's coming out of next year into '27. And those lower margins in '26 are fully factored into the guidance we've given. Richard Wowryk: Yes. And maybe just to add on the Access Solutions business. So that one is really, as we talked about, is like the deferral of projects that pushed out from Q3 into the fourth quarter and into early 2026. So we do anticipate sort of the expansion of margin as those mats go on rent and then the long-term tailwinds about sort of the nation building and all that's going to require access matting. So very excited about the future. Matthew Lee: Okay. That's helpful. Then maybe just a quick one maybe for Rich. A philosophical question on maintenance and growth CapEx. When you think about refreshing the fleet for Canadian North, to me, it seems like it's to capture incremental revenue. So how do you think about that the new fleet up between maintenance and growth CapEx? Michael Pyle: Maybe I'll jump in. Rich, is just calculate something. When you look at Canadian North, they're actually pulling up our actual numbers. The Canadian North investment, we knew that under the previous ownership, they made decisions to defer cash investments. And so they were renting engines instead of overhauling engines. They were doing stuff. Their planes were fully safe and fully maintained, but they weren't doing them on a cost-effective basis because of capital restrictions. And so we've got engines to overhaul. We've got landing gear to overhaul. And that stuff is, by our definition, purely a maintenance CapEx. Now it's actually in an absolutely transparent world, it's maintenance CapEx that we would have done over the last 2 years, not now. We're going to catch up. And that's why I said we're going to take a little bit of a period to get to our 15% because we're going to make those investments. When we bought the company, we knew those investments were required. And so there's not a surprise here, but it's part of the process. But you're also hitting on a key other factor. There's opportunities within Canadian North to switch to more of a combi fleet, get rid of some pure freighter aircraft and replace those with combination passenger/freight aircraft. That will take some investment. And to the extent we do that, that we would view that as a growth CapEx because it's going to generate new revenue because of that investment. It's not big dollars, and we're not -- because bear in mind, you're going to trade off pure freighter capacity to buy the combi capacity. So there will be the investment in some aircraft, but that would flow through our growth line in the future. That's not part of the maintenance CapEx that was really factored into the purchase price when we bought the company. Richard Wowryk: I think the one other thing I would just point out when we're talking about capital, that's really pointed to your growth and maintenance split that Mike has already talked about, but just certain investment decisions that they've made over a period of time because of their capital constrained nature, specifically finance leasing certain assets, we'll buy those out and did that during the -- during the third quarter. And just deploying our balance sheet, having a lower cost of capital than they had provides us with the opportunity to be a little more efficient. But to Mike's point, the growth versus maintenance split, when we look at that, we've looked at it consistently with how we've looked at our ongoing businesses and notwithstanding that, that meant that we had to take it on the chin a little bit for 6 to 9 months here. We thought that was the appropriate way to disclose it so that folks didn't think there was additional growth coming out of something that was really getting their fleets into a spot to drive that consistent cash flow. Operator: The next question will be from Krista Friesen at CIBC. Krista Friesen: I just wanted to touch on -- I mean, obviously, there's a lot in the budget as it relates to the North and to defense. But do you have any comments around the accelerated depreciation in the budget? And if that's something that you guys are excited about? Michael Pyle: Yes. I mean the accelerated depreciation of the budget will let us maybe take on a couple of projects that might not have hit the threshold the way we wanted them to. So I'm not in a position to give you specifics yet. We've only had a couple of days with this, and we've locked our rockstar tax department led by [ Marley ] into a room, and they're working on a couple of these things. But it's very exciting for us that the government wants money to go back in to the Canadian economy, and they want to be specifically Canadian. And I just want to harken back to that ISR opportunity here because when you look at our ability to surveil, we would take a Canadian-made aircraft, the Q400. We put Canadian-made equipment on that aircraft. We'd adapt it in Canadian facilities. We'd fly it with Canadian pilots out of Canadian facilities with investment from Inuit partners because this is taking place in the North. So I'm not sure we can have a better fit with what the government is trying to do than our ISR opportunity. And quite frankly, there is no one else in the country who could do this. Richard Wowryk: And I think one thing just to point out, when we think about returns on an investment that we look at, we're always looking at a 15% unlevered pretax return. So while this won't change the way -- the returns that we're generating because we're going to continue to look at them the same way we always have since our inception, it will make the economics better for us to get the tax deduction faster. Krista Friesen: Right. Okay. That makes sense. And then maybe just another one on the budget. I noticed there were comments there around Northern Medical access. Is that something like -- will you guys play a role in that? Or are there conversations that you've had there? Michael Pyle: The discussions thus far have been preliminary. But to be honest with you, I wouldn't suggest that we play a role. I would suggest that we play the role. We have been the sole provider of medevac services to the government of Nunavut for decades. And we're in the midst of negotiations now on a new long-term contract with enhanced services, enhanced care for the Northern people. And so yes, we will be smacked out in the middle of that. Krista Friesen: I appreciate the color. Congrats on the quarter. Michael Pyle: Thank you. Operator: Next question will be from Tim James at TD Cowen. Tim James: My first question around, again, Canadian North. And Mike, you talked earlier on about kind of the charter business and the contribution from that here in the third quarter. It sounds like it was fairly meaningful. How do you factor -- and it sounds like you're kind of going through a bit of a review on the plan for that business and how strategically it fits over the long term. How do you think about or factor that decision into your guidance for next year? Or not to say that it's maybe material, but when we think about the guidance range, it probably has enough of an impact on that. Could you just discuss what's factored into that when you think about 2026? Michael Pyle: Yes. I mean, it's a really good question, Tim. The charter business in Canadian North is different than our charter business anywhere else. This is long-run 737 pavement-to-pavement that WestJet could do it, Air Canada could do it, Nolinor could do it. There's lots of people that could do it. And as a result, it's much more commodity-like. The margins are very small. And the contracts are old. And because the contracts are old, everyone knows what aviation inflation has been, the returns on the old contracts are very thin. But at the same time, like the first LNG project is coming to a close. And so that means revenue from that will decline. That's factored into next year. But the margin impact is de minimis. Now we are in discussions with the people in terms of the second phase of LNG. And we could do that at a price that is acceptable, we will continue to do it. But the aircraft release, and if we can't do it at a return that matches what EIC wants to do, we don't need to do this business. We effectively didn't pay for it. And the reason I say that is we paid asset value and most of the aircraft that are utilized in this business are these aircraft. So if we didn't win it at the right price, we would just move out of it. We'd have no losses and no write downs. There's nothing. But it's a big opportunity if our team is successful in negotiating new contracts to generate new EBITDA that isn't reflected. So it's got an upside, not really a downside. Did I answer your question? Tim James: That's helpful. That is helpful, yes. My next question, just want to confirm two things quickly here, actually. The 2026 guidance came up earlier. You're not assuming any M&A in there or any sort of incremental growth CapEx. But does that guide take into account EBITDA from currently planned growth CapEx? I'm assuming that's the case but not any unplanned additional growth CapEx that you may kind of announce or plan in the future. Is that the way to think about it? Michael Pyle: Yes. It includes the stuff that we're underway with this year. So we're just finished off our flight simulator for our King Airs in Winnipeg. That's going to generate revenue next year. So that's in there but it's paid for. It includes the Newfoundland contract of the medevac contract. It includes the additional aircraft that we've added to our leasing portfolio in Regional One, ones that are completed and the ones that will close during the fourth quarter. So there's nothing in there for growth beyond the start of the year. Whatever we add to that will be additive to the guidance. One of the things we like to do, and this is very cultural within EIC, and I appreciate we might be a bit of an outlier on this in the public markets, is I don't want my team's feeling any pressure that we need to invest x dollars to get to our budget. We don't have to invest anything to get to our budget other than our maintenance CapEx and finishing the projects we've already started. So when we get, for example, the Spartan plant up and going, that's going to cost us $60 million or-so, but that's 100% additive to the guidance when it gets up and running. It's not a 2026 example. Adam has no targets for acquisitions. He has returns he needs to generate when he finds one. But that way, when we talk to the markets, it's not about something we haven't done yet. And it's part of the reason I believe we've been quite reliable in hitting the numbers we've told the market about. It's because we base our promises based on what we know we have, not what we aspirationally think we will. Having said all that, we aspirationally expect we're going to do some things that aren't in this number. Richard Wowryk: I think the other thing, just we talked about it earlier in the call, but just for avoidance of doubt here. From a growth CapEx perspective, for next year, we still also have the 4 aircraft that will be delivered for the Carson Air contract. And those aircraft that they're displacing will be rolled into the Newfoundland contract. Tim James: Okay. And those -- that growth CapEx, I assume, and the EBITDA coming from that is in the guide for '26, is that? Michael Pyle: That is correct. That's in the guide because it's a project we already announced. Tim James: Okay. Very quickly, Mike, you cited earlier kind of a $50 million approximate sort of normal window business for systems and $20 million for matting. This was in reference to a question earlier. Is that in reference to EBITDA? Is that those two dollar figures you were talking about in very round numbers, I realized, it was an EBITDA reference? Michael Pyle: Yes. I mean, yes but it's also effectively an EBIT number because we're already paying the dollar already. And there's really -- the only net cost would be your working capital costs because you're going to have receivables. But other than that, that ramp up -- and quite frankly, the number in the window business will ultimately be more than that with the synergies that have been created by Darwin and the teams at Quest and BV by streamlining production. You'll see that when those plants start running anywhere near capacity. Richard Wowryk: And just to clarify, those numbers are additive to where we are now, not the run rate for that business. Tim James: Okay. Sorry, I'm going to try and sneak one more in. Mike, you're highlighting kind of the opportunity that you see coming in trading in the 737 market for Regional One, should we think about that market -- and obviously, that's a huge sort of potential market. How do you think about the margin profile of trading in that platform versus the regional platforms that you focused on to date? I mean, is it any different? Or does it not really matter in that type of business? Michael Pyle: It's a great question. And the short answer is we're not there yet. We're going to sell to ourselves first, figure out what we can do. We're going to build up what we could buy older 737s at. This is not something we'll jump on. It's not like cliff diving. We're going to jump in and go all in one. It's more like stepping in the kitty pool. We'll get our ankles wet first and we'll grow, and it's exactly how we did it with the Embraers. The model we have at Regional One is going to work with the 737s. But the key thing that's made Regional One so good with Hank and their team is they make sure they know what the exit is before we get in. We always know we can make a product -- a profit by part of these things out. We're not there yet on the 737 but we now have a whole bunch of data we didn't have before. And quite frankly, the size of that market is so big. The parts stuff will be more efficiently priced, which probably means slightly lower margins. But the ability to gain market share in a massive segment like that is so exciting. And I mean, quite frankly, Hank Gibson, the guy who runs Regional One, spent 15 years in the Boeing world. He has -- this isn't his first rodeo. So this is something I think you'll hear us talking about for the next 20 quarters as we slowly grow this business. Operator: The next question will be from Jeff Fenwick at Cormark Securities. Jeff Fenwick: I wanted to focus back on the ISR conversation. And maybe first, just, Mike, you offered up some commentary that it's relatively easier to put that effort to work with the Canadian government in a relatively short term. So I guess just help us understand that. Is it a case where this isn't about putting out another RFP but maybe there's an opportunity just to amend the existing sort of contracting that you have with the government? Is that kind of the key to moving it along? Michael Pyle: Again, I got to be really careful that I don't tell the government what they're doing, but we have proposed something to them without an RFP. And there are certain ways the government could do new projects without RFPs if they hit certain thresholds, largely driven by how Canadian they are and whether there would be multiple people capable of doing it or not. And we think we hit most of the -- well, not most, all of the criteria to do this without an RFP. But to be clear, the federal government hasn't told us that's what they're doing. We're in the state. I mean you're closer to that than I am. Jake Trainor: Yes. Keep in mind, in the budget that was just announced with the formation of the new Defense Investment Agency, and that's the clear mandate of that organization, how to put capital to work faster than in previous practice. So you've got to appreciate that was only really formed 30 days ago. And obviously, we've been in contact with the bureaucracy and the government ministers responsible for that. So we're encouraged by the initial steps the government has made. They're making the right signals. But again, we're somewhat at the mercy of them as a pacing function. Jeff Fenwick: Okay. That's helpful commentary. And then, Jake, I wanted to circle back on the one comment you made reference to potentially providing some solutions in the ISR into the unmanned vehicles. So when I kind of survey the industry, there's clearly a big focus on the opportunity in drones as being a cost-effective solution for a lot of different countries around the world. So on the one hand, I guess we view that as a competitor to the sort of solutions you've been putting out today but I know that CarteNav is a pretty flexible platform. So maybe there's an opportunity there as well. Like how do you kind of balance those 2 things in the context of that the drone market? Jake Trainor: Sure. So great question, Jeff. And I think drones are a solution -- is part of the solution. It's a tool in the box. And if I look back 10 years ago, there was a lot of commentary about the manned aircraft are going to be substituted by unmanned, and that's really not the case. What we're seeing today employed in a lot of regions is what's called a system of systems that really is a woven network of satellite information of manned aircraft and unmanned aircraft. And it's really taking the data off all the platforms, merging that data and taking the data and creating insights. And that really is what CarteNav, our software product is great at. We're using that in the U.K. Home Office, for example, where it's a layered approach to generating the insights needed for decision-makers. And so while we see each type of platform is good at certain things, they're not good at others. And that combination of things, particularly in a marine environment where you've got long space and time constraints or in Canada's north, the same thing. So it's going to be a combination of all. We're excited again by the employment of CarteNav on certain unmanned systems. But we don't feel necessarily any of the manned platforms are a threat. It's all part of the similar solution. Michael Pyle: I think that a way to look at this is when you look at freight delivery within the cities, you've got couriers who are running around in Prius is handing off envelopes. You've got the Amazon fans with the big high roof handling packages. And then you've got semi-trailers and planes moving it from city to city. One doesn't replace the other. They're all parts of the system. Drones and fixed wing aircraft are -- each have their area where they're better. When you're flying into a dangerous place, if you can do it without a person, that's an advantage. Jake Trainor: And I was just going to say the common thread through it all is the information generated and the information handling system, and that's what CarteNavs great at, and that's where we're seeing significant adoption across all segments. Operator: Next question will be from Konark Gupta at Scotiabank. Konark Gupta: I wanted to first clarify a few things on the 2026 guide. So good to see another ton. By that, I mean, $100 million EBITDA growth back to back. It seems it's mostly driven by the Aviation segment. Is that a fair characterization? I mean manufacturing might grow a little bit, but not too much as compared to aviation. Michael Pyle: That's absolutely fair, Konark. Konark Gupta: Okay. And seasonality-wise, do you think -- I mean, this year has been very similar to last year, '26. Do you see any significant changes in seasonality... Michael Pyle: The interesting thing is Canadian North is exactly the same cycles as Com Air, Perimeter, PAL, all the other one of our airlines. So Q1 is always going to be the weakest. Q3 is always going to be the best. The only thing that has changed that a little bit is Spartan, it doesn't really have a slow first quarter. If anything, they have a slower Q3, Q4 because it's so hot in the south, it actually slows some of their work. But with the exception of Spartan, the seasonality of our business really hasn't changed. Konark Gupta: Okay. And on the windows business, I know and I appreciate the challenges that you guys have been facing for the last little while here. I hate to be a devil's advocate on this one. But like -- what will take you to make a tough call on this one? Michael Pyle: I would -- I'd make a tough call if I didn't believe in it. EIC is doing really well with windows not contributing but they're not hurting us. We're not losing money. It's not like we're feeding it. And if I wanted to shrink it down to make it even more cost efficient, we can lay people off, we could do stuff. But the simple fact is, if you look at the competitive landscape in that business, the number of companies that have left the business is dramatic. And we're not going to not build high-rise apartments for people in big cities. This is -- in Canada, this is the result of a hangover of building 500 square foot condos that people were buying and renting out. The market didn't build what the users needed. They built what was easy to finance. And we have a hangover and that hangover is not over yet. That hangover is not nearly as bad in the U.S. and that's why we see more life right now in the U.S. than we do in Canada. But ultimately, that's coming, Konark. And if I got to wait 12, 24 months to get there, the $50 million in EBITDA that I know I can make in that business is a big prize for no net investment. I'm not going to trade out of it for the sake of not having to talk about it each quarter. Our business model is based on being able to carry things when there's a challenge. And I believe I've got the best management team there is in the window business. So I'm prepared to wait. Jake Trainor: And maybe a couple of other things, Konark. So like we are strong believers in the business, but we are seeing positive demand signals in certain geographies, whether it be sort of in U.S. or certain cities across Canada. Oftentimes, we're very focused on the Toronto market, but there is a lot of positivity in some of the other markets across Canada, where we're seeing lots of opportunities and projects. So we are starting to see that turn. It's just a bit of a function of how fast does it turn? And can we get developer costs down, interest rates are coming down. So we are seeing some of the big demand drivers existing. And as Mike talked about on the call, we are also seeing in Canada a big shift similar to the other geographies moving to rentals as opposed to condos, which is a different form of financing but we think the capital exists there. People are just waiting on the sidelines for -- to book the projects because we're seeing a huge number of inquiries continue. Richard Wowryk: And ultimately, this just comes back to EIC's strategy and how we've conducted our businesses over 20-plus years. In the early days of COVID, no one was asking us whether we were going to sell our aviation businesses because they were challenged and windows was carrying the day. And ultimately, we're at the low point of the market. It will come back, and we're excited that what it does will generate returns that fall right to the bottom line. And ultimately, there may be another challenge at that point in time, and we'll deal with it the same way we always have, focusing on the long term and making decisions so that we're profitable over the long term, not maximizing short-term profitability for at the expense of the long term. Michael Pyle: If you looked at Comair in sort of 2011, 2012 period, it was a lot worse than this is. We were feeding that business. And now it's amongst my best-performing airlines. And so this really is part of the EIC model. Not everything is going to work at once, but quite frankly, it doesn't need to. Jake Trainor: And the last point I'd make is the fact that we have confidence in the management team. As Mike said, we feel we have the best windows management team out there. And as we look at things like infrastructure build, schools, hospitals, we're seeing them pivot towards that direction. So again, we hire good management teams. We acquire companies with good management teams and expect them to captain the ship through a little bit of rough water, and we're there to support them. Konark Gupta: Okay. And those are very insightful comments. And clearly, we have seen that strategy work. So all the best for that. And if I can just ask one more quick before I turn over. In the budget, obviously, there's a lot of great things, I think, for you guys you talked about. But one thing I kind of noticed there as well, I think these guys are also looking to build some sort of all-season roads up north. And I know you have a bunch of airlines doing sort of work and seasonality is more pronounced, right, during the summertime. But what do you think about that being as a small risk to your business up there in the north? Michael Pyle: There are certain places where they will probably build all-season roads. it's exceptionally difficult. And it's not a project that's built in a year or 2 or 5. You're talking -- some of these are decade-long projects, where they're going to get built, how they're going to get built. Just as an example, and this is just an anecdotal example, there's been discussions of building a road to Churchill. Well, they're having trouble keeping the rail line functional because the permafrost is melting and it's turned into a blog. And so the railway keeps sinking into the ground. Building roads over that's exceptionally difficult. And so undoubtedly, if the government is committed to this, there will be some of that done. But we don't view that as being a material piece of our business. Some of the places we fly are so remote. The cost per person of building a road is prohibitive. Jake Trainor: And not to mention the very difficult environment, can you imagine snow clearing thousands of kilometers of roads between communities that, as Mike pointed out, have very low population density. It's something that we just don't see that will necessarily be a factor. Operator: Next question will be from Amr Ezzat at Ventum. Amr Ezzat: Just to press on the guidance. I mean, you guys announced it shortly after the federal budget, and that included all the good stuff you mentioned, new defense spending, critical mineral spending and so on. Just to clarify, were any of these tailwinds embedded in your guidance? Or should we treat it as a clean base case with upside tied to procurement activity materializing? Michael Pyle: That's the easiest question of the day, yes. It doesn't include any of those things, and that's the base case that as these things become operationalized, they'll be additive to this guidance. Amr Ezzat: I love to hear that. Then if you'll allow just one follow-up. On the Canadian North charter operation, I mean, I think we all know that the returns are thin like you guys mentioned, all contracts are rolling off. But can you walk us through the framework you're using to evaluate whether that business is worth keeping, especially how you weigh your return thresholds versus strategic access and customer stickiness? Michael Pyle: It's a bit of an art form as it relates to charters because we don't own the assets. They're leased. So we're not putting the capital out. But quite frankly, we look at it the same way. If we own that aircraft, are we getting our 15% return. And that's kind of the way we factor into, that we factor lease payments in at the end that isn't enough to do the work. I mean, the good part is within Canadian North, it provides good jobs. It spreads our overhead over more flights. So there's lots of good things about it. But the advantage is in the way we acquired Canadian North, we said, look, we've got to fix this up so that the returns match your assets. And we knew that LNG 1 was coming to an end. We knew that -- and it's quite clear LNG 2 is getting done. So -- and we have great relationships with those people. And so we're very optimistic that we'll be successful in being able to do this. But as I mentioned earlier, this business is the most commodity-like of anything we do. We could be replaced by Nolinor. We could be replaced by Porter. We could be replaced by anyone who could fly a jet spot to spot. There's facilities in there. It's not the business that -- hard business that Canadian North does everywhere else where they look after inuit people in remote communities where it's an essential service. This is much different. It's much more akin to what Air Canada does than to what we do. Now we have some advantages because of our First Nations ownership of the communities and those kinds of things that help us. But quite frankly, we'll be disciplined. If it makes economic sense, we'll do it. If it doesn't, we won't. And because of the way we bought it, there's no downside. And I mean, I think you can see it, it's not really a charter question but it relates to the Canadian North thing. It's very seldom that we buy something that's 100% asset-backed, including an adjustment for deferred taxes. And so that's why you see higher depreciation in the statements perhaps than some of the analysts are coming because we don't often buy things that have that much asset back in. But in the long run, that makes it way better because we own everything we've got. We don't need to make investments. We just maintenance CapEx, which we've talked to you about. So this Canadian North business is such a great fit for EIC. Whether we do the charter work or not, we'll see. We'd like to, we're going to try to. But if we can't, -- we still got everything we paid for it. Operator: Next question will be from Chris Murray at ATB Capital Markets. Chris Murray: Just this is more of, I guess, a semantic question or a thought process question around the balance sheet. So Mike, you mentioned that you're kind of working through getting to an investment-grade rating. Historically, I'm thinking about you guys have always been thought of as sort of a diversified financial company. What are the rating agencies telling you about what's going to be required for you to get that investment grade? Is it going to be kind of the end markets you're supporting? Is it going to be leverage levels? And really, how do you think about what that does? Because a lot of the time, what happens in the debt markets drives what we're going to think about in the equity markets longer term. So just thinking about how to think about the company over the next 3 to 5 years as it evolves. Michael Pyle: I got to be very careful how I answer this question because we have had discussions with the rating agencies. I'd start by saying we're confident that we will fit into the investment-grade window. I think the thing that really helps us with the rating agency is the percentage of our business that's tied to government contracts or the dominant market positions where it's an essential service. You see our investment-grade argument is made in 2020 when other people in the aviation space or the manufacturing space got crushed, our EBITDA fell by 10% and then was back up immediately in the following year. I think it's the resilience and the reliability of our cash flow stream. And then quite frankly, we have a 20-year track record of discipline on the amount of leverage we place on those kind of contracts. And so that combined with the -- I guess, the way I can describe it is we've grown up and outgrown our convertible debentures. They've been great to us. We didn't get to Series N because I didn't like them. They were great. They let us sell equity at a future price. The ones we're calling now are only, I think, 3 years old, and the stock price was in the 40s at the time we did it, low 40s, we're selling equity at 60. So they've been good to us but as we've gotten bigger, we will be able to access the bond market at prices that are materially lower than what we paid for convertibles and give us a much more quotation marks traditional balance sheet for a material public company. Richard Wowryk: Yes. I think the other thing, Chris, when we talk about having the conversations and what we need to make us successful in that endeavor is really telling the EIC story we tell every day anyway. We're not a traditional airline. We don't fly point-to-point in southern centers where there's material competition risks. And that story moves you away from an airline's rating methodology into a different ratings methodology where our leverage profile is considered conservative. And it's really -- to Mike's point, we have a 20-plus year track record of maintaining leverage in a band that is viewed as conservative or modest. And I think it's that track record and reinforcing that track record with the rating agency that we prefund things in the equity market if we need to do something. We don't go splash and raise leverage to 4.5x and promise to pay it down over a period of time with cash flow. And I think it's really that track record that really drives the EIC equity story that will be just compelling in the debt markets as well. Chris Murray: Okay. To that point, and I guess the next piece of this question is just even looking at the equity stack. I know you've always had the NCIB kind of as more of a defensive tool, given some of the history. But is there a point where you start just starting to buy back stock expectations that if you do get that re-rating, maybe the stock you're buying back today is going to be less expensive than it would be in the future, especially you've managed to put out a fair amount of dilution with all the converts. But with that being said, just any thoughts around that? And if you can also maybe talk about the DRIP as well and where that sits, that would be great. Michael Pyle: That's a good question. And it's one, which is going to be weird for me, I have a relatively short answer. We look at buying back stock as the alternative to deploying the money on future projects. As long as I've got things I can do with the money, whether it be Australia, the government of Canada, an acquisition for Adam, the plant for Spartan, that's the first place our money goes. If I don't have enough of those and I've got some left, we will use it to buy back stock but only when I don't have the ability to use that as the base for my growth. We are looking at the DRIP. It creates uncertainty every quarter end because people short the dividend and play games with it to get to the 2% discount. Is that right, Mitch, 2% 3% discount. So we are looking at whether maybe we've outgrown that, maybe we don't need it anymore. No decision has been made at this point, and none will be made until we get to our year-end Board meetings. But there's definitely, at the very least, a thought that maybe we've outgrown the premium that we pay on the DRIP. Operator: Next question will be from Gary Ho at Desjardins Capital Markets. Gary Ho: Just one question for me. So you talked about the build-out of a second facility for your composite mat business, $60 million investment. Just any color in terms of the increase in composite matte production with the second facility? And what are your thoughts on offering these through a rental leasing model? And maybe talk about geographies that this new facility could open up? Michael Pyle: I'll start with the last one first. We're going to be in that Southeast corner of the U.S., somewhere between the resin factories in Louisiana and Texas and Florida, where we are now. So I think you'll see us in the Mississippi, Louisiana, those kinds of places. We're very close. I really had hoped to announce on this call where it was going. We haven't finalized the lease. So I don't want to limit my negotiating capability by saying exactly where it is. But it will be somewhere because -- well, those mats are used across the U.S., our customer base is more East Coast driven. And so we want to stay close to our -- the resource we need to make it, which is the resin pellets and close to our customers because mats are heavy and shipping them, I'd rather not. In terms of the lease portfolio concept, that's part of the reason we're building this as we'd like to eventually build out a rental mat business like we have in Canada. It's impossible to do right now because we're selling every mat we can make, and I'm not going to not sell something as we're the smallest guys in this business in the U.S. There's really 3 manufacturers, and we'd be the smallest but we're also the fastest growing. We want market acceptance. So we'll continue to put the product out. And when we build this factory, it's quantum bigger, its capacity will be depending on how many ships you assume, 2, 3x the size, perhaps even more than that than our existing factory, although we certainly won't go from nothing to full blast in that factory. We'll phase it in over time. But we definitely would like to take some of the stress off our Florida plant. The people we have there are doing a phenomenal job of running the plant 24 hours a day, 7 days a week. That's not something that's easy to do. And so the sooner we can get some additional capacity into the system, the better. Operator: Next question will be from Razi Hasan at Paradigm Capital. Razi Hasan: Just 2 quick ones. On Canadian North, can you disclose what percentage of the revenue comes from the Charter business? Michael Pyle: It varies period to period but just let me have got a sheet out here. It would be 0.25. Razi Hasan: Okay. Great. And then lastly, if we think about the Aerospace business representing about whatever, 11% of 2024 revenue, given your comments on defense spending and all the potential that can come with that, are you able to maybe frame how large a piece of the pie the business line can become? Do you think it can double from where it is in terms of revenue contribution? Or just any color on how big this can get? Michael Pyle: Okay. This is a complicated question, Razi, because what we give you in guidance is based on what we know, not based on what we could do. If we are successful in a couple of the negotiations we're in, the revenue from this business could double easily. It could be more than that. Australia in and of itself would do that. The government of Canada would be a huge piece, the discussions that we're in Greenland or in other European countries. So -- and bear in mind, none of that's in the sort of $850 million number at the midpoint of the guidance we've given you. That's all additive if as and when we win. Jake Trainor: And the one point I'd make is just keep in mind, depending on the nature of the contract and the types of assets that are required to service those, there might be a delay while we modify the aircraft. So again, as Rich spoke to the delay between deploying capital and seeing returns, Australia is a good example where we're deploying capital for a couple of years and the contract doesn't start generating revenue into '28. So you've got a bit of a delay and a lag until you see some of the material gains through that. And as Mike said, we've not put that in our '26 guidance. Richard Wowryk: And just because you referenced the revenue disclosure that's in the MD&A, the one piece that obviously I'll point out is that, that's a percentage of revenue at a point in time. Even if the revenue within the aerospace side doubled, we don't plan to stop growing our other businesses. So it's not like that's going to go from 11% to 22%, you're going to see growth within the other businesses. In absolute dollars, it could kind of double, as Mike said, but you would still see growth within our other businesses. So that percentage wouldn't grow at the same rate. Operator: Next question will be from Michael Goldie at BMO Capital Markets. Michael Goldie: On the Northern Canada opportunity, both from an aerospace and Essential Air perspective, how much of this would be new aircraft versus increased utilization of existing equipment? And then for the new piece, like what would the time line be to get assets up and running? Michael Pyle: We have to -- let's break that into the 2 types of business. So the ISR business would be all new aircraft. We don't have -- we just deployed the last one we built into England. So those ones would be all new aircraft. The time line could be -- depending on how many could be as short as 12 months, could be as long as 24 or 30 months, depending on how many we can build a lot of them but our system is basically built on 1 or 2 at a time, not 4 at a time. So it depends on how big a contract would be. But I think on the all but Australia world, it's 12 to 18 months to get them up and running. Although your first aircraft may be flying before the other ones go in, it's probably a phased approach. It's not like we'll wait until we have all 4 until we fly. Anything, you'll start flying as soon as the first one is ready. On the regular part of our traditional airline, we have capacity in that business to add volume without investing something. And then as it comes, it will be kind of step, like we've got x number of ATRs, we add 1 more, we had 2 more. And so there's not a big investment coming in that. There's no investment coming in the near term. And then if we decide to make an investment to move towards the combi stuff that I talked about earlier in the call, that would be a new investment, but that would come with efficiencies immediately. Jake Trainor: Yes. And the other thing I'd say is the benefit of scale as we have multiple airlines operating similar aircraft is we have that ability to start to smooth some of those step changes. And we've got examples where we've got 2 of our airlines involved in servicing a specific customer where as it ramps up, we're employing smaller aircraft from one operator for the bulk of the contract, larger aircraft from another. And then as the shoulder hits on the downside, it reverts back to the original. That gives us a real advantage to other competitors as opposed to having to go buy a bespoke asset to engage, and it might not be optimized for the volume through the contract. Michael Goldie: Okay. And then obviously, as you've added assets, D&A up 18% quarter-over-quarter. Can you remind us how we should think about that as we go into 2026? What assets will be coming online and how that can trend? Michael Pyle: Yes. I mean most of the stuff that's on -- is in now what's different is, as Ritchie mentioned, we got 4 more of the aircraft for the BC Medevac contract. I think round numbers, those are about $10 million a piece, closer to $15 million after they're fully modified for medevac stuff. So there's probably $60 million worth of assets there. And then the variable is quite simply how many assets Regional One buys to put into their lease portfolio. We described them every quarter and how much we bought. But it's highly variable. Earlier this year, we actually had negative growth investment for a quarter where we sold more assets than we purchased. And so that can bounce around. So you got to kind of look at the trailing 12 in terms of the investment to work on the D&A number of that. And I think where it was hard to do on this was we don't often do asset deals. Like the Canadian North was essentially -- we bought $200 million worth of stuff. And so it was all depreciable, and I think that was a higher number than people thought when they did it. Operator: Any further questions, Mike? Michael Pyle: Okay. Well, it sounds like we're done. We really appreciate everyone taking the time and listening to us today. We're ecstatic about what's coming. We've given good guidance for 2026, and I can't wait to increase it. So have a great day and enjoy it. Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines. Have a good weekend.
Operator: Good morning, ladies and gentlemen. Welcome to Saturn's Third Quarter 2025 Results Conference Call. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. I will now turn the meeting over to Ms. Cindy Gray, Vice President, Investor Relations. Please go ahead, Cindy. Cindy Gray: Good morning, everyone, and thanks for attending Saturn's Third Quarter 2025 Earnings Conference Call. Please note that our financial statements, MD&A and press release have been filed on SEDAR+ and are available on Saturn's website. Some of the statements on today's call may contain forward-looking information, references to non-IFRS and other financial measures, and as such, listeners are encouraged to review the disclaimers outlined in our most recent MD&A. Listeners are also cautioned not to place undue reliance on these forward-looking statements since a number of factors could cause the actual future results to differ materially from the targets and expectations expressed. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless expressly required by applicable securities laws. For further information on risk factors, please view the company's AIF filed on SEDAR+ and on our website. Also note, all amounts discussed today are Canadian dollars unless otherwise stated. Today's call will include comments from John Jeffrey, Saturn's CEO; Justin Kaufmann, our Chief Development Officer; and Scott Sanborn, our Chief Financial Officer. I'll now hand the call over to John. John Jeffrey: Thank you, Cindy. Good morning, everyone, and thank you for taking the time to join us today. I'm pleased to share some additional context around our third quarter results, which reflects another consecutive quarter of outperformance as we continue to execute on our Blueprint strategy. The Q3 production averaged over 41,100 barrels a day and exceeded our previous guidance as well as analyst consensus, which had us just over 40,000 barrels a day. We also beat guidance on a BOE operating cost in Q3, which came in at $19.24, below the $20 per BOE annual target. This past quarter also showcased Saturn's ability to be nimble, our commitment to allocating capital to the highest potential return opportunities. Given the uncertainty and volatile commodity price environment that prevailed in the quarter, we elected to reduce our original $300 million development capital budget by 18% to approximately $255 million and pivot our focus towards opportunistic tuck-in opportunities. These tuck-ins offered more attractive capital efficiencies than drilling, having a combined production addition cost of under $16,000 per flowing barrel. Reallocating capital to M&A allowed us to increase production while preserving the value of our existing assets by not drilling them at a time when prices were weak. How we view this is when prices are stronger, we can always go back and drill those wells, but we won't be able to execute on these deals at this pricing level. Further, by coring up in areas where Saturn has strong development success, we can leverage our size, scale and existing infrastructure. which allows us to optimize production, reduce costs and enhance the performance of the assets. Our first tuck-in acquisition included an asset package in Southeast Saskatchewan that was approximately 4,100 BOE a day, comprising just under 70% liquids for a total consideration of $63 million. These acquired assets have an estimated 255 gross company identified locations, including open hole multilateral development potential in the Midale and Torquay. The asset features high working interest, optimization and cost reduction potential, along with extensive opportunities to consolidate facilities and batteries. As Justin will expand on, this package is strategic for Saturn. It expands our runway of open hole multi-leg drilling locations, which are among the highest rate of return wells in our development program today. With the second tuck-in, which closed in October, we acquired a private company operating in Central Alberta, located within Saturn's greater Pembina Cardium area for total consideration of approximately $22 million. In addition to its 1,300 barrels a day of low decline current production, Saturn gained over 80 internally identified drilling locations in the Cardium, Glauconite and Bluesky development, enhancing our operation in the area. Our operations team has already started digging into these assets to identify cost synergies, optimization opportunities and streamlining potential. The nature of our conventional asset base has allowed us to be very opportunistic by being able to stay nimble and pivot quickly when market conditions require. We are unique from other peers who are developing resource plays where they can cost tens of millions of dollars with lead times that can take several quarters or even years to plan and execute. With our assets, we can respond and adapt quickly to a dynamic market condition. As a result of production adds from the acquisitions, along with our strong drilling results to date in 2025, Saturn remains on target to exit the year with a production range of 43,000 to 44,000 BOE a day, which will represent a new production record for the company. We are committed to value creation and continue to use share buybacks as an effective way to return capital to shareholders and drive equity value over time. Our team believes the combination of ongoing share buybacks, coupled with tuck-in acquisitions contributes to growing production per share, adjusted funds flow per share and free funds flow per share. For example, August 2024 to today, we have bought back nearly 16 million shares in the open market through the NCIB and SIB, returning approximately $36 million to shareholders. Over a similar time frame, we have also increased our production per share by 22%. I'm extremely proud of the team who continue to give 110%, putting in the hard work needed to advance Saturn's goals and deliver compelling value for our shareholders while prioritizing safety to ensure that every one of our employees makes it home safe at the end of every night. I'll now pass it over to Justin to expand on our capital program and development highlights in the quarter. JK, over to you. Justin Kaufmann: Thanks, John, and good morning, everyone. As John mentioned, Saturn made the decision to shift a portion of our 2025 drilling capital to M&A during Q3 as we identified 2 tuck-in opportunities that would compete for capital in the prevailing commodity price environment and which we could acquire for attractive metrics. Our Q3 production does include new volumes from the Southeast Saskatchewan tuck-in acquisition, but it also showcases our ongoing type curve outperformance, plus the start of our drilling program after spring breakup, which supported the guidance beat. Our Bakken open hole multi-leg program and conventional Spearfish development wells coming online in Q3 contributed to another quarter of strong results. Saturn invested $87 million of capital in Q3, with $58 million of that directed to drilling and completion activities, including 29 gross wells, 23 of which were in Southeast Saskatchewan and 6 in Central Alberta. We also directed $17 million to purchase 2 strategic parcels of undeveloped land, which we believe will unlock 60 new open hole multilateral locations, representing 5 years of drilling inventory to an additional rig in Southeast Saskatchewan. Our open hole multilateral locations in Southeast Saskatchewan offer some of the shortest payouts and highest potential returns among our undeveloped locations, even in a softening oil price environment. Several of our open hole Bakken wells ranked in Saskatchewan's top 10 best performing wells over the last year. Most recently, our 16-21 wells was ranked as a top 10 well in the province in September for monthly oil volume and daily oil rate. This is a testament to how prolific these wells continue to be. We are excited about the potential we see with this program and our open hole inventory currently represents about 15% of the 2,500 total identified locations in our portfolio. The open hole multi-leg portion of this portfolio has essentially doubled every year for the last 3 years as we continue to progress this exploitation technique to other plays. Most recently, we continued this expansion into the Spearfish play, where we became the first and only operator in Canada to have drilled in an open hole multilateral Spearfish well, and now we have drilled 3 of them. Our third Spearfish well at 1605 came online during the quarter with an IP30 rate of 330 barrels a day. This is about 3x our internal estimate type curve of 110 barrels a day. These initial strong results support our plans to drill 4 additional Spearfish open-hole multilateral wells next year. Building on this success, we are planning 2 open hole multilateral reentries into the Midale in Q4 with up to 6 legs each. This would represent the first ever Midale open-hole multilateral reentry wells ever drilled. These wells are expected to be drilled on land acquired through the Southeast Saskatchewan tuck-in we completed in Q3. More broadly, we expect to allocate up to 35% of our 2026 development capital to our open hole multilateral program, including plans to drill our first of 2 Torquay open hole multilateral wells. With this, we expect to be the most active open hole multilateral driller in Saskatchewan next year. And if oil prices further weaken, we can shift more capital to this program, positioning us to generate compelling returns and robust economics even in very weak price environments. In addition to our open hole multilateral development, we continue to advance the Creelman waterflood in Saskatchewan, where we currently have 5 active injectors. In late October, we received regulatory approval to convert another 2 producers into injectors, which not only support base production, but also fuels future repressurized development locations. Investing in waterflood is a part of Saturn's ongoing strategy to mitigate declines and enhance our long-term sustainability. In Alberta, we finalized the drilling and completion of our 3-well Montney pad featuring 3-mile extended reach laterals. These wells are the longest laterals on record to ever be drilled in the Kaybob area. The North well on this pad has the most productive days and is already exceeding type curve expectations. The South 2 are still cleaning up, but based on reservoir quality observed while drilling, we do expect similar results once they've reached peak production. Finally, I'm proud to share that Saturn drilled the fastest extended reach horizontal Cardium well ever on record during the quarter, drilling to 5,090 meters measured depth on a single draw, achieving well completion from surface casing to full depth in only 4.8 days. These best-in-class results are another example of Saturn's commitment to enhancing efficiencies while operating safely and responsibly. With that, I'll hand things over to Scott for an overview of our financial results. Scott Sanborn: Thanks, Justin. Saturn demonstrated continued resilience this quarter despite a challenging price environment with WTI prices falling 14% over the comparative 2024 period. Operationally, the company continued with its success, producing over 41,100 BOE per day touring revenue over $235 million, driving adjusted funds flow of $103 million or $0.54 per share compared to $94 million or $0.46 per share in the third quarter of 2024, a 17% increase on a per share basis. The integration of the company's most recent tuck-in in South Saskatchewan, which closed on July 31, has been seamless with our production mix remaining consistent at 81% oil and liquids compared to 83% in previous quarters, reflecting the 67% oil and liquids weighting from the acquired asset. Our team continued to focus on operating cost reduction initiatives, realizing year-to-date net operating expense per BOE of $19.04, down from $19.30 on a year-to-date basis prior year. Our third quarter net operating expense per BOE of $19.24 reflects the increased field activity following a seasonal low period due to spring breakup in prior quarters, consistent with increased capital expenditures and associated workover costs. Saturn maintains its annual net operating expense target between $19.50 and $20 per BOE. During the quarter, we returned $12 million to shareholders through a normal course issuer bid and substantial issuer bid. Subsequent to Q3, we returned an additional $4.6 million via the NCIB. As John mentioned earlier, we successfully bought back nearly 16 million shares, representing approximately 8% of the shares that were outstanding at the time we launched the first NCIB in August of 2024. With the combination of tuck-in acquisition activity in Q3, the restart of our drilling program in July after spring breakup and movement in foreign exchange rates, net debt at September 30 was $783 million. Over the past 5 quarters, Saturn has repaid just under CAD 135 million or USD 95 million on the principal outstanding balance of our notes by making our regular 2.5% quarterly amortization payments as well as the open market purchases we did at a discount earlier this year. To drive a more meaningful leverage ratio, we are presenting our net debt to adjusted funds flow on a pro forma figure that incorporates the impact from our Southeast Saskatchewan tuck-in assets, resulting in net debt to pro forma annualized cash flow to 1.6x or 1.4x net debt for EBITDA in line with guidance. Saturn maintains strong liquidity and financial flexibility with $34 million of cash on hand at quarter end, plus an undrawn $150 million credit facility and an uncommitted accordion feature that allows for the expansion of additional $100 million, giving us up to approximately $250 million in total. Looking out to year-end, we are expecting Q4 capital expenditures to range between $60 million and $70 million with average production between 42,000 and 43,000 BOE per day, while our December exit approaching 44,000 BOE per day. This reflects our fourth quarter drilling program and new production from the Central Alberta tuck-ins, which closed October 20 through the end of the year. Saturn anticipates releasing our full 2026 budget and guidance mid-December. That concludes our formal remarks. So I'll thank everyone for joining us and hand the call back to the operator to begin Q&A. Operator: [Operator Instructions]. Our first question comes from Adam Gill at Ventum Financial. Adam Gill: One question for me. As we go into 2026 in a bit of a softer oil price environment, how are you thinking about prioritizing production maintenance versus buybacks versus net debt reduction? John Jeffrey: Yes. Thank you, Adam. So it's a constant kind of battle. So we're always looking to deploy our capital at whatever can get us the highest rate of return. So we're going to go into the year, most likely when we do set guidance, most likely just to maintain flat production. Meanwhile, the NCIB is likely to continue. However, should we find M&A opportunities that pose a higher return than drilling our own land, as you've seen us do in Q3, I think what we'll do is likely reduce our CapEx to fund those acquisitions. We really like that strategy in that not only does it leave our reserves in the ground, but if we're able to acquire some of these assets, at a discounted price due to this commodity. That's something we like. We get all those reserves. So generally, we get production online that's a lower decline at a better capital efficiency than drilling our lands. And again, we can save our locations for that -- for a higher oil price. So that's just something that we're always watching. And again, if we can monitor that and get the highest price, the highest return on our capital, that's where you're going to see us continue to do. Adam Gill: Sounds good. One quick follow-up. Just on terms of declines, what do you think your decline would have been through a 100% organic drilling program coming into 2026 versus doing the tuck-in acquisitions that you disclosed in Q3? John Jeffrey: Yes. That's a great point as well. So again, by acquiring mid-life cycle assets as is a Blueprint, you're getting assets with a much lower decline. Obviously, a new well has a much higher decline. So should we have spent all that capital on CapEx instead of doing the M&A, I think we would have been around the 23%, 24%. However, we get -- this will be closer to that 20%, 21% now with these 2 acquisitions and the reduction in CapEx. Operator: And our next question today comes from Jamie Somerville at ROTH Canada. James Somerville: How does the 330 barrels a day from this Spearfish multilateral compared to the previous 2 wells that you drilled? And why was your type curve only 110 barrels a day? So like what I'm trying to get at is, what are the chances that this is just a fluke rather than a significant technological breakthrough. John Jeffrey: Well, I will pass it over to Sylvester Zdonczyk to elaborate a little more on that. But I will say, I think generally so I will agree that, that was more of a risk type curve. But I'll pass it over to [ Sylvester ] to comment. Sylvester Zdonczyk: Yes. Thank you, John, and thank you for the question. Absolutely for us, this is a new concept, a new play. So our type curve was risked. So while we're pleasantly surprised with 330 barrels a day, the 110 barrel a day type curve was a risk number. So we've done modeling. We've looked at analogs, but we do have limited data coming into the Spearfish in this specific zone for the first time. So this is better than our 2 previous wells. The type curve would have been closer average to the 2 previous wells. So while we can't expect 330 barrels a day every time for IP30, we do expect strong and consistent results. So this result may result in us writing up that type curve, but we wouldn't consider it a fluke. We knew what we were going after. We saw good signs when we were drilling. So we're expecting to see strong results go forward. Again, it might result in a slight write-up in our type curve. But again, that type curve represents an average. And as we learn more about this play, as we drill more wells, we'll refine that as we go. But we're confident in our inventory for 2026 and beyond. James Somerville: That's helpful. Can I follow up as we think about potential reserve bookings from everything you've been doing, both organically and acquisitions, but in particular with regards to multilaterals, can you maybe talk around the reserve booking potential? I'm not clear as to the extent to which your -- the locations. I think you're indicating like 375 multilateral locations currently, but I don't think all of those were booked at year-end 2024. And I don't know to what extent that number -- that estimate has increased since year-end 2024. John Jeffrey: So corporately, we try and be conservative in that we only book what we have strong confidence in. And as we've expanded our overall multi-leg drilling, that will allow us to further increase our bookings. We definitely did not have those booked, but we are lucky because Sylvester actually does our reserves as well. So can you give a little color on what we had booked going into last year, going into this year and what we could expect going into next year? Sylvester Zdonczyk: Absolutely. It's a well-timed question as we're going through our 2025 year-end reserves process right now. And as John said, we were a bit conservative, but also not knowing to the extent, which we'd be drilling in the next 5 years, which remember, with reserves, you need to maintain that line of sight to development and also balance the inventory that you can drill. We have close to 2,500 locations internally that are viable and that we like. But unfortunately, we just won't drill them in a 5-year development plan. And so for reserves, we must honor that. So that's why last year, we only had 1,115 booked locations. Looking ahead to this year, we will see growth in that number, and we will see growth in our open hole multi-lats as we drill more and have line of sight to drilling those in the coming year and within the next 5 years. So I can't give you a number of what 2025 year-end will be. We were only in the 20s last year for open hole multi-lats, so quite conservative, but it did honor our pace of development. Now as we drill more and have multiple rigs drilling open hole multi-lats, we will see an increase in that number. And as we go through this process, that will become apparent in the next couple of months. James Somerville: Sorry, really quickly, I missed the number that -- of multi-lats that you had booked last year. Did you say in the 20s? Sylvester Zdonczyk: Yes. Last year, we were in the 20s in the Bakken, and we only had 3 booked in the Spearfish. So again, we had only drilled at that time last year. So us and the reserve auditors weren't prepared to book tens or hundreds of those Spearfish. But now that we've drilled 2 more and have line of sight to 4 this year and beyond, we'll see that number grow. Operator: And our next question comes from Abhi Patwardhan with Sculptor Capital. Abhishek Patwardhan: Congratulations on another strong quarter. With regards to your reserve report since we are already in November, have you been talking to your auditors around getting better credit for a slightly higher or above type curve performance? John Jeffrey: Yes. Again, I'll hand it over to [ Sylvester ] here in a minute, but what we don't want to do and what we've been successful in doing thus far is we've never had to take a write-down on our reserves. Again, maybe we are a little conservative in our approach. But what we'd rather do is have them come in a little more on the conservative side, beat expectations and grow our reserves instead of getting a position where you're overbooking and then having to take write-downs. But I will pass it over to Sylvester to comment further. Sylvester Zdonczyk: Yes. The other thing to add to that, John, is that the type curve represents a field-wide average. So we're not just looking at a localized pool, especially in Southeast Saskatchewan. We're taking our results from the past year as well as recent years as well as our peers and competitors in the area. So our outperformance speaks to our technical team's ability to deliver on those results as well as the quality of our reservoir and inventory. So while there is potential, and we do look at this year-over-year. So I shouldn't say that it doesn't happen because every year, our type curves are reviewed. We look at the well results, we look at our remaining land base, and we do reflect our remaining inventory. So the fact that we've outperformed speaks well to our technical team and to the quality of assets and reservoir that we do have, but we are honoring the field and pool averages. So we will look at that. We do look at that every year. It's not stagnant. They get looked at year-over-year, and you might see some changes to reflect the most recent performance, but we also want to honor what our remaining inventory is, not just within the next year, but again, within that 5-year book period on our proved reserves. John Jeffrey: And I think the best example of that is one of the fields we've been in the longest would be the Viking. And the Viking for almost 5 or 6 years in a row, I believe, that type curve has increased because we've had such great results in that field. So again, it's -- the more time we spend this field, the more data points we have, the more confidence we get, and that allows us to take higher estimates on those wells. Again, the Viking is the best case because we were beating type curves consistently for 6 years in a row. And each one of those 6 years, you've seen that type curve come up. So again, something that hopefully, we can continue these great results in our other fields, and you'll see that similar trend. Abhishek Patwardhan: And John, remind me for Viking, how much above the type curve are you right now? I mean when I say type curve, I mean the type curve that you got credit for in your reserve report last year? John Jeffrey: So this year, we have actually deferred a Viking program. Again, in favor of with this commodity price and the relatively higher declines you get in the Viking, we deferred that in favor of some of these tuck-in acquisitions. The last Viking program that we executed on was last year. I think we're 22% ahead of type curve there. So strong consistent results, which is what we like. But again, as the type curve comes up, year-over-year, your beat on that will eventually decline until you're at type curve. And that's the point is not just to beat the type curve, but eventually land on it. So you're booking properly, you're executing accordingly. But yes, so no Viking results so far this year. But in the past, we have managed to beat our expectations even with those expectations rising year-over-year. Abhishek Patwardhan: Got it. Would you mind sharing some color on hedging? I'm curious how hedged you are right now and if there is any changes to the hedging philosophy internally? John Jeffrey: Yes. So I'll pass that over to Scott to have a couple of comments. I will say, I think this will make this part of our corporate presentation moving forward. We have been really lucky this year in that the 3 times we have added hedges were the 3 highest oil prices we've seen in the last 10 months. But as far as the amount hedged and where we're at with that hedge book, I'll pass it over to Scott. Scott Sanborn: Abhi, Scott here. Yes. So currently, right now, we're 50% hedged on a 12-month basis on oil and liquid volumes. We've been pretty active on the gas front as well. So we're between 50% and 70% of gas between 280 and 350 makes up a small proportion of our production, but still there, nonetheless. Thereafter, we're about 20% for the following 6 months. So we're pretty active in the market. As John mentioned, we did take the opportunity this year to hedge at the peaks of oil in early January and again in August. And we layered on some subsequent hedges in our financial statements as noted yesterday. Abhishek Patwardhan: Got it. And one last one for me. What's the base decline across all the assets, the entire portfolio right now? John Jeffrey: Yes. So I think going into '26, you should see a decline right around, I would think that 21%, 22% kind of depends on if it's an annual average or specific to, say, January 1. But I think we're going to be somewhere in that low 20s would be a great number to use. Operator: Thank you. And that's all the time we have questions for today. So this concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Dear participants, we warmly welcome you to today's conference call of the SUSS MicroTec SE following the publication of the 9-month results of 2025 earlier this morning. SUSS is represented by the CEO, Burkhardt Frick; CFO, Dr. Cornelia Ballwießer; and COO, Dr. Thomas Rohe. The Management Board will speak shortly and guide us through the presentation followed by a Q&A session. But before we start the presentation, let me hand over to Sven Kopsel from Investor Relations. Sven Kopsel: Thank you, Sarah. Yes, and many thanks. Welcome to our Q3 conference call. As you probably know from earlier calls, this call is again being recorded and considered as copyright material. It cannot be recorded or rebroadcast without permission and participating in this call implies your consent to this procedure. Please be aware of our safe harbor statement on Page 2 of the slide deck. It applies throughout the conference call. And now I hand over to our CEO, Burkhardt, for some opening remarks, followed by our CFO, Dr. Cornelia Ballwießer, presenting the financial development. Burkhardt, please. Burkhardt Frick: Thank you, Sven, and many thanks, and welcome, everyone, to this call. I will go a bit faster over the next few slides to have more time to focus on the margin analysis you guys are all interested in, I'm sure. We showed the next page, we showed this exactly this page already 9 days ago in the extraordinary call. So nothing new here. The changes -- there are no changes to the figures since then. We also mentioned the low level of EUR 70 million in orders received in Q3. After various customer meetings in Korea and Taiwan last week, I'm very happy to report that activities are picking up in the fourth quarter. Orders exceeding EUR 100 million are likely. We do see quite some momentum here. We already communicated last week about the pressure on margins and the fact that we had to adjust our guidance for the gross profit and EBIT margins once again. I will go into details of margin development in a moment. However, I would like to state that the current margin pressure does not impact our 2030 ambitions. We will present our new midterm expectations at our CMD on November 17. Last week, the development of our 2 segments was not yet included. So I'd like to highlight a few things here. First, Advanced Backend Solutions. The order intake remains strong for coaters, but this was not quite enough to offset the decline for bonders. The demand for our UV scanners remain intact. Imaging and Coating Systems showed year-on-year sales growth of larger than 50% each. Bonders still showing slight growth after 9 months. Gross profit margin significantly impacted, more on this shortly. Photomask Solutions, we have a very low order intake again. Orders from China now down EUR 32 million versus previous year but more significant orders expected in this Q4. Still high year-on-year sales growth, but Q3 sales was lower than expected. Unfavorable product mix is the main reason for low gross profit margin of 31.7%. Now we have prepared 3 pages where we compare our initial 2025 guidance for sales, gross profit margin and EBIT margin with the actual year-to-date 9 months figures. Firstly, on sales. After 3 quarters, we reached EUR 384 million or 78% of the midpoint of our sales forecast and therefore, are on track and achieved what we expected to do. Q3 sales, as expected, was EUR 118 million, lower than previous quarters. Reason here lower order intake in the first half of 2025. In the fourth quarter, we need sales of EUR 85 million to EUR 125 million to meet our forecast. EUR 105 million would, therefore, leads to the midpoint, which is EUR 490 million. The product mix is different as planned at the beginning of the year with more coaters and fewer bonders based on orders received in the first half of the year. The recent postponement of 2 high-margin projects to 2026 will have a negative impact on gross profit margin in Q4. Now we'd like to provide more transparency on our negative gross profit development. Let me first explain the methodology we applied here. The table on the left shows our actual figures for the first 3 quarters. These are the left columns and a projection of what our gross profit would have been if actual sales had a gross profit margin of 40%, which is the midpoint of our original forecast of 39% to 41%. Our analysis shows we have a gap of EUR 16 million, which we like to explain. On the right-hand side, we allocate these EUR 16 million to special effects, quantify them, specify the timing and if these effects can be considered as one-offs or not. From top to bottom, first, the UV scanner in Taiwan, the ramp we performed there in the first half of the year. We had extra expenses for training and supply chain efforts amounting to EUR 3.2 million, and that's a one-off. Secondly, we had a write-down on discontinued technology projects amounting to EUR 2.2 million that affected Q2. Also, that is a one-off. Expenses for our new site in Zhubei, EUR 1.2 million for double rent relocation and utilities, they affected us only from Q3 onwards. And they will have -- this will have an impact on expenses in Q4 as well as in Q1 2026. Rework during assembly and customer ramp-up support amounting to EUR 2.4 million since Q1 were necessary to support customers to improve performance of recently installed multiple lines and maximize the output and availability of these in the field. This was really important and is an ongoing effort and it also will open the door for follow-up business, which we are, of course, looking forward to expect. The last point is the unexpected product and customer mix changes, which we often use also to explain deviations in our margin. This is for more coaters, less bonders, many low-margin photomask tools for key customers, and that results in also lower fixed cost coverage due to lower sales and overall business activity. That amounts to EUR 7 million in Q3. In total, EUR 16 million of which slightly less than half can be characterized as one-offs. Now on this page, we focus on the EBIT. We applied the same methodology. Left column shows the actual development of first 3 quarters, right column, the projection with midpoints of initial gross profit and EBIT margin targets, which was 15% to 17%. The gap here is EUR 7.2 million, which means that more than half of the gross profit gap of EUR 16 million was offset by stricter cost management and a positive balance in other operating income expenses. According to the original guidance, we allowed for OpEx of EUR 92.3 million after 3 quarters and would still be on track to achieve the original EBIT margin targets. The actual OpEx, that is expenditure on R&D, sales and administration amounted to EUR 86.8 million. This shows our short-term cost-cutting measures are having an effect, savings of more than EUR 5 million compared to Q2. In Q4, OpEx is expected to be below EUR 30 million. However, most likely above Q2 level based on increased expenses on IT and digitalization projects as well as rising R&D costs also to support scheduled product launches. I think I said above Q2, I should have said above Q3, right? Yes. We will correct this, and you will see it also in the tables. Now after all these numbers, here are a few impressions from last week's opening of our new site in Zhubei, Taiwan. It was an amazing day with a great atmosphere. We welcomed over 100 guests, including Taiwan's Vice Minister of Economic Affairs, a C-level representation from a leading HBM manufacturer and management from the top foundry in Taiwan. We got a broad confirmation that it's important to increase our presence close to the heart of the semi industry sector. We introduced our large clean rooms and made it clear that we are set for future growth. First modules and tools are already being built in Zhubei and will be delivered to our customers in early 2026. Leases for all old locations will terminate by the end of Q1 2026. The financial double burden will also end at this point. And with this, I'd like to hand over to Cornelia to provide some more insights on our financial performance. Cornelia Ballwießer: Thank you, Burkhardt. After we've already discussed Q3 in detail, I will just summarize some additional developments on the next slides. We already talked about the slow order intake, which leaves us with an order book of EUR 276.1 million as of end of September. This is 35.9% below the level of the first 9 months of last year. Tool orders with roughly EUR 140 million are scheduled for delivery in '26. The visibility for '26 is improving. Our free cash flow from continuing operations came in at minus EUR 0.7 million in the third quarter with operating cash flow of EUR 5.9 million and cash flow from investing of minus EUR 6.6 million. After 3 quarters, free cash flow is now at minus EUR 28.2 million. For the full year, we still see potential to generate around EUR 28 million of free cash flow so that we could end up at end '25 in slightly positive territory. Total CapEx for the 9 months is EUR 17.8 million, mainly driven by our new fab in Taiwan. At the end of the year, we expect to land at CapEx level of EUR 25 million. In '26, we will return to a level of clearly below EUR 20 million. Without additional projects, the level will be approximately at EUR 10 million. On this slide, you see the development of our most important key performance indicators for the last 7 quarters. You can very clearly see the margin development, especially in the last quarter due to the effects we already talked about today. On this slide, you see the two segments. In the Advanced Backend Solutions segment, margins in the third quarter were roughly at the same level as in the previous quarter. Burkhardt already mentioned the most important drivers. In Photomask Solutions, the margin level is in the first 2 quarters of the year higher. Overall, we're still at 38.4% gross profit margin for the 9-month period. However, the third quarter was weak, mainly due to an unfavorable customer mix, as already explained. Here, you see our order intake by segment and regions. The book-to-bill ratio continued to remain at a very low level of 0.62 for the 9-month period. This is, of course, far too low for a company with growth ambitions as we do have. But as already discussed, we expect increasing orders in Q4. Demand from China continues to be very low. The China share of total order intake in the first 9 months of '25 is now 18.5%. In '24, also after the third quarter, the share was at roughly 30%. But generally speaking, we do not have major shifts in the order intake by region. Finally, let's go over the main developments of the balance sheet. Total assets increased by EUR 22 million. For the noncurrent assets, the main driver was the Taiwan expansion with the right-of-use asset for the site and further installations at the site as well as CapEx in Germany, which we already showed in our half year report. Current assets, we have a decrease by EUR 29 million to a total volume of EUR 413.3 million. Inventories declined and are now EUR 12.9 million below the value of end of December '24. Contract assets and trade receivables increased by EUR 22.7 million. Cash and cash equivalent decreased by EUR 41.8 million due to free cash flow in total of minus EUR 31.5 million and the dividend payment as well as repayments of financial debt, including the leasing liabilities. On the liability side, the main changes also happened in the first half of the year with the inclusion of the leasing liability from the Taiwan site. In noncurrent liabilities, the major driver in the 9-month period was also the inclusion of the lease liability for the Zhubei site, which already happened in the second quarter. Current liabilities decreased. Here, the major drivers are still lower advanced payments from our customers who supported last year's ramps and less orders from customers, which have prepayments. After the 9 months, the equity ratio is at 58.2%, which means we improved the equity ratio while we had our ambitious investments. Burkhardt? Burkhardt Frick: Now let's turn to the outlook for 2025 as a whole. First, here is a page that was already shown last week with the reduced guidance ranges for gross profit margin and EBIT margin. Everything stays the same as communicated last week. Last week, we already explained that we are discussing possible measures to sustainably improve the cost structure. However, I ask for your understanding that all decisions will be carefully considered. I do not currently expect that we will be able to communicate these possible measures already in 2025. For now, our full attention lies on Q4 to bring in the anticipated new business and set the stage for 2026. We are now opening the floor for your questions. Thank you. Operator: [Operator Instructions] We will start with the first raised hand with Janardan Menon. Janardan Menon: I just want to go back to the order increase that you're expecting in Q4. 9 days ago, you had said that you would see an increase in orders. You said above EUR 100 million is possible. But at that point in time, you had also just commented that your Q4 is always typically quite strong. You've seen a very healthy double-digit increase in quarter-on-quarter in your Q4 orders in both 2024 and 2023. So my question is, this increase that you are expecting in Q4, is it purely a seasonal thing? Or do you see an underlying trend of improving orders amongst your customer base? And -- especially, you have been seeing quite low orders on the temporary bonding side. And one of your big customers looks like he's -- they're getting qualified or have got qualified, who knows. And so is there a clear upswing that you see in that market? Also on the UV scanner, are you seeing an upswing? What I'm trying to get at is the sustainability of this order. I mean it may not be huge, but does Q3 mark the bottom and then more than the seasonal, are we getting a more improvement into next year? Whatever your current thoughts are? Second question is just on the margin. Just trying to piece together the whole thing. You'll end up at about 36% gross margin this year based on your guidance. Are you -- do you think that as some of those one-offs go away in the first couple of quarters of next year? You're likely to get to a higher margin than that? Any kind of color on where we could expect based on current expectations? Where you assume your sales are down in line with consensus for next year? Where would your gross margin end up for next year? Any thoughts there would be great. Burkhardt Frick: Yes. Of course, we have to be careful in forward guidance, but let me start with the order intake. Yes, there has been some seasonality in the past years. But of course, customers order when they really have demand. And so therefore, I would not really call it seasonality at all. I would rather see it as a consequence of activity in the AI space picking up again. And that has been, of course, communicated for the frontline AI players already a quarter earlier, but it takes a while until this goes through the entire equipment chain and also leads to orders. So there's not an immediate effect at the moment a big memory supplier gets qualified or post their future plans, it will not immediately trigger orders. This is more a question of how utilized are your lines, how much throughput can you get on the existing lines and when is the next window to increase? And that seems to now nearer than before. And that's also why we are confident that we get AI-related orders in the first quarter and especially after those discussions we had with our lead customers. Now this will be a mix, of course. So there will be, of course, HBM-related orders, but also CoWoS or packaging-related orders requiring multiple systems, but we see a clear upward trend. How big this one is, as I said, well, I feel confident that it will be larger than EUR 100 million that -- I stick to that number. How large we have to see because we also have to make sure we can also deliver and build these machines on short notice because the demand is required on short notice. On the second question on the margin expectations, I can hand over to Cornelia. But of course, we want to improve our margin performance. There's no doubt in that. But even in line of potentially declining top line, we have to make sure that we do this with good sense. Cornelia Ballwießer: In terms of margin, of course, our ambition is to have a better margin or to achieve a better gross margin in '25. What I can say is it is probably lower as '24. Currently, we are preparing our budget. And as you see and as explained, the margin depends on the customer and product mix, and we are working on this. And that's all I can say for the moment. Regarding your one-offs, yes, there are, of course, one-offs that will not occur again in '26. For example, the write-down of the discontinued technology project, then our double rent relocation and utilities costs in Zhubei, in Taiwan will end, end of the first quarter '26. And yes, the rework, we will see. It depends how we can satisfy our customer or what is needed. But that's what I can say regarding the margin for the next year. Operator: So -- and then we move on with [indiscernible]. I can see that you're unmuted, unfortunately, we cannot hear you. Unknown Analyst: Can you hear me now? Operator: Yes. Unknown Analyst: Yes. Great. Sorry for the background noise. A few questions. On the order backlog, can you give a little bit the split in ABS segment? What is the CoWoS, the scanner part in the order backlog? And then in the cleaning equipment market, what is the part of the China business in the PS segment? In the backlog, right, not for order entry. Burkhardt Frick: Yes, we are not being specific on the individual products on our backlog. Please accept that because we do give this granularity. The China portion, of course, is declining, as already previously mentioned. We see it in both in sales, but order intake significantly. We have for China, for example, only 18.4% of the order intake are China bound. For Taiwan, for example, in contrast, it's close to 40%, that's usually what we can disclose. In terms of further information on the backlog, we have, of course, also announced that EUR 140 million of the current backlog is already bound for 2026. And we can also safely state that we have about EUR 20 million in service and upgrade business also for '26 already slated. Unknown Analyst: Okay. Maybe let me ask a little bit differently. On your CoWoS, I think the scanner is a little bit older technology generation, right, if I understood that correctly. And the question would be, what are your lead times? I mean when the customer places an order with your scanner business until you ship and final acceptance, what is the time lag there for the scanner business? Burkhardt Frick: Yes. For scanners, of course, it's around 6 months. But of course, as we stated also in previous calls, we tripled our output capability this year. That means also we are pretty full in that sense. So that's also why we concentrate on our main application field, which you rightly state is CoWoS. Now of course, we also get inquiries, how quickly can you top this up. And that's exactly the discussions we are currently having with those lead customers because they expect basically deliveries already as early as in Q1 next year. So right now, we have very active engagements with these customers who also realize that our lead times reduced, but I think they are waiting really until the last second how to place orders. And then we also have to make sure that we can react very quickly, and that keeps us busy. But that's also causing a bit positive momentum of the last days. Unknown Analyst: Okay. And would it be fair to assume that the gross margin, the product mix impact was also due to this, yes, high volume ramp in scanner business and that this is a little bit more service intense for you in order to have the machines up and running with your lead customer, and that might change with the second generation of the scanner tool you are planning to introduce next year? Burkhardt Frick: Yes, it definitely will change with the next generation of scanners. But we need to distinguish between product margin and supporting efforts. So I think the supporting efforts of our scanner are not higher than other 2.5D or HBM type products. So you need to account for that. For some of our products, our support efforts were higher than anticipated, which I explained earlier, which caused the extra cost. But I mean, you're absolutely right that the scanner is not our highest margin product. Unknown Analyst: Got it. And then final one. If you look at your product mix or backlog, what you have right now and the EUR 140 million for 2026, do you expect that the share delivered from your Asia business will be substantially different from this year? I mean that you have much higher shipments in your Asia locations than here in Europe? And if so, what would be the incremental there, the incremental shipments? Burkhardt Frick: You mean shipments from or to. Unknown Analyst: No, from your Asian manufacturing footprint, right, your fabs in Asia. Burkhardt Frick: Yes. Thank you. So first of all, our regional mix will not change, except what we explained, the decline of the China portion. In terms of the products we manufacture out of Asia, they are the same products we are currently manufacturing. But of course, this can change if we are introducing new products. As you know, we are launching up to 5 new products next year. And we have to see also where we will produce those products. So there's a fair assessment, a fair judgment that the amount of products will increase, which we are going to produce in Asia. Unknown Analyst: But you cannot quantify like EUR 50 million more sales from your China -- Asia footprint and versus this year, it's not possible right now from your backlog? Thomas Rohe: No, that's -- I can answer this. We use both sides really pretty flexible in terms of where we do have rich capacity. So we try to leverage our load of factories in both sides as well as in Asia as well as in Germany. Operator: So by now, we have 4 participants left who raised the virtual hand. So please be patient. And the next one who is able to ask his question is Michael Kuhn. Michael Kuhn: I'll start with one on the guidance once more. If I just use the midpoint of your sales and gross margin guidance and then combine it with the midpoint of your EBIT margin guidance, I'm ending up at Q4 OpEx of EUR 34 million, which is clearly above the less than EUR 30 million you're envisaging for the final quarter. So let's assume you do midpoint sales, midpoint gross margin, is it fair to assume that you would rather end up at the upper end of the EBIT margin range, excluding obviously any one-offs you might book in the fourth quarter? Cornelia Ballwießer: We calculated various scenarios over the last past days. And if we achieve the gross profit margin in the middle of the range, let's say, 36%, it is likely that the EBIT margin will end up above the middle. Yes, could be. Michael Kuhn: That is good to hear. Then one more in the context of OpEx. So we are obviously in the upper 20s run rate-wise right now. This is still including some double costs. At the same time, I guess, IT costs will rise into next year. From today's point of view, what would you think is a realistic OpEx run rate to assume for next year, maybe from the second quarter onwards when you don't incur the double cost in Taiwan anymore? Cornelia Ballwießer: Yes, good question. Our ambition is that we have a run rate, let's say, EUR 30 million. Michael Kuhn: Around EUR 30 million. Okay. And last but not least, you mentioned product launches already. Obviously, those include new products in the Photomask area, including the mid-range product. Do you think part of the softness you see from Chinese customers right now is due to those customers waiting for those products? And that said, is there a chance of, let's say, a little China revival at some point next year once the new product range is available for orders? Burkhardt Frick: China revival sounds like the rolling stones in concert. But I -- obviously, the mid-end range of the mask cleaner is really geared for nodes between 30, 90 nanometers, which are the predominant nodes China is running on. In the past years, they bought very high-end equipment, which was basically overspecced because they don't have EUV equipment in China. So the mid-end range is a better fit for the Chinese market. So yes, we do expect that, that business will pick up once that system is in mass production. And we already have several reservations and quite some are out of China. But also, of course, this mid-end product is interesting enough to replace the aging fleet of old mid-end mask cleaners. Therefore, there is also quite some replacement need lining up. Operator: And then we will move on with Madeleine Jenkins. Madeleine Jenkins: I just have one clarification. The customer that is pushing for kind of expedited deliveries in Q1, I think you said. Is that memory or logic? Burkhardt Frick: It's fair to say both. It's not a single customer who is pushing. Madeleine Jenkins: Okay. And then in terms of -- on the kind of HBM side specifically, are you still running at like underutilization at your big Korean customer? Or is that kind of back to the levels where you'd expect incremental orders? Burkhardt Frick: Well, I think one -- we have 2 out of 3 HBM players. And one is really running at full swing. And then, of course, that's also the one which kind of further scales up. The other one, of course, is just about to accelerate again, and they still have, I would say, headroom left. So we don't see short-term excess business coming up there because I think they're not running at peak utilization. Madeleine Jenkins: Okay. So the kind of Q4 orders isn't necessarily driven out of Korea. Is that fair? Burkhardt Frick: Correct. Madeleine Jenkins: Okay. And then I just had a -- you've got a high-NA cleaning tool, Photomask cleaning tool coming out. Could you just give us a sense of kind of when you expect the first orders for that? And also what sort of ASP uplift versus the low-NA version? Burkhardt Frick: Yes. Madeleine, you're referring to the MaskTrack Smart cleaning platform, which is launching pretty much as we speak. So we are working with some lead customers who want to position this system in kind of -- it's more than just evaluation. It's kind of early production state. So we do expect that we get the first orders still this quarter for this first system. But we are, of course, in the middle of the negotiations, and it's important that we get this first volume customer order for that system, but we anticipate it this quarter. Madeleine Jenkins: And just on the ASP... Burkhardt Frick: Sorry, say again? Madeleine Jenkins: Just on the ASP, is it kind of significant uplift versus the last generation? Burkhardt Frick: It is somewhat more expensive than a MaskTrack Pro. But as you know, it highly depends on the configuration. So this is a tool which can be configurated to a larger extent and therefore, will be also more expensive than the existing platform. Operator: And then we move on with the questions from Johannes Ries. Johannes Ries: Also some follow-on questions to the cost side first. Maybe first, what -- the leasing cost for the old production side, which will fall away at the end of Q1, how high is this maybe regarding to the full year or for the remaining 9 months. Therefore, what is maybe the positive impact? Then maybe on the bonders, if the bonders recover, will they have the same margin like in the past, there have been maybe some special high prices regarding the shortage or maybe the urgency at the customer side to cut the products in the past. So are you achieving the same pricing at the temporary bonding side like in the past? And on the coaters, is anything possible also to increase the margins there because it seems that they have comparable low margins. I know there is more competition from Tokyo Electron, for example, but maybe also an update there. And you talked a little bit now on mask cleaners. How is the ramp for all the new products with better margins, the scanners? I have also something like you have a new coater coming on the market for next year. That's maybe all impacting a little bit the cost and the margin side. Therefore, I took all these questions in one. Burkhardt Frick: Yes. Thanks, Johannes. That's a lot of questions. Let me try to start taking them down one by one. So the bonder orders, of course, we had at the very early phase of the ramp, they did have somewhat better margins because we were -- these were rush orders. We had to expedite things. So once we got into real volume phase, also we had more volume prices applied to that. So the initial systems were more profitable than the volume systems. But this has stabilized now, so we don't anticipate unusual things there. So they are above average compared to the rest of the portfolio. On coaters, we have -- we keep getting stable repeat orders from existing OSAT customers. And that is a very stable business and also this customer continues to place these orders. There was also one of the customers I visited early last week. So we can also expect a good solid business there. You are absolutely right. The competitive situation is very strong. But when you're a tool of record, you at least can retain your seat, but you have to price competitively. And that's why coaters usually are more on the average spectrum of our margin. For the Photomask tools, we are launching, so the new systems, they are completely redesigned. They do have a different margin structure, but you cannot just increase margin without offering new features. So it's always a mix of both. Then I think you had a question on the rental cost, right? Cornelia Ballwießer: Yes. The impact of the additional rental cost for the old site rental cost that turns out in a positive impact next year is EUR 600,000 per quarter. Johannes Ries: Per quarter, okay. And when will the scanners be launched this new scanner generation, will it happen in the first half next year? Burkhardt Frick: No, I think that's a bit too early, but we will deliver the first system around, yes, mid next year to the first customer. And that's, of course, we get more feedback. The broad launch of the system is more towards the end of next year. Johannes Ries: Okay. Super. And also maybe there's definitely much more but not to go in too much details. The wafer cleaning product will also not launch next year or will it come over the next year? Burkhardt Frick: They will launch next year. And we kind of -- we get the first hardware at the turn of the year. And then, of course, we need to refine the processes. We have one lead customer who will start evaluating. And then we will have not only the volume tool because the first one is a 200-millimeter wafer cleaner, low volume, there will be high-volume tools coming shortly after. And we have -- since we kind of got quite some customer traction, we have now 300-millimeter customers interested in that tool as well. So we are also now checking how fast can we launch a 300-millimeter tool. So wafer cleaning will be a family of tools, the first one coming next year. Johannes Ries: Super. Great. Maybe also on our calculation for next year, you mentioned you have on top of the EUR 140 million in product backlog for next year, you have also 20-point something on service and spare parts. What is the normal number for service and spare parts for the whole year? I think it's more than EUR 20 million. Burkhardt Frick: Yes. Johannes, usually, it's about 15% of the total revenue. I think the numbers, I think we stated before were, of course, the first 9 months and then the portion of 26 out of those first 9 months. But I think it's -- you can roughly assume 15% of the total revenue is the service-related part. Johannes Ries: Only maybe a follow-on. You mentioned it already in the comments. The recovery you see maybe in the pipeline coming on maybe the whole back-end market and also driven also partly by the strong business with AI. It's not only the OEMs, it's also the OSATs you see a recovery. Burkhardt Frick: Yes. And they -- of course, they are somewhat connected because the 2.5D players, they are closely linked to OSATs as well. And you have all these new sites evolving based -- driven by CHIPS Act projects, which are also starting ramping. I mean all the big news were, of course, for the front-end fabs, but you also need the back-end operations somewhat close by, and that's starting to evolve as we speak. Operator: So before we move over to Martin Marandon, who is waiting for such a long time in the queue, please be reminded that it's still possible to ask questions if you may have. And with this, Martin, please go ahead with your questions. Martin Marandon-Carlhian: The first one is on temporary bonders. I was wondering there if you mentioned the AI demand picking up. There is also the qualification of one of your customers. But I was wondering if the transition to HBM4 is already a factor here because we know that the number of layers are increasing -- the average number of layers. So it should demand more equipment. So do you think it has started now? Or will we see these effects maybe a bit later? And I have some follow-ups. Burkhardt Frick: Yes, it's a good question. Of course, our -- at least one of our lead customers is in active pursuit of also planning the ramp for HBM4. And we received the good news last week that we are qualified with our temporary bonder for the HBM4 process. And that is good news because the ramp of that will start from late Q1 or starting Q2 next year onwards. Martin Marandon-Carlhian: Okay. That's very clear. And maybe still on temporary bonders. I mean, Johannes mentioned some competition with Tokyo Electron, but I was wondering about new entrants as well. So like EVG, for instance, if that's something that you see at some point, multi-sourcing in that market or you do not see it at the moment? Burkhardt Frick: Yes, we do see, of course, our competition. There are no new entrants. They are the same. They have been the same in the past years. And indeed, EVG and TEL are our main contenders there. And yes, they are actively pursuing our base. So yes, so this is happening to some extent. But I think for now, we have the majority of our equipment at those existing customers of ours. Martin Marandon-Carlhian: Okay. That's clear. And the last one is on the EBIT margin for next year. I mean, I know it's too soon to give a guidance. But I'm just wondering with the backlog that we see at the moment, it probably implies a down year next year, and you have the consensus down by about 15%. And I'm just wondering in that context, let's say, of a double-digit decrease of sales, how much space do you have to reduce cost on the OpEx side next year? Do you think that, for instance, mid-single digit could be a credible scenario if you have such a down year? Or is it too aggressive? Burkhardt Frick: You mean mid-single digit for what, which... Martin Marandon-Carlhian: For decrease of OpEx. Burkhardt Frick: Yes. I think that's a reasonable assumption. I think we need to stay below EUR 30 million. I think this was mentioned before. We also said that we will not reach gross margins of the heydays like '24. So we will be also there, I think, definitely below 40%, but above the numbers we are currently seeing. So because we have to compensate this with a lower top line. Operator: And now we have a further virtual hand from a person who has dialed in with the phone ending 847. [Operator Instructions] I can see that you are unmuted, but unfortunately, we cannot hear you. Malte Schaumann: Can you hear me now? Operator: Yes. Now we can hear you. So if you can please introduce yourself to us. Malte Schaumann: It's Malte Schaumann, Warburg Research. First question is a follow-up to the former question of -- related to Chinese waiting for the new tools and the environment of the demand. I would broaden that to the overall customer base. Do you see potentially among other customers kind of holding back because you're about to introduce new product generations? I mean you indicated a pickup in activity and in the pipeline. But do you see generally some customers holding back in light of the upcoming product workovers? Or is that not really the case? Burkhardt Frick: Yes, Malte, that's very hard to say because we cannot judge if they're waiting for new products, but some of these new products are only launching late next year. So if there is a demand and we don't have the right product, I'm pretty sure customers will order elsewhere. So if they wait, of course, good for us. But we -- where we see a kind of more wait behavior that's on the mid-end cleaner because that is the right tool for that market. There, we get a lot of inquiries. But of course, we have to get the first tool out first before we can be bullish about that. But other than that, we, I think, see customers simply wait till the last moment until they order and then they are rushing and then we have to see how we can, even with our reduced lead time to make it happen. That's the current discussions we have also with our -- among our sites. Malte Schaumann: Okay. Then on the rework on some tools that impacted the gross margin. What caused that basically? I mean that this happens from time to time, but what caused it this time? Was it kind of design flow? Was it new customer demand? Was it the extreme -- potentially extreme ramp? And do you think that you more or less sorted these out? I mean you indicated that this is kind of mixed effect so might reoccur next year. So maybe you can expand a little bit more on that topic. Thomas Rohe: Well, Malte, Thomas speaking here. So the question cannot be easily answered, to be honest, because it's a lot of facts which really come into this point here. On the one side, for sure, our customers are also very demanding with the request for support there because they also ramped up in a pretty short time and really they already have by themselves a very demanding customer. So the support was really requested by customers to be there on site, sometimes even 24/7 to support this ramp-up of our customers, and this was really partially -- only partially anticipated, and we were really a little bit overwhelmed by the request and also the hard request from customers. Nevertheless, we supported them pretty good, I guess, and this is also why we still have really very good relations with these customers because they are taking us into account also for our next-generation HBM4, as Burkhardt already said. And also, if you go really in this steep ramp-up, we see sometimes also some topics which we did not see if we use our tools in a normal way or 2-shift way. So this is some, let's say, improvements, which we also did also because customers changed the process chemistry partially, where we also had some learnings together with our customers. And this is -- these are the main reasons why we had to support more than we anticipated before. Malte Schaumann: Okay. And the reason why you indicated that this is a mixed effect that you think you're not fully through, so that might reoccur? Thomas Rohe: I don't think that it might reoccur. We learned a lot and we learned together with customers and they let us learn together with them. So from that point of view, the learning curve also for us should go down so that we really reduce it. It will not go away completely, but it should really be reduced significantly. Operator: And we have further virtual hand from Nicole Winkler. Nicole Winkler: So basically, I have one left regarding operating cash flow development. So basically, in Q3, you turned positive again. Can you give us an indication what we should expect for Q4 and where we could end up for full year 2025? Cornelia Ballwießer: Yes. As you said, in Q3, we turned in terms of operating cash flow into a positive number. And we think that there is a good chance that we can end up at EUR 25 million in a positive territory. So this means in Q4, we will have or there are a good chance to have the EUR 28 million cash inflow that we need to get in a positive number. Sven Kopsel: That's for free cash flow, Cornelia, right? Cornelia Ballwießer: Free cash flow, yes. Sven Kopsel: And for operating cash flow, for sure, this would mean that this number should be a bit higher because we also still have CapEx ongoing. Cornelia Ballwießer: Yes, that's right. It's around -- yes, I would say, EUR 30 million, EUR 35 million we need in terms of operating cash flow. Operator: And then we have a follow-up from [indiscernible]. So you should be able to speak now. Unknown Analyst: A brief question on your next-generation scanner tool. If I remember correctly from your previous calls, this is also enabling panel level packaging, right? If so, if -- can you give a little bit color around -- I mean, what we hear panel level packaging could bring cost advantages to TSMC, et cetera, well above 30%. So the technology seems to make sense. But then can you elaborate a little bit, are you covering different parts of the manufacturing process? And can you give a little bit color on the competition part of the business? So are you working with one lead customer and you're exclusive there? Or are other companies in the qualification process as well? A little bit color would be great. Burkhardt Frick: Yes, [indiscernible], thanks for the question. I mean, obviously, yes, this is really for panel level packaging. This new UV scanner can handle both wafers and panel-level package applications. There will be several versions of that also with a path to 1 micron resolution. So it's also a more accurate system, but this will not be launched from the get-go. The first focus is indeed panel level packaging for that one lead customer whom we develop this closely together. So this is the launching platform. This will be applied in similar applications as spaces as the current ones, but we have access to more layers and more process layers than before. And also, it will open the door for more other customers because this is a very interesting field to be. So we will be able to broaden our exposure there. Unknown Analyst: And competition part? Burkhardt Frick: Well, competition is the same as we have now, which are I-line steppers and scanners, you have already in the market, but we currently have a lead over them in cost of ownership and throughput. And we, of course, want to maintain that lead. Operator: And in view of the time, we will come to the end of today's earnings call. So thank you to the Management Board for your presentation and the time you took and also to you, dear participants, for joining and your shown interest. So should further questions arise, yes, Sven Kopsel from Investor Relations will be happy to assist you. And on that point, it was -- yes, it was our pleasure to be your host. And Sven, final sentence belongs to you. Sven Kopsel: Yes. Thank you so much. Just one remark. You know that we are going to have this CMD on Monday, the 17th of November. If you have not registered yet or if you are unsure, maybe please just contact me or Florian Mangold as soon as possible. We are still accepting registrations. So take care. Goodbye.
Operator: Good morning, ladies and gentlemen. Welcome to the BCE Q3 2025 Results Conference Call. I would now like to turn the meeting over to Kris Somers. Please go ahead, Mr. Somers. Krishna Somers: Thank you. Good morning, everyone, and thank you for joining our call. With me here today are Mirko Bibic, BCE's President and CEO; and our CFO, Curtis Millen. You can find all our Q3 disclosure documents on the Investor Relations page in the BCE website, and this was posted earlier this morning. Now before we begin, I would like to draw your attention to our safe harbor statement on Slide 2, reminding you that today's slide presentation and remarks made during the call will include forward-looking information, and therefore, are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements, except as required by law. Please refer to our publicly filed documents for more details on assumptions and risks. Now with that out of the way, I'll turn the call over to Mirko. Mirko Bibic: Thank you, Kris, and good morning, everyone. Last month, at our Investor Day, we unveiled an ambitious and exciting 3-year strategic plan, which positions Bell for the future. This includes clear and transparent financial targets to drive long-term shareholder value and a refreshed brand that better reflects the full breadth of our customer segments. We also took the opportunity to introduce our investors to several members of the executive team and conducted deep dives into each of our operating businesses. As we execute against this plan, we're leveraging our proven ability to drive efficiencies in order to generate strong, sustainable free cash flow growth and total shareholder return, and that's supported by a disciplined capital allocation strategy. Earlier this year, I shared our intent to focus on 4 strategic priorities, all underpinned by our unique and highly differentiated assets in fiber, in wireless, in media and enterprise. And in Q3, we continue to execute diligently against all 4 of those strategic priorities, and you can see this in our results. I'll start first with the customer. We have a reenergized focus on customer service, and it's really paying off. Thanks to the investments we've made, we reported a second straight quarter of significant postpaid churn reduction, and this is the direct result of customer service improvements, increased product intensity and effective real-time retention offers. A few weeks ago, we launched new wireless plan tiers, each offering distinct value propositions. This innovative approach moves beyond traditional data bucket sizes, introducing differentiation based on network speeds and video quality, roaming and long-distance features, varying levels of device discounts and content offerings. The response from our customers has been very positive. This construct gives customers more choice and it reduces churn, all while leveraging our owner economics and content. Our premium Bell branded postpaid wireless loadings are significantly higher than our consolidated reported postpaid net adds with Bell brand postpaid year-over-year growth exceeding 100%. This is a clear indicator of strong customer demand and the strength of the Bell brand in the market and it's completely on strategy. We're also continuing to make meaningful progress on transforming the customer experience with initiatives like the AI-powered virtual assistant that we showcased on October 14. This as well as other AI-driven applications serves as a technological foundation for a next-gen customer experience. I'll move now to delivering the best fiber and wireless networks. As you know, for well over 100 years, Bell has built and operated the best networks in the country. And now, we also have one of the best network growth engines in the U.S. with Ziply Fiber. This was our first quarter of operating this asset and its results are reported in our new Bell CTS U.S. segment. We're very pleased that Ziply Fiber's financial results continue to exceed our original investment case. Again, as you saw on October 14, Harold and his team are engaged and excited by the tremendous opportunity ahead. With the formation of the Network FiberCo partnership now complete, Ziply is well positioned to accelerate its fiber build and expand beyond its current 4-state footprint. Construction is set to ramp through 2026. Currently, Ziply's Fiber network passes 1.4 million homes in the U.S., and we expect to reach approximately 3 million locations by the end of '28. Over time, we intend to leverage the Network FiberCo partnership to expand our U.S. fiber footprint to 8 million locations, and we'll do that in a cost-efficient manner. Including our U.S. operations, we added 65,000 net new fiber subscribers this quarter. In Canada, fiber continues to be a key driver of multiproduct penetration through mobility and Internet and content cross-sell opportunities. We're focused on increasing the number of subscription services per household with content bundling playing a central role in that strategy. In Q3, product intensity was up approximately 7% year-over-year, fueled by growth in content subscriptions. And as we shared at Investor Day, we plan to increase product intensity in the next 3 years by approximately 25%. So we're off to a good start. Our fiber advantage will grow with the availability of Wi-Fi 7 and Wi-Fi 7 works best on fiber. And again, it's going to improve the product intensity momentum. Turning to wireless. The environment has stabilized, and we expect this trend to continue. Wireless service revenue and ARPU both declined by less than 0.5 percentage point while postpaid churn improved by 15 basis points. We also recently announced a partnership with AST SpaceMobile to deliver direct-to-cell satellite service. This breakthrough technology will expand our network reach, bridging the gap between the terrestrial 4G and 5G networks in Canada's most geographically challenging areas using powerful and reliable low-band spectrum. And note, initial launch of our service is scheduled for late 2026. The service will include voice, video, text and broadband data capabilities using base stations owned and operated by Bell within Canadian borders, and it will be accessible with an ordinary smartphone. The partnership with AST will enhance network reliability, resiliency and security for all those choosing Bell. Turning now to enterprise and leading with AI-powered solutions. We all know that the Canadian economy is changing, our industry is changing and technology is advancing at an unprecedented pace. The AI revolution is in full swing, and it has the potential to change how we work, how we live and how we connect. At the same time, global instability is rising and Canada and other countries are reassessing long-standing relationships that, in some cases, seem far less solid than they once were. Against this backdrop, as we've been sharing, we've reshaped our strategy, and we're well positioned for growth in this new environment. In just the past year, we've launched the 3 game-changing AI-powered solutions businesses, and they're all foundational to our long-term growth strategy. And that's Ateko, Bell Cyber and Bell AI Fabric. Each of these businesses is expected to deliver significant top line and bottom line growth as we execute against our 3-year strategic plan. I'm pleased to report that revenue from AI-powered solutions grew 34% year-over-year. Most of that's organic growth, and it's a strong validation of our strategy. Canada is having its AI moment, and it will be distinctly sovereign. According to a recent survey by the Harris Poll commissioned by Bell, 75% of large Canadian businesses consider AI to be a strategic enterprise-wide priority with 91% of them prioritizing data sovereignty. This is where Bell holds a clear advantage. Bell's AI Fabric is precisely engineered to meet these exact needs. Our purpose-built AI data center business and the full stack AI alliance we've assembled with other Canadian tech leaders continues to have a deep pipeline of interest, and we expect to announce more growth in this space in the coming months. The public and private sectors share a fundamental role in building Canada's sovereign AI ecosystem and the renewed commitment to AI that we saw this week in Budget 2025 is an important step forward that will support adoption, strengthen the economy and help Canada compete globally. I'll turn now to the fourth strategic priority, which is building a digital media and content powerhouse. We recently introduced our new streaming bundles for Bell Mobility and Internet customers, and that features Crave, Netflix and Disney+ together all in one bundle. Our commitment to sports content also remains strong. We announced long-term broadcast and streaming rights extensions for regional coverage of both the Montreal Canadiens and the Winnipeg Jets, and that reinforces our leadership in Canadian sports media. We're also continuing to ramp our digital media capabilities. Our long-term partnership with iHeartMedia was expanded this quarter to include Canadian representation of iHeartRadio's extensive podcast portfolio, significantly enhancing our digital audio offering. Additionally, we entered into a strategic ad distribution partnership with Tubi, one of the largest and fastest-growing free streaming platforms in Canada. All in, these initiatives will create new opportunities for digital advertisers to reach Canadian audiences across Bell Media's audio and video platforms. So in short, we're executing with discipline, and we have momentum across all 4 of our strategic priorities. This focused path will continue, positioning us to deliver long-term sustainable free cash flow growth and enhanced shareholder value. As shown at our Investor Day, we have a highly coordinated and energized company that's fully aligned and ready to continue to execute. With that, I'll now turn it over to you, Curtis, for a review of our Q3 financial results. Curtis Millen: Thank you, Mirko, and good morning, everyone. I'll begin on Slide 7 with BCE's consolidated financial results. Total revenue was up 1.3%, driven by the acquisition of Ziply Fiber completed on August 1. Ziply Fiber's operating results are reflected in our new Bell CTS U.S. segment, while our Canadian wireless and wireline operations are reported under Bell CTS Canada. Overall top line growth was moderated by retroactive revenue adjustments at Bell Media related to contract renewals with certain Canadian TV distributors in Q3 of '24. Adjusted EBITDA increased by 1.5%, also reflecting the contribution from Ziply Fiber. This led to a 10 basis point margin increase to 45.7%, our strongest result in more than 30 years. Excluding the contribution from Ziply Fiber and normalizing for the aforementioned retro benefit of Bell Media last year, overall BCE's EBITDA grew by 0.4%. Net earnings and statutory EPS were up significantly over last year. This was largely due to the $5.2 billion gain from the sale of our minority stake in MLSE on July 1 and lower asset impairment charges compared to Q3 of last year. These noncash charges were related to Bell Media's legacy properties to reflect the ongoing digital transition of the advertising ecosystem. Adjusted EPS was up 5.3%, supported by higher EBITDA. CapEx was down $63 million this quarter, bringing year-to-date CapEx savings to $551 million. We anticipate a year-over-year step-up in overall spending in Q4 as Ziply Fiber executes its fiber build-out, consistent with our 2025 capital intensity guidance of approximately 15%. The combination of lower CapEx, higher cash from working capital, lower severance payments and the flow-through of higher EBITDA drove $171 million increase in Q3 free cash flow. Turning to Bell CTS Canada on Slide 8. Internet revenue was up 2%, solid results showing we're striking a healthy balance between sub growth and disciplined pricing supported by fiber. Our business markets continues to build momentum with strong demand for our unique and differentiated suite of services. We saw sustained strength in AI-powered solutions, where revenue increased 34% year-over-year, driven by rapid growth at Ateko and Bell Cyber. We're excited about the opportunities ahead and remain on track to generate approximately $700 million in AI-powered solutions revenue in 2025. Wireless service revenue declined modestly by 0.4%, in line with the 0.3% decrease in Q2. When normalizing our Q2 results for the nonrecurring revenue benefit related to G7 Summit, Q3 service revenue performance showed notable improvement compared to last quarter. Wireless product revenue was up $41 million this quarter. This year-over-year increase was driven by greater sales of mobile devices. Our EBITDA result was in line with plan with a notable 10 basis point margin increase over last year to 46.8%. This reflects our continued focus on cost management as evidenced by a 0.6% reduction in operating costs this quarter. Turning to our new Bell CTS U.S. segment, which reflects Ziply Fiber's operations for the 2-month period following the acquisition on August 1. As a reminder to investors, Bell CTS U.S. financial results are reported under IFRS accounting standards, consistent with Bell's other operating segments. We're pleased to report a strong start, financial results tracking ahead of the expectations we set at the time of announcement. Total revenue reached $160 million, driven by the strength of Ziply's Fiber-to-the-prem platform. Internet revenue grew 15% year-over-year, supported by continued expansion of Ziply Fiber footprint and strong customer penetration. Bell CTS U.S. delivered $71 million in EBITDA for the period, representing a robust 44.4% margin. This performance reflects both higher operating revenue and the benefits of Ziply Fiber's efficient cost structure and customer-centric operating model. The impact of Ziply's customer-focused model is evident in higher NPS scores and cost efficiencies. While the customer base continues to grow, customer contact rates are declining, now among the lowest in the U.S. market. Looking ahead, with continued operational discipline and a significant growth runway, we expect strong EBITDA growth for Bell CTS U.S. over the coming years, in line with the 3-year plan presented at our Investor Day. On the subscriber front, Ziply added 9,000 net new fiber customers in August and September, underscoring the strong momentum in expanding Ziply's Fiber customer base. Notably, fiber now represents 87% of total retail Internet subscribers. Total retail Internet net adds totaled nearly 5,000 subs, which reflects competitive losses in copper areas. Over to Bell Media on Slide 10. As projected, total revenue was down in Q3, decreasing to 6.4% year-over-year. Excluding the onetime retroactive sub fee adjustment in Q3 of last year, the decline was closer to 1%. Despite strong digital ad growth, both in video and out-of-home, total advertising revenue was down 11.5%, reflecting continued softness in traditional advertising demand for non-sports programming as well as the impact of the previously announced divestiture of 45 radio stations. While Crave and sports direct-to-consumer streaming continued to grow, subscriber revenue declined by 5.2%, primarily due to the aforementioned retroactive revenue adjustments we lapped from last year. These adjustments were also a major contributor to the 6.7% decline in Bell Media's EBITDA this quarter. Excluding this onetime item, Q3 EBITDA was up 11.3% year-over-year. We're also pleased that OpEx was down 6.3%, shows you the focus we have on business transformation. Looking ahead, despite near-term headwinds on linear advertising demand, we remain confident that Bell Media will deliver positive revenue and EBITDA growth for the full year. Our focus remains unchanged for Bell Media to consistently deliver annual revenue and EBITDA growth while contributing meaningful free cash flow to BCE. Turning to Slide 11. Our balance sheet is very healthy with $3.6 billion of available liquidity and a sizable pension solvency surplus totaling $4.5 billion. Our net debt leverage ratio at the end of Q3 was approximately 3.8x adjusted EBITDA. This reflects the acquisition of Ziply Fiber, which closed on August 1 and was funded using the $4.2 billion in net proceeds from the MLSE sale received in early July, along with cash on hand. In late August, Ziply Fiber's outstanding debt of $2.7 billion was redeemed, partially funded by the $2 billion public debt issuance we completed earlier in the month. I'd also highlight that BCE's nominal net debt at the end of Q3 was $40 billion, which despite the Ziply Fiber acquisition is lower than the $40.3 billion reported at the end of 2024. Looking ahead, we remain sharply focused on reducing our leverage ratio to 3.5x by the end of '27 with a clear path towards 3.0 by 2030. We expect to reach these milestones through a combination of organic EBITDA growth, free cash flow generation and near-term monetization of noncore assets. To conclude on Slide 12, we remain sharply focused on our 4 strategic priorities to drive growth across our key business units alongside our company-wide transformation to enhance efficiency. With the year-to-date consolidated financial results tracking in line with plan, operating momentum across the business and our consistent proven execution in a competitive marketplace, I'm reconfirming all of our financial guidance targets for 2025. I will now turn the call back over to Kris and the operator to begin Q&A. Krishna Somers: Thanks, Curtis. [Operator Instructions] With that, we're ready to take our first question. Operator: [Operator Instructions] The first question is from Vince Valentini from TD Bank. Vince Valentini: Can you help us unpack the federal budget a bit? It's still not clear to me these tax breaks for accelerated depreciation could some of that apply to the money you spend on typical CapEx also on the data center front, the dollar commitments from the government, do you take that as they would co-invest in facilities with you, which eases your investment burden or that they actually would be a big customer and spend more on their own needs and do that only with sovereign providers like Bell. Those would be the 2 main things out of the budget. If you have any comment on the tower siting and sharing fiber builds stuff too, if you think there's any relevance there. Anything you can tell us would be helpful. Mirko Bibic: Yes. I think as a general comment, Vince, I'd say that at a macro level, the budget is certainly positive in terms of having a number of initiatives industry-wide, I don't mean the telecom industry only, but just generally speaking, spurring more investment in the Canadian economy is a decidedly good thing. And I think there's a lot of pro-competitive pro-investment initiatives in the budget that should be looked upon favorably. On the capital allowance initiatives, Curtis, I'm sure will add to what I have to say, but those are always looked upon favorably because I do think they're a direct mechanism to continue to encourage companies to invest. On the AI side of things, still a lot to unpack there, Vince. So I can't answer your questions specifically just yet until we do more unpacking. But I would say that the initiatives that are outlined in the budget, the upwards of $900 million for sovereign AI and sovereign cloud shows that this government is committed to seizing the AI moment and encouraging AI adoption. And this is where we're at. We're at the moment in time where we need to move from AI science to industrialization at scale across the Canadian economy using Canadian tech leaders. I think that's the signal you should draw from the budget. So in that regard, it's a good thing. AI infrastructure in Canada by Canadians for Canadians. And I think we'll be able to capitalize on that in general terms because that's a measure to increase adoption. in a sovereign way. So view that as a directional positive for Bell AI Fabric. And with the sovereign AI alliance that we've put together with Bell AI Fabric and Coveo and Cohere and ThinkOn and a number of other Canadian tech leaders, we're in good shape there, and you're going to see some growth at Bell AI Fabric in the quarters to come. I'll turn it over to Curtis to unpack some of that for you. Curtis Millen: Vince. Just on the tax side of it, as Mirko said, it's certainly helpful. I think over the medium term, it's ultimately accelerating a tax shield. And a similar proposal to what was instituted in 2018, we will see a benefit of that over time. I wouldn't expect a benefit in '25 or '26 based on the wording where it qualifies once the budget is actually enacted and given timing of spend. But '27, '28, we would expect a benefit. Vince Valentini: I guess you can't quantify that, Curtis, even in ballpark terms? Curtis Millen: No, not yet. We've got to work through that, but we'll get back to you with more details when we have them. Operator: Our next question is from Drew McReynolds from RBC. Drew McReynolds: Just on the, I guess, Internet competitive landscape. Obviously, a lot of focus continues to be on the TPIA regime. So just Mirko or Curtis, can you just provide an update on how you think the competitive environment is evolving here in Eastern Canada? And maybe an update on whether you've started out West with some of your initiatives you've highlighted at your Investor Day. And then just a quick second one on Northwest Hill. Is there an update just in terms of potential timing of getting that deal across the line? Mirko Bibic: Thanks, Drew. I'll take those. So on -- let's start first with Internet out in the East. I'll emphasize or reinforce what we shared on October 14. So our specific plans, really our approach is going to be twofold. But in the East, number one, it's protect Bell's retail position, and we're going to execute on the integrated strategy that we outlined on October 14, and I summarized today. And ultimately, our view is that fiber resellers will, on balance, take more share from cable. And so we'll be able to continue to improve our position on the retail side, on the Bell brand, while at the same time, driving higher fiber network penetration in the East. And it's typically what happens. And in the West -- so number two, in the West, our focus is going to be, again, as I said on October 14 or as Blaik said, I think we're going to protect our mobility base first and foremost and by offering more services in a disciplined way. So it's leaning in on the wireless tiers, using our distribution strength out West, then layering in no set-top box 5 TV or streaming content bundles or both to grow wireless sales out West and lower churn. And when it's necessary, especially for our highest value customers, we plan to resell fiber Internet. So all in, we'll be more competitive in the West. We have a trial right now, Drew, in Kelowna, and we expect to have a full launch of fiber resell out West in January. But we're going to do all this in a very disciplined way. I think that's an important point to call out. On Northwest Hill, the purchasers are still working with the federal government to secure funding. And so we remain actively engaged to close that transaction. It looks like it will more likely be in 2026. But I think given the amount of time this has taken, it's worth saying the following, very important. We want to close the deal for sure. But we're also happy to operate Northwest Hill and to serve residents in the North. It's a good, healthy, strong asset. And look, close or not close, it has a minimal impact on deleveraging. So we weren't disposing of -- trying to dispose of Northwest Hill because of deleveraging. It was for altogether different reasons. Happy to close, but that's what we're still working on doing. That's priority #1. Operator: Our next question is from Jerome Dubreuil from Desjardins Securities. Jerome Dubreuil: First one, a very helpful Investor Day a couple of weeks ago. One of the comments we've been receiving is some investors were expecting to see some margin growth down the road. We don't necessarily have a problem with that given the mix shift. I don't know if you can share, but do you expect margin growth on the Canadian telecom business between 2026 and 2028? Curtis Millen: Yes. Jerome, it's Curtis. So yes, at Investor Day, we did talk about '25 to '28 revenue, 2% to 4% growth, EBITDA 2% to 3% growth. So at the high end of revenue, are you looking at margin compression? But ultimately here, what we also announced at Investor Day was our continued focus on operating cost reduction. So $1.5 billion of cost savings and frankly, more thereafter as we continue to leverage technology and our internal digital transformation. So I think you're going to continue to see a focus on cost containment. As you mentioned, I know your question was Canada specific. Ziply, as we accelerate our footprint with the PSP partnership, those margins will decline over time, but still at a very 44.4% margin starting point for Ziply. So pretty healthy margins all around. Ultimately, in the range of flat margins is more what I would say. Jerome Dubreuil: Okay. And on the AI Fabric, I would like to maybe dive a bit more into the timing of the impact on your results. So maybe if you can reiterate the level of investment there, the expected financials and returns and the timing of flow-through in earnings. Mirko Bibic: Yes. So we have -- I'll start and then Curtis maybe add what's appropriate. We gave -- we were pretty transparent as to what the growth targets are that we expect on October 14. And what those are based on from an AI Fabric perspective is monetizing 73 megawatts of power. And so the ambition is greater than that. But just -- I would say that it's more of a conservative growth projection that we gave at Investor Day since it's only about monetizing 73 megawatts, and that's expected to drive $100 million to $150 million of annual EBITDA. So a very solid business, a very strong pipeline of demand. And as I said in my opening remarks, expect to see some announcements in the coming weeks and months that just shows how we're activating the sovereign AI alliance that we've put together. So very, very positive there. And again, I will reiterate, we said it a couple of times, but it is worth mentioning. So we have 34% year-over-year revenue growth in Q3 in the AI-powered solutions business. The vast majority of that growth is organic, and all of it is Ateko and Bell Cyber. And in Q3, none of it is Bell AI Fabric. You saw the benefits of AI Fabric in Q2. There were no new announcements in Q3, and AI Fabric will see some growth, as I said, in the coming weeks and months. So we're really excited about that growth vector. Operator: Our next question is from Maher Yaghi from Scotiabank. Maher Yaghi: So Mirko, I speak with a few U.S. domiciled data centers with subsidiaries in Canada. And I mean, the view is that whatever they're offering in Canada is sovereign. The reason I'm saying this is, do you think the government is going to formalize what is considered to be sovereign AI to make it very clear to enterprise in Canada, what constitutes sovereign AI and what does not constitute sovereign AI because it's kind of like what she said, he said type of thing right now in the marketplace. Mirko Bibic: Yes. So thanks for that, Maher. So I'll answer it in two parts. So there needs to be a very clear understanding and definition of what sovereignty means. And sovereignty isn't just about having a data center located in Canada. That doesn't -- that's not sovereignty. Sovereignty is a multifaceted thing. It's who has -- where the data is located, how data moves, who has control over the data, who has control over the action, which is the compute and who has control over the governance, which is who can access everything and who has access to the keys to the technology. So it's action, movement, storage, governance. So that's one part. The second part is I'd encourage everyone to just take a look at some of the -- and there are a number of them, but some of the federal government ITQs and RFIs that are out there. And you'll see some pretty hard notions of what sovereignty means in some of those technology ITQs and RFIs. So you really do need to be sovereign Canadian all the way through in order to qualify for some of the requirements that the federal government has. And in the case of Bell AI Fabric, what we can guarantee to our customers is their data will stay in Canada. And if the data needs to move, whether or not it's from St. John's to Vancouver points in between, it always stays in Canada. We have a definitive advantage in that regard. Maher Yaghi: I hear you. And the reason I'm asking this question is I have looked at the RFIs that the government has put out, and they have their definition. But how can that permeate into the enterprise market? Because I mean, I agree that getting a contract from the government is going to be easy probably -- their definition of what constitutes sovereign AI is probably the highest level of conservatism, let's say. But what about the general enterprise, the Canadian enterprise market where so far, it seems like it's still -- it's true. It's not clear what constitutes sovereign AI. So do we need like some form of formal definition by a government agency to kickstart this new era of sovereign AI in Canada? Or do you think it might -- it will happen without some formal regulation? Mirko Bibic: I think it will happen without formal regulation. Just the market will speak Maher. And the enterprise market in this space will be like it is in all the other enterprise vectors we operate in. I think our customers are going to rely on the providers that they trust, that they have deep relationships with. And I think there's going to be a preference for Canadian. And that's with or without kind of the geopolitical concerns that permeate today. I think the geopolitical concerns just actually further help market demand being tilted towards Canadian providers. So if you take a step back, in the case of -- in our case, we have the deepest enterprise relationships. We have the most long-standing enterprise relationships. We are speaking to our enterprise customers on AI-powered solutions, growth vectors at the same time as we're talking to them about the core business relationships that we've had for a long time. So as they seek to lean into AI workloads, we're in good shape in terms of having the infrastructure ready now. And a key advantage in AI is time to power and time to compute, and we can deliver that. We can deliver data centers that are connected to the very best networks, all located in Canada from a company they trust and has provided reliable service to them for, in some cases, for over 100 years. So on the enterprise side, I think at this point in time, we're just going to rely on our unique market advantages. Maher Yaghi: Okay. And maybe just my follow-up question on wireless. You mentioned something interesting in your prepared remarks related to the amount of postpaid subscribers you loaded on the Bell brand. So I'm happy to see how you guys are pivoting your offering, making less emphasis on data buckets and more on quality and content and value-add services in wireless. Can you maybe just dig a little bit deeper into what happened in Q3 as you made that pivot? Because when you look at the numbers from a big picture point of view, we see a lot more prepaid and postpaid loading this quarter versus last year. And so I'm trying just to make sure to understand what you meant by in your prepared remarks. Mirko Bibic: Yes. Okay. No, thank you for the question, Maher. So our focus -- so first principle is that our focus remains on the financials. And what we're trying to do is balance subscriber loadings and the economics of those loadings. And I think you can see it in the financial results, whether or not it's service revenue and ARPU and obviously, the massive churn improvement. Overall, you can see it also in our product intensity gains. And there's a whole long list of factors that have improved significantly. But on the postpaid wireless numbers, the consolidated number you see there, if you unpack those numbers, the Bell brand postpaid net adds are -- I don't want to give the number, but they're very, very large. And so what that means is it's the flanker brand net adds that have declined so that you end up with the consolidated number in front of you of 12,000. But the Bell brand postpaid is a very big number. And so it's on strategy. The strategy is focus on the financials, focus on the Bell brand, focus on multiproduct offerings. And then underneath that, there's the new wireless tier plans, which I think are going to drive good subscriber numbers in the quarters ahead and certainly strong churn and financial numbers. Operator: Our next question is from Stephanie Price from CIBC World Markets. Stephanie Price: Hoping you can give us a bit of further color on the U.S. Internet environment now that you've had a full quarter of Ziply. Are there any changes to your thoughts on the pace of the U.S. fiber rollout here? Mirko Bibic: No, it's -- everything is on track, as Harold outlined in detail on October 14. So we're very pleased with Ziply's performance. And we're looking forward to continued growth. I mean the key thing is that it continues to perform ahead of our investment case. And the key thing is as we ramp the build in 2026, that's just going to lead to better subscriber revenue and EBITDA growth. Stephanie Price: Okay. And then a follow-up for Curtis. Just on free cash flow growth. It was very solid in the quarter and year-to-date, but full year guidance is obviously maintained. Hoping you can talk about the puts and takes here as to get you to the bottom and the top of the full year range for free cash flow. Curtis Millen: Yes. Stephanie, thanks for the question. So Q3 specifically was strong. There are some timing impacts, I'd just say off the top, still confident in the 6% to 11% full year. CapEx, we still expect it to be in the 15% [indiscernible] for the full year. So it was a little bit lighter in Q3. Those are timing items. So we do expect Q4 to be heavier CapEx spend, which is probably what you're picking up on. So really nothing but reiteration of our full year expectations and timing in terms of CapEx and a few working cap items. Operator: Our next question is from Sebastiano Petti from JPMorgan. Sebastiano Petti: I guess just maybe following up a little bit on Jerome's question regarding the cost savings. I guess, can you update us where we're at in the $1.5 billion? Yes, I think at the Analyst Day, you talked about being halfway there. Help us maybe with the shaping of that? And maybe just remind us, Curtis, is that $1.5 billion a run rate exiting 2028? So just some color on the shaping there would be helpful. And relatedly, as we think about the CAGRs on EBITDA, particularly understanding maybe there might be some margin compression as Ziply and PSP kind of ramp up over time. But maybe help us think about the shaping of the consolidated EBITDA growth, I guess, over the forecast period. I mean, does it make sense that 2026 growth is maybe above trend as we kind of think about the guided range? Curtis Millen: Thanks, Sebastiano. A few things to unpack there. In terms of margins to tie up to Jerome's earlier question and how that flows through. So I think cost savings, you're right, we're halfway through. That will continue to accelerate. So that lumpy with initiatives, but continues to increase year-over-year over year-over-year as we continue to leverage digital transformation and efficiency initiatives. So I think you see relatively flat EBITDA margins over time. And our focus on reducing costs and driving efficiencies allows us to absorb some of the strong subscriber growth in the U.S., which includes COA, and it allows us to fund our other growth businesses like AI-powered solutions. So -- and again, those investments in the newer business, not only CapEx, it's OpEx also. So flat margins on a percent basis, increasing margins on a dollar basis as we continue to transform the financial profile to more be heavily weighted towards future-focused products and services while maintaining the same similar in-line EBITDA percent margin. And then in terms of the U.S., again, 44% margin we've talked about between 40% and 45% in the U.S. So again, I think you'll see offset of efficiencies and scaling benefits in the U.S. with incremental costs and expense to drive subscriber growth as well as leveraging the PSP network code which comes with a couple of incremental costs. But ultimately, looking to drive EBITDA margin dollars while we focus on cost containment and efficiencies, but overall driving EBITDA dollars out of the U.S. Operator: Our next question is from Tim Casey from BMO Capital Markets. Tim Casey: Mirko, when you think about the growth in AI-powered solutions, doubling the $750 million by '28, will it be a balanced contribution between Ateko, Cyber and AI Fabric? Or is one of those more likely to be an outsized contributor? And as a follow-on, at AI Fabric, do you not have to onboard the additional data centers, and I think it takes 9 months to build one. So is there a cadence to that, that would be more back half or loaded more towards the back half of that time frame as you onboard these data centers? Or am I thinking about that incorrectly? Mirko Bibic: Okay. Thanks, Tim. So I think on the unpacking the $1.5 billion as between the 3 components. I just -- if you go back to John Watson's Investor Day deck, you'll see we're expecting around $400 million from Cyber, around $700 million from Ateko and around $400 million from AI Fabric, and that would be your breakdown of the $1.5 billion. And then in his slide deck, he has the annual growth rates that he's expecting for each of those 3 components of AI-powered solutions. And in terms of AI Fabric and the time to build data centers and the like, I think I'll keep it a little bit more general. You should expect -- I think we're expecting kind of a couple, 2, 3, let's say, launches in 2026. So it's not like we're going to be signing contracts in the first half of '26 and then you'll only get to see revenue in 2027. That will happen, but you will see some activity based on the pipeline we have in 2026 and our ability to open a few of those data centers next year. Operator: Our next question is from Aravinda Galappatthige from Canaccord Genuity. Aravinda Galappatthige: I just wanted to go back to the free cash flow question, Curtis. Obviously, you benefited a little bit from working capital movements. I think that's what you're referring to in terms of timing. So should we expect the sort of a more unusual or higher-than-usual working capital outflow in Q4? And then I guess the larger question is, when I look at the '25 to '28 free cash flow projections you provided, it suggests that you still anticipate fairly meaningful working capital outflows right through that period. And I just wanted to understand a little bit more why that it needs to be consistently fairly high. Maybe I'll just start there. Curtis Millen: Yes. Thanks for the question, Aravinda. So obviously, puts and takes within the free cash flow buckets I can't control all of the timing on individual payments. I'd say we are continuing our focus on working capital management. So we've seen benefits in inventory. We're managing receivables and especially. So I do think we're seeing goodness there. But again, that fluctuates quarter-to-quarter. I'd just say overall free cash flow, confident in our full year 2025 guidance. So no real change there. CapEx is a bigger driver of kind of quarter-over-quarter, and we do expect Q4 to be seasonally high relative to Q1 to Q2 and Q3 and north of what Q4 was last year. So that's this year. And then ultimately, as we talked about free cash flow, '25 to '28, there are a few things happening. One, CapEx dollars flat, but lease repayments will come down. So kind of as I think of the capital investments over time combined between what is accounted for as CapEx versus leases, that total bucket comes down over time. I do think -- so the decrease in that combined bucket leads to payable decreases over time as well. So you don't capture all the free cash flow benefit in the same period where your CapEx comes down. But over that period, we will capture the benefit. And beyond that, ultimately, you're just normalizing your way through, right? By the time you're at 2028, there's no buildup or onetime. You're just a run rate free cash flow generating business. Aravinda Galappatthige: Understood. And just my quick follow-up on the comments you made on the enterprise side, Mirko. As you kind of push ahead, talk to the CIOs with -- pushing ahead with Ateko and Cyber, what kind of competition are you coming up against? Is it sort of the more fragmented independent players? Or is it sort of the larger established players? Do you -- to what extent do you have sort of unseat some of these existing incumbents in that area to sort of win over the sort of the IT services and cybersecurity mandates there? Mirko Bibic: Yes. Thank you for the question, Aravinda. So I'd say when it comes to the collection of the overall offering that we have in AI-powered solutions business, the full stack AI, the AI platform, the integration of AI automation platforms through Ateko and Bell Cyber, when you put all that together, frankly, we're 1 of 1. And I'm not exaggerating. We are -- when you look at all 3 together, we are 1 of 1. If you want to kind of look at each one discretely, there are others who provide cybersecurity solutions, but nobody who can kind of provide the integration of the Bell network security platform with the automated cloud-based AI-powered SOC that the former strategy and now the combined business is called Bell Cyber offers. And on Ateko, there are a number of systems integrators out there. We all know their names. But what stands Ateko apart are many things, but two in particular that I would call out. One is we are very focused. And I've talked about this before. We have a clear lane of verticals where we're targeting. And we are hyper focused on AI and the hyperscale platforms, whether or not it's ServiceNow, Salesforce or the 3 hyperscalers. So we provide the benefit of a really focused expertise. And then the other thing that stands Ateko apart from anyone else is we are both an operator and an integrator. So Ateko does for our third-party customers, what it does for Bell. So we can offer the real experience of having done it for an operator. So we know the use cases that work, where you're wasting your time as a customer. And I think that's a value add that the classic SIs don't provide. So I'll leave it there. But you see it in the growth numbers. I mean we only started this in 2023 with Ateko. And since then, even this year, like we rebranded Ateko, we launched Bell Cyber, and we've launched on May 29 of this year, AI Fabric, and it's pretty strong growth in its own right. Operator: Our next question is from Batya Levi from UBS. Batya Levi: Question on the wireless side. Looking at your postpaid wireless base, is it possible to get a rough mix of what the Bell branded subs make? And as that mix grows, I think can we expect wireless ARPU returning back to growth? And I believe the new MVNO also contributed in the quarter. Is it possible to quantify that? Mirko Bibic: Yes. So the MVNO -- the network revenue from a wholesale relationship on wireless is frankly immaterial. It's not a big number. So it wasn't a big component of kind of call it, the ARPU stability, if you want, because there's a slight decline there. On the Bell brand postpaid loadings, let's leave it at this. Like there's -- the postpaid loadings consolidated are 11,500, close to 12,000. The Bell brand postpaid net adds were multiples of that, but I'm not going to unpack the actual shaping of Bell versus Virgin in that mix. And the prepaid loadings are quite strong. You see them there, and that's all Lucky Mobile given that at this point in time, we only offer prepaid on Lucky Mobile. Did I miss a question? I'm sorry? Curtis Millen: I think there's a -- just on ARPU. So I think overall, we're pleased with the trajectory we're seeing on ARPU as wireless pricing is firming up. So both postpaid and blended ARPU are up versus Q2 on a reported basis. And I think it's also important, so new and monthly rates are higher than the embedded base rates. So new loads are actually helping blended ARPU, which is a trend for the positive. Operator: Our next question is from Lauren Bonham from Barclays. Lauren Bonham: You mentioned that you plan for the AST satellite service to launch in late 2026. Could you talk more about how that service will be marketed and included in the mobile plans or what sort of price points you're targeting as well as how you're thinking about size of the potential market there? Mirko Bibic: Thanks, Lauren. Look, the question is very on point. So it's a little bit too early to be able to give you information on that given that we plan to launch in late 2026. So we'll come back to that at the appropriate time. But I get the question. It's a really important one. It's just a bit too early. So with that, I think as we're running out of time, what I would -- I -- thank you, everyone, for the time you've given us this morning. I'd say this, again, I go back to -- it's going to be a constant theme in our interactions and in our results. We're going to always anchor back to what we said we were going to deliver for investors between now and 2028. But we're on the right track here, and the stage is set for executing against '26, '27 and '28. We've improved -- the fiber net adds are growing in Canada and the U.S. We've improved fiber Internet churn. We've improved product intensity. You see some stability in ARPU. And as Curtis just answered in response to Batya's question, we're seeing that headed to flat and positive as we head into next year. The Bell brand postpaid loadings are very strong. Ziply is better the investment case. We didn't answer any questions on media this morning, but you can see our Crave growth is impressive. The digital revenue is progressing exactly as we said, and the AI-powered solutions business is delivering better than we expected. And we only just got started, and we're on our way to the $1.5 billion that we projected in 2028. So all the key parameters of growth are there and are delivering, and that's what we're going to continue to do. It's an exciting time here as we've reset Bell and the team across the board is energized. And thank you. Curtis Millen: Thanks, everyone. Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
Operator: Welcome to the Light & Wonder 2025 Third Quarter Earnings Conference Call. [Operator Instructions] I will now turn the call over to Rohan Gallagher, Executive Vice President, Global Chief Corporate Affairs. Please go ahead. Rohan Gallagher: Thank you, operator, and welcome, everyone, to our third quarter 2025 earnings conference call. Joining me today in Sydney are Matt Wilson, our President and CEO; and Oliver Chow, our CFO. During today's call, we will discuss our third quarter results and operating performance, where we will refer to our earnings presentation. This will then be followed by a question-and-answer session. Today's call will contain forward-looking statements that may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call. For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted in the Investors section of our website and our filings with the SEC and the ASX. We will also discuss certain non-GAAP financial measures. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings release and earnings presentation located in the Investors section of our website. With that, I will now turn the call over to Matt to discuss the third quarter results and operational highlights on Slide 3. Matthew Wilson: Thank you, Rohan. Hello, everyone. Thank you all for tuning in today for our third quarter results. I'm pleased to share that our strong execution on our product road map and game performance enabled us to deliver robust earnings growth and cash flows. Consolidated revenue for the quarter increased 3% year-over-year to $841 million. Importantly, consolidated AEBITDA grew double digits year-over-year to $375 million, an 18% increase, supported by record margin expansion across all 3 businesses. Additionally, adjusted NPATA for the quarter grew 25% year-over-year and adjusted NPATA per share or EPSA increased 35% year-over-year to $1.81. Pleasingly, we continue to improve our quality of earnings with gaming operations once again emerging as an area of strength. Our teams delivered meaningful sequential installed base growth of over 850 units, including Grover. Additionally, recurring revenue grew 14% year-over-year, which accounts for approximately 69% of our consolidated revenue in the quarter. This high flow-through business is a key driver of our cash flow flywheel, which we expect to further enhance through our continued investment and execution on our road map. We remain intentional and committed to our capital allocation strategies. This quarter, we returned $111 million of capital to our shareholders through share repurchases. We're remaining nimble in the face of any near-term opportunities as we transition to a sole standard listing on the ASX, scheduled to take effect on November 14 in Australia, where we have been listed since May of 2023. I want to thank all of our stakeholders and advisers for their hard work and support during this transition. We are confident our move to the ASX will provide significant shareholder value in the next step of our company's journey and enable us to enhance Light & Wonder's profile in a market that is attuned to the gaming industry. Turning to Slide 4 for an update on our Grover Charitable Gaming integration. We have now seen a full quarter's worth of contributions from Grover with over $40 million in revenue and 229 incremental units added sequentially. Since we announced the acquisition, over 830 units were added to the fleet, bringing the Grover install base to over 11,250 units. Our focus remains on the seamless integration of Grover into game development and technology platforms, and we are pleased with the progress the Grover team has made in building out its team in anticipation of the growth ahead. Our new office and studio in Raleigh, North Carolina, which will serve as Grover's headquarters, soft opened in late October, and we expect to complete the build-out later this year. The Indiana market launch as our sixth operational state is progressing well. And importantly, we've build out a dedicated and experienced team locally to be fully prepared for launch needs. We remain incredibly excited about the vast potential of Grover and its contributions to our diversified business model and look forward to key Light & Wonder game launches into the charitable gaming market in early 2026. Moving along to Slide 5. We've continued to deliver on our core strategy by leveraging and prioritizing our robust R&D engine across complementary channels to deliver engaging content experiences as one of the leading cross-platform global games companies. We foster a high-performance culture with talent and a deep bench led by a leadership team with a proven track record, a highly valued asset in this industry. Our financial profile is impressive with high margins and cash-generating recurring revenue streams that enable meaningful capital creation. We execute on a disciplined capital allocation blueprint to create sustainable shareholder value. We are truly unique among our peers in both structure and operations, operating across multiple industries that have high barriers to entry. I will now take you through our segment results and highlights. On Slide 7, you will see that we've provided a summary of our revenue and profitability by business. What I'm most impressed with in this quarter is the margin expansion across all verticals. Oliver will provide more details into the growth drivers and outlook later on the call. Turning now to the gaming business performance on Slide 8. You will see that gaming revenue was primarily driven by strong gaming operations performance, which increased 38% year-over-year to $241 million on North American units installed and $40 million on Grover contribution. Looking ahead, we expect momentum to continue in North America on strong game and hardware releases introduced at AGA and G2E as well as the continued expansion of the Charitable Gaming business with our entry into Indiana in the coming months. The decline in gaming machine sales was largely in the international markets, which was adversely impacted by the large Entain order of 3,600 units in the prior year and our out-of-cycle hardware churn in Australia. Going to the fourth quarter, we expect a sizable order of our SSBT or sports betting terminals in the U.K. as well as previously discussed Asia demand that has shifted in timing. Our systems and table businesses both saw modest growth in the quarter with systems supported by higher international hardware sales. We expect the business to continue its growth trajectory, underpinned by customer-centric innovations. Tables revenue increased on higher utility sales in North America as we continue to expand our product offerings and pipelines. We received strong feedback on our Obsidian offering and the new team led by John Hanlon is well equipped to capitalize on domestic and international electronic table games opportunities over the coming years. Here is an in-depth look at our gaming KPIs on Slide 9. We now have 47,240 installed base units in North America. Excluding the 11,255 units of Grover, North American premium units have grown for 21 consecutive quarters and now account for 52% of the total North American installed base. This is a true testament to our game performance and pricing precision of our commercial strategy. In North America, average daily revenue per unit declined on a reported basis due to the inclusion of Grover units. However, excluding Grover, our North American installed base revenue per day increased 5% year-over-year, primarily driven by wide area progressive performance amid a resilient gaming backdrop and strong GGR. Importantly, we continue to lead in the new [indiscernible] game Index with 3 out of the top 5 indexing new premium leased and WAP games with our Ultimate Fire Link and Huff N' Puff franchises. North American gaming machine sales remained strong with over 6,000 units shipped in the quarter despite the difficult year-over-year comparison and softness within the International segment. Light & Wonder's scale and global presence enabled us to be a meaningful participant in all markets. Just recently, we entered the Nebraska skill game market and commenced trials in the Eastern European dynamic multi-game market. We see ample opportunities for our products to reach new markets that will be coming online and available to us. In the latest Eilers report, we saw Piggy Bankin Break In debut at #1 as the top indexing new video real game and Dragon SpinSaga Fire & Water rounding out the top 5, reflecting our continued commitment to building great for sale games. We showcased an exciting lineup at G2E, as shown on Slide 10. The feedback on our cabinets and games from our operator partners was encouragingly positive. I am thrilled with the launch of Lightwave and expect our Cosmic cabinet, along with our proven franchise extension to fuel our installed base and game sales growth, underpinned by our differentiated R&D engine. Turning to SciPlay on Slide 11. Quick Hit Slots and 88 Fortunes once again delivered record quarterly revenues, their 15th and fifth consecutive quarters, respectively, as they continue to ramp with exciting slot content and features. The year-over-year revenue decline in the quarter was primarily attributed to the decreased number of average monthly payers at Jackpot Party. Despite the softness, we're able to grow the other games within this game portfolio, and we continue to invest in building and deploying engaging games through our omnichannel strategy. Monetization remains strong with average monthly revenue per paying user up 11% year-over-year to over $126 and average revenue per daily active user maintaining a record level at $1.08 with 4% year-over-year growth. From a profitability perspective, we continue to see significant progress in our direct-to-consumer platform, which grew to 20% of SciPlay's revenue, up from just 12% a year ago and putting us well on track to reach our 30% target by 2028. There is continued runway for wider deployment and adoption, which we expect to further expand margins going forward. Regarding Jackpot Party, we have seen stabilization and opportunities to return to growth with a revamped game economy and increased efforts around unregulated suites-based gaming. There is reason to believe the general environment will improve as initial data from states where the ban is in effect becomes available. At the same time, we'll return to our roots and execute on our success drivers over the past 3 years, fine-tuning our acquisition, engagement and monetization flywheel, as you can see here on Slide 12, which will enable us to get back on track. In terms of UA, we will remain efficient and continue to focus on ROI opportunities through innovative marketing efforts. Engagement will also be closely assessed and enhanced with meta features and more land-based games to drive cross-platform play. Ultimately, we plan to take a prudent approach to monetization while providing our players with a robust game experience they enjoy. This is a process we will continue to navigate over time, but we remain confident in our teams and the broader portfolio of great games to drive a return to sustainable growth. Moving to iGaming on Slide 13. We delivered record revenue of $86 million in the quarter, up 16% year-over-year, driven by continued strong momentum in North America, underpinned by first-party content proliferation in the U.S. market and growth in our partner network. In fact, 7 out of the top 10 games across our OGS network were first-party game types, led by Pirots 4 in the #1 slot, followed by 3 Huff N' Puff games ranking second, third and fourth on the list, reflecting the strength of our omnichannel strategy and durability of our game franchise expansion. Margin expansion was evident with the proliferation of first-party content as AEBITDA increased 42% year-over-year to $34 million, with AEBITDA margins up 800 basis points over the same period. This also accounted for our strategic initiatives and realignment of resources. Wages processed through OGS grew 23% over the prior period to $28 billion with record volumes across all regions and content types demonstrating the growth potential of our platform and the industry. We remain committed to capitalizing on our iGaming road map, as you can see on Slide 14. There is genuine player affinity for our game franchises, and we are committed to bringing those games to the iGaming platform broadly. We are slated to launch more player favorite land-based franchise extensions in the fourth quarter, such as Big Hot Flaming Plots Tasty Treasures, Huff N' Extra Puff, Ultimate Fire Link Cash Falls Glacier Gold and Rainbow Riches Road to Even More Riches 2, just to name a few. Our OGS is regarded as one of the most mature iGaming content aggregation platforms in the industry, connecting studios and operators in over 40 regulated markets and over 7,500 operator connections. Its reach has enabled studios to scale their games across various jurisdictions as seen with Lightning Box and Elk whose GGR has grown over the years. Elk Studios is in the process of expanding its U.S. presence with a pending license in Michigan as we expand the audience for these digital native studios and games. International expansion remains an opportunity for growth. We recently received approval to go live in the Philippines as the first licensed iGaming supplier, and we are very excited about the prospects given that we are one of the leading land-based slot suppliers in the region. We are confident that investments in the iGaming portfolio will be further accentuated with the support of our team's focused execution. We will continue to leverage our leadership position and expand our robust portfolio to capitalize on the opportunities available to us. As we close out the year, I want to commend the team on their resilience and dedication as they executed on several key operational and financial initiatives simultaneously. It's quite a feat to navigate the broader environment this year, but we're able to deliver growth and profitability supported by a solid business model, underpinned by a differentiated R&D mode. I will now hand it over to Oliver to go over our financials. Oliver? Oliver Chow: Thanks, Matt. First, I'd like to note that we've expanded our financial reporting this quarter to include a detailed reconciliation of the non-GAAP profitability metrics aligned with the Australian market on Slide 16. We expect to provide this level of detail on an ongoing basis as we transition to a sole standard listing on the ASX. Turning to the results. This quarter reflected continued earnings growth driven by our disciplined execution. Consolidated revenue growth was driven by strong gaming revenue with contributions from Grover and another record iGaming quarter, fully demonstrating the performance of our game portfolio. Net income increased 78% year-over-year, primarily driven by revenue growth and continued focus on operational efficiencies as evidenced by AEBITDA margin expansion across all businesses. This led to consolidated AEBITDA and adjusted NPATA growth of 18% and 25%, respectively, year-over-year. On a per share basis, net income per share on a diluted basis increased by 89% to $1.34 compared to $0.71 in the prior year period. Adjusted NPATA per share or EPSA increased 35% to $1.81 compared to $1.34 in the prior year period. Our continued focus on operational excellence and disciplined execution once again drove meaningful year-over-year consolidated AEBITDA and adjusted NPATA growth you see here on Slide 17. In gaming, margin expansion in the quarter was primarily driven by North American gaming operations units installs and higher revenue per day led by the performance of our wide area progressive units as well as the contributions from Grover. Product mix was also a factor in the quarter on higher gaming machine sales in the prior year. Looking forward, we expect our gaming AEBITDA margin, inclusive of Grover, to trend in the low 50% range based on product mix and currently estimated mid- to high single-digit million dollar range of quarterly tariff impact starting in the fourth quarter and into 2026. SciPlay continues to drive meaningful profitability, evidenced by DTC growth to 20% of the revenue in the quarter. The team has formulated a solid blueprint around our user acquisition initiatives, and we'll deploy efforts prudently based on the potential ROI and seasonality. Historically, the fourth quarter is more of a competitive market for ad spend, and therefore, it is likely we will ramp UA spend back up in 2026. We continue to see solid performance at iGaming as both revenue and AEBITDA were at record levels for the quarter. Our decision to realign resources to the most impactful areas of the business is paying off with revenue and first-party content growth contributing to margin expansion. I'd also like to note that the now discontinued live casino business had approximately $3 million of AEBITDA impact in the prior year and will have a residual impact into the first quarter of 2026 from a comparability standpoint. Our corporate and other expenses are also realigned to better fit our business needs, and we expect this to scale proportionately as we continue to grow the business with some legal expense potentially shifting into 2026. From an adjusted NPATA perspective, the 25% growth was largely driven by AEBITDA increase with record margins across all businesses. This was partially offset by increased depreciation and amortization from the inclusion of Grover units and success-based gaming operations capital expenditures as well as interest expense as a result of higher outstanding debt associated with the Grover acquisition and share buybacks. I would like to provide some color on some of the nonoperational items that are expected to impact adjusted NPATA as we close out the year given the listing transition quarter. We expect amortization of intangibles and interest expense to continue to trend up year-over-year on the Grover acquisition, with interest volatility also driven by our share buyback program in the fourth quarter as we transition to a sole listing on the ASX. From a tax perspective, our effective tax rate is expected to remain between the 21% to 24% range. Overall, we remain confident to land within both our full year 2025 targeted consolidated AEBITDA and adjusted NPATA range accounting for Grover, which we provided on the previous call. Turning to Slide 18. Cash flow continues to be a focus of the organization as we generated operating cash flows of $184 million in the quarter. Free cash flow was $136 million, a 64% year-on-year increase, led by earnings growth and lower cash tax payments. Importantly, we intend to drive further improvement in our working capital cycles, inventory position and capital expenditures to improve cash conversion over time, in addition to growing our top line and managing our cash tax payments and interest efficiently in response to broader environmental changes. Our goal is to continuously improve free cash flow through the quality of earnings on growth of our recurring revenue business, amplified by continued execution on our key cash enhancement initiatives. Here, you will see that we've trended positively over the past 9 months from a cash conversion perspective and ended the quarter with a 36% conversion rate based on consolidated AEBITDA, translating to an 89% cash conversion over our adjusted NPATA metric, both up significantly from the prior year. We remain committed to meaningful cash flow generation over the long term as we continue to scale and optimize efficiency across the company. Moving to our capital structure on Slide 19. Our net debt leverage ratio for the quarter remained within the targeted range at 3.3x on a combined basis following completion of the Grover acquisition, which was financed through our $800 million Term Loan A. We recently issued new $1 billion, 6.25% senior unsecured notes due in 2033. With the proceeds, we redeemed the 7% senior unsecured notes due in 2028. We paid our outstanding revolver credit facility borrowings with related fees and expenses and added cash to our balance sheet for general corporate purposes, which include providing available funding for our share repurchase program as we maintained $1.2 billion of available liquidity. This enabled us to further optimize our existing debt structure with an average tenure of 5 years by extending bond maturity from 2028 to 2033, while also reducing the interest rate from 7% to 6.25%. Our effective net interest rate is approximately 7.2% with fixed versus floating debt mix at 55% versus 45%. We will continue to strategically look for avenues to optimize our capital structure through opportunities when available. Our capital allocation framework remains the same, as you see here on Slide 20. R&D is the engine of our business, and we remain committed to investing in our growth initiatives with targeted R&D and CapEx allocation of 17% of our consolidated revenue. This enables us to continue developing our content across our verticals to drive sustainable growth over the long term without compromising our short-term targets. We also remain committed to returning capital to shareholders with $111 million of shares repurchased or approximately 1.2 million shares during the quarter. Subsequent to the end of the third quarter, we repurchased an additional $101 million of shares with residual buyback capacity of $735 million remaining on our existing authorized program as of October 31, 2025. The company completed $765 million of its total authorized $1.5 billion share repurchase program as of the end of the third quarter and since the initiation of the prior share repurchase program in March of 2022 through October 31, 2025. Overall, the company has returned $1.5 billion to shareholders through the repurchase of approximately 19.9 million shares, representing approximately 21% of the total outstanding shares prior to the commencement of the programs. We retain discretion to accelerate repurchase activity to capitalize on opportunities to deliver enduring value creation for shareholders and currently expect to utilize a meaningful share of the remaining available capacity prior to the end of 2025, while preserving a healthy liquidity position. Pending the expense of the share repurchases, our leverage may move slightly above the high end of the range in the near term. However, we would expect to quickly return within our targeted range, underpinned by the strong cash generation of our business. Importantly, we maintain a highly flexible capital structure, which allows us to deploy balance sheet capacity opportunistically when appropriate, with flexibility to undertake buybacks on both the NASDAQ prior to the [ list ] and the ASX with intentions to be active, subject to regulatory approvals. Absent any capital allocation opportunities, we aim to position at the lower end of the target range over the long run. Overall, our priorities will be thoroughly planned through a disciplined capital allocation approach, which we expect will create sustainable long-term shareholder value. As we close out 2025, I would like to thank our team for their continuous efforts executing on the various initiatives we have in place. We will continue to deliver exciting and engaging new games across our channels, leveraging the latest technologies and creating an exceptional customer experience. With that, I'll turn it over to the operator for your questions. Operator? Operator: [Operator Instructions] The first question we have comes from Barry Jonas with Truist. Barry Jonas: We are a bit over a month into the fourth quarter. Curious how you see the quarter shaping up to hit your 2025 guidance. What are the key building blocks or opportunities as you see them? Matthew Wilson: Yes. Thanks [Technical Difficulty] year-on-year [Technical Difficulty] driving this growth in the business. I think the U.S. sale [Technical Difficulty] contributions from the adjacent markets [Technical Difficulty]. Now another [ 229 games ] in the quarter grew very nicely over that period and made a full contribution in the quarter of $40 million. I think margins [Technical Difficulty] business, and that all added up to a [Technical Difficulty] less work to do in the fourth quarter than we had. So yes, [Technical Difficulty] third quarter, [ 65% ] of the business was [Technical Difficulty] nature. So very predictable in terms of our earnings. But obviously, a few things to close down as we [ end ] the year over the next 8 weeks. Maybe I want to kind of fill in some of the blanks there. Oliver Chow: Yes. Thanks, Matt. And I think as you said, it kind of starts with our recurring revenue businesses. So that remains very strong as evidenced with our gaming ops growth, the addition of Grover here. And we just continue to see momentum as we head into the fourth quarter. So great tailwinds there. I think North American outright sales performance remains strong for us, and that's really driven by the gaming performance that we've seen over the last several quarters, and we expect that continuing into the fourth quarter. You would have remembered, Barry, last quarter kind of preview that Canadian VLT orders are shifting into the second half. And so ultimately, that will help kind of drive outcomes for us. International game sales, that's going to be, I would say, slightly impacted by timing of certain Asia NOEs slipping into 2026 in the Philippines. But we still maintain kind of our share in Asia, and we expect our [indiscernible] share to get back to kind of rightful share gains here as we head into 2026. And then I would say on the other side of the recurring revenue, we expect continued scaling from a DTC perspective in SciPlay. We had very strong 1PP share performances in the quarter. We expect that to continue as we close out the year. And I think lastly, you heard me say this on the prepared remarks, but the tariff impact is expected to be, call it, mid- to high single digit AEBITDA impact starting in Q4 and something that we'll continue to kind of work through. So that all said, we expect a strong fourth quarter with line of sight to that 25% target range that Matt kind of mentioned. And it's going to drive another double-digit growth year for us. So that's going to be outperformance relative to the broader industry, and we certainly expect to continue to execute against our strategies. And lastly, what I'd say is -- and I want to be very clear on this, we're not going to compromise the long-term growth of this business to hit short-term goals. So we're going to continue to invest into the business into to the quality of the earnings that we're going to be delivering over time. So still some work to be done, but we have line of sight to a lot of great momentum across the business. Operator: We have your next question from Matt Ryan with Barrenjoey. Matthew Ryan: I was just hoping to get an update on Grover. It looks like you've added some more boxes in the quarter. Just can you tell us about, I guess, the integration with the broader Light & Wonder content and just also just more specifics on Indiana as a launch? Matthew Wilson: Yes, I'll take that. Yes, I think great quarter for Grover added 229 games for the period. The first full quarter of contribution from Grover in the third quarter. I think the team is doing a fantastic job integrating into the broader Light & Wonder family. They had a great showing at G2E. Matt, I know you were there and a number of other people on line were -- the business is performing very well. You'll start to see our game, the Light & Wonder games show up on the Grover installed base early in '26. And then we are getting ready for Indiana market entry. It looks like it may have shifted into the first quarter, just the regulations taking a little bit longer than we had anticipated, but we don't see any issue to the long-term nature of that market. It's still going to be a big and vibrant market, and we'll start to scale the installed base over 2026. We opened the Raleigh, North Carolina head office in the period, which is great. We're starting to staff up there. There's content and technology teams going into that facility led by Brian Brown, obviously. We've opened up an integration center in the Indiana market. So things are set up really nicely as we turn the page into 2026. You're seeing that nice sequential addition of gains quarter-after-quarter. Indiana will be a growth driver for us in the first quarter. So yes, looking like at this point, a great piece of M&A and a part of the portfolio that belongs in the broader ecosystem of Light & Wonder. So really encouraged with where we stand with Grover. Operator: Your next question comes from Chad Beynon with Macquarie. Chad Beynon: Matt and Oliver, I know the original guide for Q3 was for low double digits. So you clearly exceeded that. It looks like most of beat or a lot of the beat came from the gaming margin more in the mid-50s versus the low 50s. So can you double-click a little bit just into that flow through for Q3 in gaming? I know there's some noise, obviously, integrating Grover, but anything to help there would be helpful for us. Matthew Wilson: Yes. I thought it was a fantastic quarter again from the entire team. We guided to low double digits in the third quarter. We delivered 18% growth. So clearly pacing ahead of our expectations and what we've committed to the market. And a big driver of that was gaming. And in particular, the gaming operations business, which has added a lot of games in the period, 639 in the period over 2,800 year-on-year. So it's a powerhouse of the business for us and great tailwinds there, driven by great game performance. So we think that can continue in the fourth quarter and beyond. We've got a lot of momentum there. But maybe, Oliver, you want to touch on the margins and the mix and maybe the fee per day [ growth ]. Chad Beynon: Yes. Thanks, Matt. So yes, I think broadly speaking, as we kind of head into the fourth quarter, the one thing I did miss actually in the last question is the sizable SSBT order that we're going to have in Europe. And so certainly, that's going to have a product mix impact, even though we're continuing to scale our recurring revenue businesses. So we grew our RPDs 5% year-over-year. And so the quality of our recurring revenue business continues to be very strong. And so ultimately, product mix will play a part into kind of broader mix. But I think overall with tariffs, including kind of the gaming sales mix, I think you'll start to see a more normalized kind of gaming margin as we move forward. Operator: We now have Andre Fromyhr with UBS on the line. Andre Fromyhr: I was just wondering if you could talk about the sort of level of demand that you're seeing at the moment and conversations you're having with customers as they build their budgets for next year. For example, tax incentives on accelerated depreciation entering those conversations? What's been the response and uptake on Lightwave? Just curious to hear how that sort of demand environment is shaping up. Matthew Wilson: Yes. Pleasing to say the market has proven to be very resilient. I think it wobbled a little bit there in the second quarter after Liberation Day for obvious reasons. But just given where GGR levels are at, reinvestment levels seem really high from a customer perspective. I saw the Eilers note out today just talking about forward-looking intentions for replacement cycle ticking up. I think that's just a function of the quality of games that the market is producing. And I think operators know to compete, you got to have the best games on your floor. So we're seeing that through a solid replacement rate across the market. And then I think you're also saying that constant tick up of the percentage of the floor that is premium. So I think that ticked up to 15% or 16% in this latest slot survey. So I mean that's a great tailwind for the industry. We continue to put our best games into that category. And I think customers know that the best players want to play the best games. And so having those available on the floor is a great thing. So yes, I think all in all, where we stand today, the consumer looks resilient, particularly the gaming consumer looks resilient. That's flowing through into GGR and good forward intentions for purchasing demand. So I think as we turn the page into '26, it will be interesting to see if that flows through the one big beautiful bill, accelerated depreciation dynamic flows through into budgets. We've heard from a number of customers that they're thinking about how do they best take advantage of that to maybe potentially accelerate some of their replacement market. But each customer is different, and they're thinking about it differently. So we'll monitor that closely as we turn the page here into 2026. For us, it's really focus on the controllables, build great games, take share in the market. I think we -- it looks like we did take share again here in the third quarter, which was fantastic with over 6,000 units shipped. So a testament to Siobhan Lane and the entire gaming team. Anything to add, Oliver? Oliver Chow: No. I think you said we spent some time with customers at G2E and exactly to your point, Matt, some kind of indicated opportunities for accelerated depreciation, such as some of the bigger regionals. We'll continue to kind of work with our customer base to ensure they understand kind of the benefits of those components. But also to your point, Matt, product road map, not only just on the software side, but also the hardware that we're coming out with will continue to spur kind of opportunities for us to gain share. Operator: We have David Katz with Jefferies on the line. David Katz: I wanted to ask about iGaming and SciPlay, both. When we look at the setup, right, with revenues that aren't growing, but there is a benefit of DTC mix in there that's driving some profitability with it. How far does that really go? I know you've talked about a DTC target mix, but can, at some point, the revenues start to grow again? Or how are we thinking about that longer term? Matthew Wilson: Yes. So I'll address the SciPlay question that you laid out there. Yes, it was a quarter where we didn't grow the top line to our expectations. And it's a portfolio of games, David, as you know. We've got some very fast-growing games, Quick Hits, 88 Fortunes, MONOPOLY, all grew nicely in the quarter. Really, the drag on the portfolio has been Jackpot Party and Gold Fish. These are big mature games that have been in the portfolio for over a decade, have been growing ahead of market for the last 10 years. The good news is we've stabilized those 2 games. And so as we can get those back into growth mode, it kind of lifts the tide for the entire portfolio across social casino. But I'll say from the outset, Jackpot Party in particular is not where we want it to be, and we need to work hard to get that back into growth mode, and Josh is doing a lot of work to focus on that. We've been fairly public about the impact of sweeps on this category. We see some data in markets where sweeps is being eliminated, and we're seeing a subsequent uptick in the social casino market. So we think as that manifests over time and the deregulation of the sweep stakes, I guess, happens over time, then that will be a tailwind for the social casino sector. We don't really control that. So what we can control is the economies that we can optimize in our games. So we do think we get revenue back to growth mode in 2026 as we get those games dialed in, and we have the benefit from sweeps. The direct-to-consumer benefit is real. It's -- a year ago, we were at 12% of revenues were direct-to-consumer. It's 20% now. In May, we guided to 30% by 2028. So clearly, we're pacing well ahead of the direct-to-consumer mix. And we feel like we can accelerate beyond that target over time. So there's a real tailwind from a margin perspective on direct-to-consumer. We've got to focus on getting the top line growing again, and that's the focus of the team at the moment. Oliver Chow: Yes. And maybe just one quick add just from a monetization perspective. I mean that continues to improve year-over-year. So David, I think the fundamentals seem to still be there, which is great. And Josh and the team know how to run and grow games to Matt's point. So if you look at ARPDAU, that grew 4%, almost 4% year-over-year. Our ARPU grew almost 11%. So if you look and just peel the onion back, there's certainly some favorable trends that we're going to continue to try to build on. But I mean you called it. I mean, that's going to be an area that we're going to continue to focus and drive this back to growth over time. Operator: Your next question comes from Rohan Sundram with MST [ Marquee ]. Rohan Sundram: Just the one for me. Oliver, can we please just revisit your commentary around the gaming EBITDA margins where the expectation is to trend towards 50%. Just the timing of that. And within that, you mentioned Grover, are you saying that Grover is a negative mix shift? Or did I get that wrong? And on the tariff side of it, where do you see scope for mitigations, if not already? Oliver Chow: Yes. Yes, I think the benefit that we got in the quarter, certainly, as Matt mentioned before, was product mix. And so as we head into the fourth quarter -- sorry, a little feedback, with the SSBT orders and game sales, probably a bit more prominent in the quarter, we should see a more normalized kind of mix. Grover gaming is not a detriment to our margins. In fact, it's a margin enhancer for us. It's a free cash flow driver for us at the end of the day. And so as our recurring revenue, and I think Matt mentioned this earlier, 69% in Q3 of mix of recurring revenue. As that continues to kind of scale over time, that's just going to drive even better margin and free cash flow outcomes for us. So yes, I would expect that to continue over the coming periods. And then it will just be kind of timing of game sales, international, et cetera, that will kind of fluctuate margins [indiscernible]. To your question regarding tariffs, yes, listen, I think Anthony Firmani and the team have just done an incredible job of mitigating our way through most of this year. The reality is we've kind of worked through the majority of the pre-tariff inventory at this point. And so we will now start to see impacts to kind of that mid- to low -- sorry, mid- to high single-digit millions as we go forward. That's something that we and the team are going to continue to look at through the margin enhancement initiatives to see what we can mitigate. But we wanted to just be open to forthright with you all about what we see at the moment. Operator: We have Ryan Sigdahl with Craig-Hallum. William Fafinski: This is Will on for Ryan. I wanted to ask about iGaming. You organized the business a little bit. I think you saw the best growth in nearly 2 years. What do you think is going to be the major driver for this going forward? And how do you feel about your positioning now versus where it might have been a few years ago? Matthew Wilson: Yes. Great question. A real bright spot for the quarter actually, they grew 18% revenue, 42% AEBITDA. So great translation of the operating momentum into the financial results. It's really about the simplification of the business. If we went back to basics, this business has really driven off great content, great 1PP content in particular. That's what drives the lion's share of margin in this business, and we've really focused on that. We saw the launch of Huff N' Puff the family into the channel in the U.S. It's got a 5% of the entire market in the U.S. is Huff N' Puff in the period, which just is a testament to how great high-quality land-based games can translate into great success in the digital iGaming market. So very encouraged by that. We've reorganized the business into one content team across all the channels, led by Nathan Drane. They're really [ ticking ] up all of those content teams across the globe to bring that content to bear on the iGaming market. So great performance from Huff N' Puff in the U.S. And then one of our digital native products called Pirots 4 had a record result in the period as well. That's kind of in the European market. So just a testament to the quality of games and what that can do for the portfolio. So simplification of the strategy, I think, is really kind of turbocharging iGaming, really pleased with that result and the team's delivery. Operator: We have Justin Barratt with CLSA on the line now. Justin Barratt: Just noting your comments, I guess, around that mid- to high single-digit millions of increase in terms of costs directly to tariffs. I want to understand what you think you can do to mitigate those costs? And particularly, I guess, from the pricing side of things, should we sort of see a subsequent or a partially offsetting increase in ASPs to help there? Oliver Chow: Yes. Thanks for the question. Yes, I think we're kind of evaluating as we kind of move into 2026. Part of that is our kind of pricing structure, but also our hardware strategy and content strategy. So putting out new content, new hardware that gives us the ability to price up as well as some of our existing kind of legacy cabinets. I think we'll work with our partners and our customers to make sure that we have an optimal outcome for the industry, first and foremost. This is not a Light & Wonder specific issue. This is going to be an issue that many industries and many companies within gaming as well will have to deal with. And we've got the best team kind of working through that led by Anthony Firmani, led by Michael Lorelli and the strategy team as we kind of navigate through other opportunities to drive margin enhancement. We've been doing this for now several years, right? And so I think we've proven that this is a strong skill set for us as an organization, and we'll continue to find ways to try and mitigate that. But again, as I said earlier, we just wanted to provide that visibility to you all. And yes, Matt and I are going to charge the team hard to figure out ways to compensate for these increases, whether that's through pricing or whether that's through cost opportunities. Operator: Your next question comes from Jeff Stantial with Stifel. Jeffrey Stantial: I wanted to double-click on David's question from earlier on SciPlay. Matt or Oliver, can you just maybe unpack for us or explain for us a little bit more some of the actual blocking and tackling that goes in, in terms of stabilizing Jackpot Party, the monetization gets disrupted, some players have that experience. Like how do you actually go back out and sort of bring them back in after reversing some of those changes? And as a corollary to this, are there sort of learnings going through this experience that you could take kind of moving forward? Matthew Wilson: Yes. So it's really a Jackpot Party specific issue. Like you can see Quick Hits, 88 Fortunes, MONOPOLY, all growing really well in the period. So it's not about the team's inability to drive games. It's specific about Jackpot Party, which is a very mature game with a pretty complicated economy that's been built over time with the kind of laddering up of live ops features. And so what this is really about is getting kind of our large players reengaging and spending at the levels they spent at previously. So Josh is driving changes to store logic, and some of the live ops to just get that reengagement back to levels that we've seen previously. Like I said, it's a pretty convoluted set of live ops that kind of entangled into the economy. So it's really about making sure as we change one thing, we're not breaking another. Josh is working on this specifically. And we're seeing stabilization of that game over time. So we're going to continue to work on optimizing the store logic to kind of reengage those players the way that I mentioned earlier. But again, also taking some of these learnings into our other games, Quick Hits, 88 Fortunes and MONOPOLY and just making sure that the simplicity of the way we design these things is the most important thing. So I guess to say all that game has stabilized. It's set to return to growth in 2026, but we've got a portfolio of games like everyone does in the space. Some are growing at faster levels than others. So this is really a kind of a Jackpot Party specific issue that we're facing. Operator: We have Adrian Lemme with City Group. Adrian Lemme: Matt and Oliver, very strong margin improvement across the businesses. I was interested in the R&D spending being down 6% to $62 million in the quarter. Can you talk to what drove this and where we should expect to see that in future quarters and whether you see any impact on the future pipeline, please? Oliver Chow: Yes. No. Like I said earlier, R&D, CapEx, that's the core of our business, the foundation of our business. If you actually look at and what we've constantly guided is that 17% of our revenues going to R&D and CapEx. Some of that will flow between the 2. So if you actually take the 2 pieces and add those together, pretty much right at 17% actually for Q3. So it's going to be an area that we continue to lean in on. Nathan continues to kind of reevaluate kind of his structure of what he needs to be able to sustain growth in all segments of the business. And I don't think Matt and I have said no to Nathan yet as he's brought really strong high ROI investment assets over the years, and we'll continue to kind of work through really just efficient capital allocation strategy, which hasn't really shifted. So CapEx, R&D, 17%. We're going to continue to kind of drive to that. And as our revenue grows every single year through this kind of 2028 period and beyond, that just gives the teams much more ammunition to be able to execute on our long-term strategy. Operator: We have Liam Robertson with Jarden on the line now. Liam Robertson: Just quickly on the quantum and velocity of bringing new games to market. It sounds like you've got plenty of confidence moving forward. From what I understand, your new carbon platform has been operational for about 3 months. Can you just talk to how that improves your ability to deliver new games across both land-based and iGaming? Matthew Wilson: Yes. Yes, Carbon is an initiative we've been working on for some time. Really kind of the catalyst for us to accelerate that was Grover being able to get our games onto the Grover platform very quickly. And so Victor Blanco, who I think is the best CTO in the industry, is driving that initiative. But it's more broadly just getting on to Grover. It's building it once and then being able to deploy it across all the channels that we operate in. I'd say we're still very early innings. There's been a bit of a rebuild of the Carbon platform to adopt some best-in-class AI tools. They're going to help us go faster and further with Carbon. So yes, that will manifest over time. I think the lineup of games is stronger than it's ever been. We launched more games this year than we have in our history. We also launched 4 new variants of hardware at the G2E show. So yes, the R&D teams are bringing a very great game content across all the channels, great hardware. You're seeing that show up in the Eilers charts. We had a record level of number of high-performing games on the premium charts as an example, which is the #1 spot in the core for sale, Eilers chart. So yes, really comfortable with the quality of the games coming out of the R&D organization. And then the efficiencies we'll get as Victor scales the Carbon platform over time will really play through nicely across all those channels. So thanks for the question. Operator: [Operator Instructions] And we now have Sriharsh Singh with Bank of America now. Sriharsh Singh: A couple of questions from my side. One, can you talk about the sustainable margin levels in iGaming? Do you think it should sustain above the 40% levels in future as well or close to that? And secondly, can we -- can you help us update on the international business outlook into Q4 and next year? And what's the pipeline looking for Australia? Oliver Chow: I'll take the iGaming margin question. So I think the iGaming margin that we referenced earlier was really a combination of kind of structural as well as operational levers. We did -- and I believe I called this out in the prepared remarks, but we did benefit from the live dealer business and exiting that live business dealer. So the comp kind of from a year-over-year perspective helped us. I think that was about a $3 million drag in the prior year. So if you kind of normalize that out, yes, the 1PP share aspirations that we have over the next several years will help us sustain those kind of normalized margins as we move forward. And that's obviously a focus of ours, as Matt mentioned, in terms of getting the right content in place and then proliferating those across the region. But Matt, I don't know if you want to touch on the other items that... Matthew Wilson: Yes. International sales, so, yes, this is a tough thing for analysts to unpack sometimes because you don't get the same visibility in the international markets as you do in the Eilers analysis in the U.S. So probably 3 parts to the international story. The first one being the EMEA region. And there's a little bit of noise in that result. So in the prior corresponding period, we had a large Entain order, which we've spoken about a number of times in that period in the prior year, which we didn't get in this period, although we do get this SSBT order in the fourth quarter in the EMEA region. So I think that's a little bit of the kind of the building blocks to how to think about the EMEA region. I think from an ANZ perspective, we're cycling over a very tough corresponding period last year. We were kind of at elevated share levels in the PCP. We -- our share level is a little depressed in Australia at the moment. It's really a function of getting kind of the content and hardware lineup dialed in. And we showed that at AGA. We've got a lot of strong feedback on the lineup for ANZ. So I think as we turn the quarter into '26, we're set up to kind of grow share in that market again over time. The team is excited to get their hands on those new games coming through. And then thirdly, probably the biggest impact is the cyclicality of the Asia region. As you know, over the years, it's been very kind of new openings and expansion driven. So there was a bit of noise in the '25 calendar year and some things pushed out into 2026. It's not a share issue, but we're holding share nicely in that market. It's just really a function of the cycle. So there are a few of the building blocks around international to help you kind of think about how to model that. Operator: I can confirm that does conclude the question-and-answer session. And now I would like to hand it back to Matt Wilson for some final closing comments. Matthew Wilson: I might actually just go back to Barry Jonas' question earlier. I know there was an audio issue that came through the line. So apologies for that. Let's readdress that one. So Barry asked the question about Q4 and the building blocks to get there. So I guess starting there, Q3 was a fantastic result by the team. We grew 18% AEBITDA for the quarter. We guided the market to low double digits. So clearly, the team outperformed our expectations in the period, which leaves kind of need a glide path into the fourth quarter. So we've reiterated guidance both at the AEBITDA and NPATA line. Like Oliver said earlier, 69% of our revenues in this period were recurring. So good predictability as we turn into the fourth quarter. We've got 2 months to go. So there are some big items we need to get over the finish line. The SSBT order is a good example of that. But Oliver, do you want to just give us some of the puts and takes and building blocks to think about that Q4 results? Oliver Chow: Yes. Yes. We'll try this again. Hopefully, You guys can hear me. But yes, I think to Matt's point, it is the recurring revenue scaling that's going to give us tailwinds as we head into the fourth quarter. I think RPDs grew 5% year-over-year. So again, we go to bed and wake up in the morning, and that's incremental revenues every single day. The North American outright sales, we continue to have great momentum in that space, over 6,000 units. I would expect that momentum to continue into the fourth quarter. We had talked about this Canada VLT order shifting from the first half now into the second half. So that will provide, again, some opportunities for us. And Matt kind of just talked about the international markets, the SSBT orders and then it's really DTC and then scaling 1PP share from an iGaming perspective. So I think those are the kind of the building blocks that we're working to get another double-digit growth performance for us and which will be outperforming the broader market. So we're really excited about what's to come. Matthew Wilson: Yes. Thanks, Oliver. And thanks for bearing with us for some of the audio issues. We're in Sydney doing this for the first time from down here. So we'll dial this in as we move forward. Once again, I'd like to express my sincere gratitude to all of our employees and stakeholders across the globe. We wouldn't be here without the collective efforts of all of you and the flawless execution and unwavering support from all of you. To our U.S. shareholders, this is not the end. We would love to have you continue on this journey with us on the ASX moving forward. And looking ahead, we're looking forward to speaking to all of you in the near future. So thank you again for tuning in, and have a great day. Operator: Thank you all for joining today's conference call with Light & Wonder. I can confirm today's call has now concluded. Thank you all for your participation. You may now disconnect, and please enjoy the rest of your day.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation Second Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Wushuang, Vice President and Treasurer. Please go ahead. Wushuang Ma: Good morning, and thank you for joining us. With me today is Preston Wigner, our Chairman, President and CEO; and Johan Kroner, our Chief Financial Officer. During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. They are representative as of today only. Actual results, performance or achievements could differ materially from anticipated results, prospects, performance or achievements expressed or implied by such forward-looking statements, and we assume no obligation to update any forward-looking statements, except as required by law. For information on some of the risks and uncertainties related to these forward-looking statements, please refer to the reports we file with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release. Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments today may also include certain non-GAAP financial measures. For details regarding these measures, including a reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through February 6, 2026, and by telephone through November 20, 2025. This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. I would like to now turn the call over to Preston. Preston Wigner: Thank you, Wush. Good morning, everyone. Thank you for joining us today. We're pleased with our performance in the first half and second quarter of fiscal year 2026. We saw strong operational execution for both segments of our company, and we are working diligently to continue that performance through the second half of our fiscal year. Let's begin with our Tobacco Operations segment, which continues to perform well. Tobacco buying is largely complete in most key growing regions, and crop sizes are significantly larger this year following several years of smaller crops due to weather. Green tobacco prices have softened in certain regions compared to the prior fiscal year. Shipments are progressing smoothly, and we are shipping tobacco earlier than we did last year. Customer demand has remained firm following several years of undersupply despite significantly larger crops this fiscal year. As expected, carryover crop sales were lower for the 6-month period, reflecting significant shipment volumes earlier in the prior fiscal year. Uncommitted inventory levels remain low and well within our target range. We believe that tobacco supply and demand are generally balanced at this point in the fiscal year, and we expect tobacco to move into an oversupply position by year-end. We have historically performed well in slight oversupply market conditions. It allows us to meet customer needs while also pursuing opportunity sales. Our team is experienced in managing oversupply markets, and we are confident in our ability to navigate the change in market dynamics. Now turning to our Ingredients Operations segment. We maintained positive momentum with higher sales and volume in both the quarter and the 6-month period ended September 30. Interest in our new value-added products continues to grow, and we are maintaining an active pipeline. Universal Ingredients' enhanced production and operational capabilities are supporting this growth. Demand for our new products remains solid, while fixed cost, product mix and external challenges, including weakness in the consumer packaged goods industry and tariff uncertainty, had a negative impact on earnings. We are taking a proactive approach to meeting our customers' strategic needs, focusing on organic growth and converting customer interest into product sales so we can continue to build scale and generate returns on our investments. We believe the Ingredients segment is well positioned to capitalize on those investments and drive future growth. I'll turn it over to Johan to walk through our financial and operational performance in more detail. After that, I'll offer some additional thoughts and open the call for questions. Johan Kroner: Thank you, Preston. Good morning, everyone. As Preston mentioned, we are pleased with our performance for the first half of fiscal year 2026 with improved results from our Tobacco Operations segment and higher sales volumes in our Ingredients Operations segment. For the first half of the fiscal year, consolidated revenue was up $40 million to $1.3 billion. This increase was driven by higher third-party tobacco processing volumes, accelerated current crop tobacco shipments and increased sales volumes in our Ingredients Operations segment. Operating income rose $16 million to $101 million, primarily due to a favorable product mix in the Tobacco Operations segment. Revenue increased $22 million, reflecting higher third-party processing volumes. Segment operating income was up $9 million due to a favorable product mix. While overall tobacco sales volumes were slightly down, about 1%, higher and early shipments of current crop tobacco largely offset lower shipments of carryover crop tobacco. Segment results reflected continued firm customer demand, a favorable product mix, larger current crop shipments, particularly from Brazil and African origins, and increased third-party processing volumes. These positives were partially offset by higher inventory write-downs. Turning to our Ingredients Operations segment. Revenue was up 11% on increased sales volumes. Operating income was lower, reflecting a less favorable product mix, higher fixed costs, including additional depreciation from our recently expanded production facility, and higher inventory write-downs. Finishing up, on the first half of fiscal year 2026, we are focused on managing our working capital. Additional purchases of tobacco due to larger crop size increased our inventory versus the same period last year. Despite that, net debt was down $52 million on September 30 compared to the same date last year. We had approximately $340 million available under our revolving credit facility as of September 30, and interest expense was down $4 million year-over-year. Now looking at our second quarter results. Consolidated revenue was up $43 million to $754 million, driven by higher tobacco ingredients sales volumes. Operating income decreased $1 million to $68 million, with higher sales volumes and lower restructuring and impairment costs slightly offset by unfavorable foreign currency comparisons, higher inventory write-downs and increased provisions for farmer advances. In the Tobacco Operations segment, revenue rose $29 million on a 3% increase in tobacco sales volumes. However, segment operating income declined by $12 million due to unfavorable foreign currency comparisons, higher inventory write-downs and a less favorable product mix. The Ingredients Operations segment delivered higher revenues on increased sales volumes. Operating income, however, was lower in the quarter despite those volumes, reflecting ongoing challenges in the consumer packaged goods industry, tariff uncertainty, higher fixed costs from our expanded facility and higher inventory write-downs. And finally, restructuring and impairment costs for the second quarter of fiscal year 2025 were $10.6 million. We did not have any restructuring and impairment costs in the second quarter of fiscal year 2026. I would like to now turn the conversation back to Preston. Preston Wigner: Thank you, Johan. We are pleased with the first half of our fiscal year. We are absolutely committed to continuing our strong operational performance through the second half. We will also continue to find opportunities and the challenges. Our diverse global footprint, long-standing customer relationships, deep local expertise and the unique value Universal offers our customers support our strategic commitment to growth. Our Tobacco Operations team remains focused on maximizing and optimizing our tobacco business. This includes offering additional services to our customers and leveraging our deep experience to navigate changing market conditions, including the expected shift to an oversupply environment later this fiscal year. At the same time, our Ingredients platform is continuing its momentum and is focused on growth. With our expanded facility, we will capitalize on our investments in extraction, blending, aseptic packaging and other capabilities. We're also focused on strengthening and expanding our customer engagement. Our sales, marketing and product development teams proactively showcase our abilities and help convert customer interest into product sales. We remain committed to driving organic growth, creating value across the platform and delivering customized, differentiated solutions to our customers. As we continue to focus on delivering long-term value, our commitment to sustainability strengthens our operations and manages risk across our company. We continue to make meaningful progress in our transition to renewable and lower emission energy sources. We have significantly expanded our use of clean electricity as an important element of our carbon transition plan. This continued progress demonstrates our strong commitment to operational efficiency and environmental stewardship. Investing in clean energy, such as on-site installations at our operations in Italy, the Dominican Republic and the Philippines, supports our sustainability goals, strengthens the resilience of our operations and creates long-term value for our stakeholders. To wrap up, Universal continues to execute with discipline across key areas of our business. The first half of our fiscal year saw solid performance, advanced operational execution and meaningful progress in our sustainability efforts. These results reflect our commitment to long-term value creation, resilience and responsible growth and position us well for the second half of fiscal year 2026. Thank you again for joining us today. We'll now open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Daniel Harriman of Sidoti. Daniel Harriman: Congrats on the quarter. I'll start off with two today, one for each segment, and I'll begin with Ingredients. Preston, you mentioned solid demand for your value-added products, but also obviously, mix, fixed costs and broader consumer weakness weighed on earnings. To the extent that you can, can you give us a sense of where utilization stands now at Lancaster and then how quickly you expect fixed cost absorption to improve as you continue to scale volume there? And then with tobacco, I was just hoping to kind of get your thoughts on -- with larger crops and softer green leaf pricing, as the new crop shipments continue to ramp, what are your thoughts and how confident are you on pricing discipline and margins through the back half of the year? Preston Wigner: Thanks, Daniel. I'll start with Ingredients. Yes, that's -- with that new facility that we've enhanced the capabilities and the investments for our campus for our extracts business. The goal is to fill that facility and to build scale, not just there, but across the platform. And we are off to a good start from where we were just a year ago, ribbon cutting. I'm very pleased with the progress we've made to grow revenues, to get volume through there and to maintain and increase an active pipeline. A lot of that pipeline conversion is a long process, and it's a slog that our team fights on a daily basis. First, proactively making sure we're reaching out to customers to understand what their needs are, to meet with those customers and offer them the products and solutions that they need, as well as understanding their evolving needs and future needs and what can we produce for them that they may not use today, but they'll use in products going forward. And all of those projects in the pipeline move at different speeds. And we're very pleased with how we're converting the pipeline, how we're growing our products and our sales. And we're building scale. And yes, we've got to cover those additional costs, and that will take time. But as those product interest and pipeline interest turn into volume, I'm confident that we will continue to increase our scale, increase our volumes and sales, and we'll be able to cover those costs going forward. On the tobacco side, I'm very comfortable with where we are in the year. I'm very comfortable with what I see for the second half of the year for this year, certainly because we don't buy on a speculative basis. Our uncommitted inventory is low at 13%. And we have lots of tobacco we need to ship for the second half of the year. But I'm confident in our ability to convert that. It's going to be subject to timing on shipments. And assuming there's no unforeseen market disruptions, we'll get those shipments out. And I'm comfortable with pricing. I talked about green pricing, really large crops this year. Green pricing, as I mentioned, has softened in certain markets, but it's been a little bit of a variety in the different markets. Some markets have softened a little bit, some are stable from where they were last year. Some might even be up. Some markets were down, and then at the tail end of the buying season, they went back up, which is really a reflection of that -- still that firm demand. And with that firm demand and still pretty stable pricing, I'm very comfortable with where we're going. We just have to see how shipments end up throughout the third and the fourth quarter. Operator: Your next question comes from the line of Ann Gurkin of Davenport. Ann Gurkin: So I wanted to start with the Ingredient segment. I'm surprised by the loss in the second quarter. I understand the reasons. So my first question is, you touched on a little bit about conversion and the pace of conversion from the customer interest versus your internal expectations. And is it a factor of end markets slower, customers are more challenged, maybe waiting to see how inventories are going to align or sales are going to align? Can you just talk about kind of the pace of conversion? Preston Wigner: Sure. Yes, it's -- I think all those factors you mentioned impact the platform. Across the board, not just one part of our platform. And I'm very pleased with how we've navigated that through the quarter, through the first half, where we've had top line growth in a market that's really been difficult for CPG companies and lots of people in the industry to achieve growth with the types of headwinds that are out there. And some headwinds might affect us directly, like tariff, for example, on raw materials that we might bring in. And some are impacting us indirectly. If they're impacting our customers, then they potentially impact us. And we've seen some of that in the quarter. Our teams on the ground are very experienced in managing procurement and particularly with our dry vegetable ingredient company, navigating tariffs, which they've done in the past, balancing their procurement strategies and their inventory strategies to try to service their customers while also trying to protect margins and returns. But overall, for the project pipeline, that's hard to predict because everything is moving in sort of different speeds. Some things -- because of our broad kind of product portfolio, some things a customer needs are core products that we've got. And it might be something like vanilla. And with vanilla, vanilla pricing is an all-time low for the raw product. And so we might have very good margins on vanilla. But on a dollar basis, those are down because the raw material is down. Other areas, there might be opportunities for us to sell a product to a customer that's core for an existing line of our business, but we can add sales of other core products from other existing lines of our business through our platform commercial sales and having some commercial synergies across the platform to grow sales that way. And then for value-added products, some are new products to customers, some are existing products that we are trying to transform with additional products in the portfolio to make a value-added blend for customers. And if it's switching out an existing product that they're getting from another vendor to us, that might work at a certain pace. If it's a new product that we've offered that they aren't getting from somebody else and it's a customized solution that we're providing, that might take longer to get through the pipeline. So it's hard to convert the pipeline into weeks and months and years of conversion. It's a real mix. And the current environment does factor into that for our customers. If it impacts our customers, it potentially impacts us. Ann Gurkin: Great. So for the year, for Ingredients, can you deliver profits in line with what you delivered last year? Preston Wigner: Yes. I think this year, I'm very happy with where we are for the first half. I'm very pleased with what I see moving forward and the work and the effort that's getting -- that's going into it. I'm very happy with what we've built and the resources that are helping us grow on the top line. We still have significant costs to cover. And as we've said, we're always focused on growing scale to cover those costs across the platform, not just for our Shank's expansion investment. So we're going to have to wait and see for the rest of the year how market conditions change, how the headwinds change, tariff variability. Are there going to be changes with the Supreme Court ruling and tariffs? What's that going to impact for our customers? How are they going to change their ordering and buying strategies? So it's still early in the year to figure out where we might be for Ingredients by the end of the year. Ann Gurkin: Great. Okay. Switching to Tobacco. Nice to see a stronger-than-expected quarter and margin than we were looking for on the Tobacco segment. And the end market demand or customer buying was stronger than we would have thought given the movement of the industry into balanced or slight oversupply situation. So I was wondering how much of the quarter upside in Tobacco was due to earlier shipments. Can you quantify that number? Preston Wigner: We don't quantify the number. We did have accelerated shipments, and we still -- with larger crops and still firm demand, we still have a lot of tobacco left to ship in the second half. So again, with -- as always, shipping can impact quarter-to-quarter and fourth quarter into the first quarter. But we're very pleased with where we are and really optimistic for the second half of the year. Ann Gurkin: So the decline in the uncommitted inventory from, I think it was 20% last quarter to 13% this quarter, was that accelerated shipment? Was that all pulled forward in this accelerated shipment number? Or is there some other factor in that decline in uncommitted tobacco leaf inventory number? Johan Kroner: And that's methodology, right? At the end of the day, depending on how you do it, but we want to be consistent. So year-over-year, that's the way we do it, quarter-by-quarter. So no, that's not really reflective of that. We're really happy with the 13%. And clearly, we're sitting on the slug of tobacco, inventory is still up. So we expect to ship a lot of that in the next 6 months. Ann Gurkin: Great. And for the full year, where do you anticipate that uncommitted inventory number being? Do you think you'll stay within your comfort range? Preston Wigner: I think -- well, I think we'll stay within the comfort range. We're in the comfort range right now. Yes, there's still a lot to go, depends on shipping timing, making sure we get customer shipping instructions early enough to get it out for the year. But because we don't buy on a speculative basis, we are very comfortable with current levels and where we're going. But we do communicate on almost a daily basis with our customers to make sure that the tobacco ships as we end the year going into another year of large crops. Ann Gurkin: Great. SG&A was lower than we were looking for. Should we use that number in the back half? Johan Kroner: You know well as anybody, Ann, that it all depends on a bunch of variables there. Even between the quarter and the 6 months, there were some things that were different. We had some favorable FX variances on one side, and then we had some other things going on. So it really depends on what the back end of the year brings, and we'll go from there. But there is just a lot of variables out there, exchange rates, what are they going to do going forward. We'll have to see. Ann Gurkin: And the same question for interest expense. Johan Kroner: Interest expense, we're really trying to bring down that leverage. I think we -- year-over-year, we have done a good job there. It all depends on how quickly can we ship this tobacco and bring down that leverage even further. Ann Gurkin: Great. And then do you have a worldwide uncommitted leaf inventory number? Preston Wigner: Yes. So the worldwide estimated unsold flue-cured and burley. Stocks were at 101 million kilos as of September 30, and that's up 76 million kilos from June 30 of this year. Ann Gurkin: Is that because of large oversupply? Johan Kroner: Because of the large crops, right? Preston Wigner: Yes, large crops. Ann Gurkin: Crop, sorry, large crops? Johan Kroner: Yes. Yes, ma'am. Operator: There are no further questions at this time. And with that, I will turn the call back over to Preston Wigner for final closing remarks. Please go ahead. Preston Wigner: Thank you all for taking the time to join us today. We look forward to connecting again for the third quarter fiscal year 2026 earnings call. Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen, and a warm welcome to the 9 Months 2025 Conference Call of the DEUTZ AG. Please note that this call is being recorded, and a replay will be available on deutz.com later today. Your participation in this call implies a consent to this. I'm pleased to welcome DEUTZ's CEO, Sebastian Schulte; and CFO, Oliver Neu. So Sebastian will begin the presentation with the key figures of the 9 months 2025 and then walk you through the progress made in the business units. Oliver then will provide you with the financial details of the 9 months financials 2025, and Sebastian again will conclude the presentation with a look on the guidance, after which we will move over to our Q&A session. And as always, please note the disclaimer, especially regarding forward-looking statements. And having said this, Sebastian, I hand over to you. Sebastian Schulte: Yes. Thank you very much, Zara, and also good morning, everyone, and thanks a lot for joining us for this 9 months earnings call here. So let me say -- let me start actually with a lot of confidence and optimism because our numbers show clearly that we, as DEUTZ continue to deliver. Double-digit growth in revenue and new orders, rising profitability, EBIT margin now year-to-date at 5%, and I will show later quarter-by-quarter improving. And most importantly, a business that's proving more resilient and dynamic again quarter-by-quarter. Our broader portfolio is paying off and the transformation towards really innovative and sustainable mobility and energy solutions is clearly gaining momentum. As I said right now, we went through this first 3 quarters of the year and quite actually following the second half of last year, every quarter, an improvement. Let's bear in mind, we came out of a very strong '23, driven at that point by the strong demand in our sort of heritage core markets, construction, agricultural equipment. But then there was the slowdown in demand, which helped -- which brought -- which made our numbers in the second half of '24, in particular, going down. But since then, we are on an upward trend. First quarter, 4.3% margin, second quarter, 5% margin and third quarter now 5.8% margin, which is actually even more impressive given the fact that typically the summer quarter, the Q3 is seasonally a little difficult because most of our customers have at least 2, 3, 4 weeks of vacation, and so do we in our engine factories in Cologne and Ulm. So clearly, year-on-year improvement and continuous momentum in margin uptake. If you look at the markets, and I mentioned earlier our sort of previous core markets now we've been broader, we're becoming broader. So we're talking about construction, agriculture, material handling, defense as the most recent addition, but also energy for our gensets. And what we see here is in construction equipment in Europe, well, the activity is still somehow muted. In the U.S., the infrastructure demand is stable. But overall, here the outlook, let me put it that way, is resilient. Agri, still in the short term, fairly weak outlook because inventories have been high. Financing costs have been slightly negative on the customer side, but structurally, it's very, very solid. Material handling, this megatrend is helping us. Commercial logistics, e-commerce that demands here quite stable activity in the material handling. Forklift CapEx remains robust. So that's why we see also on the left-hand side, a positive projection going forward. And defense, of course, very strong momentum in Europe, driven by the increasing budgets and also the NATO programs in the European Union. And energy, the gensets, I mean, this is another megatrend growth in data centers, backup power application, and we here see a supporting expansion in all regions, but particularly the regions which are relevant for us in this segment as of now, the United States with our Blue Star business and also going forward, Europe. So in total, we see that 9 months year-over-year, we've been growing at 15%. That's growing above all relevant markets here given that we are also entering into these new markets, defense and energy. If we look at -- let me start with defense. I mean, here, really the headline is that we have been strengthening our footprint in the defense tech ecosystem. When we talk about defense tech ecosystem, I mean, particular military drones. I mean, military autonomous land vehicles. You will all remember our most recent acquisition of SOBEK Group. SOBEK is a leading manufacturer of electric drives, very high-performance electric drives for not only military drones, but obviously, that is the -- that is the factor which is growing most significantly right now. We signed and closed that transaction at the beginning of September and the purchase price we financed by a capital increase using the 10% ABB procedure, which Oliver will elaborate on later. And the business has been developing pretty well since then. So all expectations that we placed into SOBEK so far have been fulfilled. The momentum continues to be strong. Then we entered into a strategic partnership with Arx Robotics. That's a Munich-based defense tech scale up. Here, we're not talking about drones, we're talking about vehicles, autonomous vehicles on the ground, as you see on the picture also on that page. And the idea of that partnership is that going forward, we will, on the one hand, supply drive systems for these vehicles and also made our mobile energy infrastructure products and of course, the global production network available because assembly of those products, I mean, that's something where we have with our facilities in this case, in Ulm, in Southern Germany, where we've got actually a competency, which help Arx Robotics in the scale-up of their production. And almost -- well, as a nice side effect, we're also intending to participate as one of the lead investors in the next Arx funding round that's going to happen over the next weeks. If you move on to engines, we are quite proud to be able to announce that we extended our product portfolio. We entered -- we brought a new product to the market. It's the DEUTZ TCD 24.0 V12 GDUL engine. That's a large engine. It's the largest engine we now have in our portfolio. It delivers some 780 kilowatts, so really on the upper end of the portfolio. It's optimized for use in gensets. That's why it's future-proof in a way that the power-gen market is expected to grow very, very strongly in the next years. And obviously, the diesel engine for backup power is a very crucial component in such gensets. And we were able to develop that product very, very quickly using our international partnerships, our international supply chains. And currently, this -- the first product is being tested in a pilot customer, by a pilot customer in Italy in a genset operation. And we also already received the first small series order very, very recently. We have planned a broader market launch of that 24-liter engine in the beginning of 2026. On top of that, partnerships becoming more important for us on a broader scale as well because we have, over the last years, engines -- industrial engines also developed together with joint venture partners in Asia, and we're currently undergoing or these engines currently undergoing the testing in our test benches, our test center in Cologne in order for us to allow these engines to be offered in the future on a global scale with a very strong focus on price and performance as well. And we want to develop or we will develop a new 6-liter engine, the DEUTZ TCD 6.0, and we will launch sort of the premier of this very, very powerful 6-cylinder engine in the Agritechnica. The leading trade fair for agricultural equipment, which is starting this Sunday in Hannover and then being there for the coming next week. So we're pretty excited about this expansion of our engine portfolio, where we are broadening the portfolio. We're bringing, particularly on the upper end, more powerful engines to the market. And of course, also sort of in the mid-end, we're utilizing our global footprint to become also more cost competitive on a global scale. If you look at service, a very important backbone for our growth, for our very profitable growth. And here, we can also proudly announce that we continue or we have continuously been growing our global service network over the last weeks and months as well. We concluded 3 acquisitions, our long-lasting Turkish service partner, Catalkaya Makina. We closed that acquisition beginning of October. And on top of that, we widened our service network and also the capabilities in the United States, most recently by achieving 2 mergers or 2 acquisitions. One is a company called OnSite Diesel and it's a Texas acquisition happened in October 2025. With OnSite Diesel, we are offering or we're broadening our offering to mobile and stationary full services, where the customer focus here is on waste management, construction and rail. So all segments where the combustion engine, the diesel engine in particular, will, particularly in the United States, be relevant for quite some time to come going forward. So that's why that was the rationale behind the acquisition of OnSite. More recently, just a couple of days ago, we acquired a company with a fantastic name of DoubleDown Heavy Repairs it's in Nevada, and it's a service company, which is extremely experienced and well positioned in the repair and maintenance of heavy equipment and engines in the mining, really gold mines and other mines in Nevada, also railway, construction and transport industries. And then on top of that, we complement these inorganic growth with also our strong organic United States growth path, where we opened 2 new DEUTZ power centers in 2025. And the plan, which is totally on track is to open another 4 new DPCs throughout 2026. On top of that, I mean, that's the footprint in the market. But on top of that, obviously, we need to really work on our backbone as well because all the parts that we deliver through our footprint to the customers, they have to come in time and in the right quantity and quality out of our very, very modern global logistics center in Cologne. We modernized that with an out-of-store system, AI-driven out-of-store system, which helped us really increasing the efficiency in the management of these parts. So we're talking about more than 25,000 parts and increasing the efficiency of up to 50%. So that means not only are we going to be faster, but we also have more space in order to grow and to really support our global footprint out of our global logistics center of Cologne. Let me continue then with our Solutions business, particular Energy continues with a very, very strong and solid performance. The business unit Energy, driven by Blue Star Power Systems in the North American market. Market is continuing to be extremely favorable and there are more and more growth opportunities. So order intake is strong, sales strong, bottom line, most importantly, with a very high cash conversion is strong that is continued to be strong at Blue Star. We also are beginning to realize more and more synergies with our U.S. business. So the service operations, that's what ties it into what I said just a couple of minutes ago on our DPC growth path in the United States. So obviously, with Blue Star, we're bringing products into the market with our service center throughout the nation, we are serving them when they are in operation. And on top of that, our North African business, which operates under the name of MagiDEUTZ, got a new Managing Director in play, a new team, and they're working quite successfully on really restructuring it and repositioning for MagiDEUTZ to be really one of the backbones for Europe. And on top of that, we're looking -- we're continuously looking here also at inorganic growth within energy. NewTech is increasing traction. UMS, a company we acquired earlier this year. The onboarding of the company is progressing pretty well. Last call, the former owner and one of the guys leading the business operationally. It's also been named as Head of Technology at NewTech. We merged now the existing sort of the formerly known as DEUTZ product portfolio with the product lines of UMS. So we've got a very, very clearly defined product portfolio now, and we're following literally dozens of promising leads with very, very relevant customers also throughout the world. So the momentum is increasing here is improving here. So there is more to come in terms of positive news throughout the remainder of the year and of course, particularly the next year as well. And with that highlights on our operational and strategic developments, I would hand over to Oliver before I come back later to give an outlook for the rest of the year. Oliver Neu: Good morning. Welcome also from my side to our investor call. And let me start with the capital increase we recently conducted. So as Sebastian said, we are in the execution phase on our strategy. We successfully conducted a capital increase to finance further growth. We have an exciting M&A pipeline. So we decided to do that capital increase even though additional debt level would have been possible as well. But considering the exciting M&A growth and keeping strategic flexibility, we conducted a capital increase. We saw strong demand, very strong demand, investors from Europe, but also from the U.S. that shows that the equity story is convincing and investors are trusting in DEUTZ, and our continuously improving performance. Books were filled after a few minutes. The take a capital increase was several times oversubscribed, and it really was a successful event that made a lot of fun from a CFO perspective as well. Talking about execution, our Future Fit program is absolutely well on track. Just to remind you, we are intending here to achieve at least EUR 50 million savings 2026 compared to 2024 based on structural cost reduction savings we are talking about. We are absolutely well on track with a good measure pipeline, more than EUR 50 million in terms of ideas. So we are expecting even an overachievement here of 10% or 20% in terms of savings, and that also applies to the current year 2025, where we will end up more than EUR 25 million rather towards EUR 30 million on the savings side. Measures are implemented, measures are on track. negotiations with the works council have been successfully conducted around 180 people already left the company. So that is a good sign and it was a good example of a positive execution. Going a bit more to the details of the figures, we see an increase in the order intake, 11.8% year-over-year. So that is basically driven due to the portfolio development. Book-to-bill ratio is around 1. Order backlog remains at EUR 470 million. On the revenue side, even EUR 15 million -- sorry, 15% increase there. So we see that application areas like construction and agriculture and a slight increase. That's, of course, also driven by the fact that we have the Daimler Truck engines, which we acquired last year, which are mainly in those areas. So the M&A activity is driving up revenue compared to the previous year. On the earnings side, cost savings are paying off. We are at EUR 75.5 million or 5.0% adjusted EBIT margin year-to-date. We see that the third quarter was the strongest of the quarters. And typically, third quarter is driven by cyclicity rather than weak quarter. So that was very good and shows and proves that our portfolio measures, but also our cost reduction measures are really paying off and that we see that continuously in our results. Talking about the different segments covering here, firstly, the segment Engines and Services. So we see here order intake increasing, revenue increasing and especially a good signaling that the margin is increasing from 6.1% last year to 6.6% this year. We need to keep in mind that last year, beginning of the year, we still were in a stronger market situation with the 3 shift operations. So overall, we see that volumes on the engine side, purely driven by market effects went down a bit, 8% compared to last year. Production almost 10%. But nevertheless, we managed to increase the margin, which is a very positive sign because it means that our measures, our strategic measures, our cost measures are overcompensating the negative economies of scale resulting from a weaker production due to weaker market conditions. Also HJS, the emission after treatment producer, which we acquired beginning of the year, successfully managed the turnaround, is profitable, is contributing positive EBIT as well. On the service side, revenue is year-to-date at EUR 406.6 million that is a 9.4% increase compared to last year. So even in the current market environment, we are continuously growing both organically, but especially, of course, also inorganically via the acquisitions we recently saw. Coming to the segment DEUTZ Solutions, we see overall an increase in the revenue. This is due to the fact that we acquired Blue Star Power Systems last year in August, but also the adjusted EBIT improved significantly. In order to understand the segment, the figures, we need to keep in mind that we combine 2 business units with a different financial profile. On the one hand, we have the business unit Energy. So especially Blue Star, MagiDEUTZ, our smaller entity in China as well. We see here the business is absolutely well on track. Order intake is on track. It's not totally like linear over the year, but it's absolutely on track. We just recently received another big order, which is not reflected in the figures here yet. Also, revenue is organically growing, a little bit offset by the U.S. dollar development compared to the former year, but organically with a strong growth rate and also the adjusted EBIT of the segment at EUR 11 million or almost 10%. With that, and you see that in a little bit hidden in the footnote, but there is purchase price allocation effect, if I take that out, right EBIT would even be at 18.8% at a margin level of 15%. So operationally, the margin is even better than what we show you on the figures driven by the technical accounting purchase price allocation effect. On the business unit, new technology, we are making progress as well. So new orders at EUR 15 million, first time consolidating the subsidiary UMS in the Netherlands. In June 2025, revenue is at EUR 9 million, so still on a low level, but we are about to start and consolidating the product portfolio and good talks with customers. So we are expecting some increase going forward there, of course. And the EBIT improved. It's still negative, mainly driven by R&D expenses, but the run rate is getting better here as well. Coming to a few more KPIs. R&D spending, we are at 4.3% of revenue. So that's a direct consequence, improvement as a direct consequence of the Future Fit measures, where R&D people are continuously getting out as part of the agreements we conducted with the works council. So that is showing a very positive trend here. Same for CapEx, we remain on a low CapEx level of 3.3%, more or less as in the year before. That is showing that we are investing where necessary. But of course, we're also structurally targeting for continuously improved CapEx ratios, considering that the business profile of our group is changing towards less CapEx-intensive businesses. Working capital, we see a slight improvement there. We are at 19.9%, so 1.2 percentage points better than in the year before. We are not overdoing it on the inventory side here. We are pushing, but we are not overly pushing inventories down just to be prepared because we are convinced that the market in this engines part of our business is picking up at one point in time, and then we want to be prepared without restrictions on the supply chain. So that is why we are still on a 20% inventory or working capital level. Talking about cash flow. Operating cash flow improved as well. So also here, good signals, direct development of a better cash generation capability, better operational performance, also a lower increase in working capital compared to the increase we saw in the year before. That is positive on the free cash flow before M&A, we guide a mid-double-digit million euro amount. That's absolutely on track here. We are -- even though the Q4 -- Q3 is typically the weakest quarter in terms of cash flow due to summer breaks and so on, we are here at EUR 2.4 million year-to-date. So that's a EUR 31 million better development than the year before, also showing the positive impacts of our transformation. And net debt slightly increased, among others, due to the M&A financing. Last but not least, balance sheet that remains strong, 49% equity ratio and also solidly financed. Our leverage is at 1.4x. That gives us sufficient headroom for the further M&A transactions we are working on. So only positive signals from this end of balancing balance sheet and financing figures. With that, I hand over to Sebastian. Sebastian Schulte: Yes. Thanks, Oliver, for the update on the financial part. Let me give you an update on the outlook of the rest of the year. So first of all, we confirm with a small specification, we confirm our guidance for 2025. So just to bear in mind what we -- what was our guidance or what has our guidance been so far. We provided so far a range between EUR 2.1 billion and EUR 2.3 billion revenue. We were always assuming a bit of an earlier recovery of the market in the fourth quarter. So that's not yet kicking in. So that's why we are specifying to arrive at roughly EUR 2.1 million or at EUR 2.1 million at the lower end of that guidance. Good thing is we confirmed the adjusted EBIT margin range as well. We confirm here to arrive in the middle of that guidance range. And I think we've been showing clearly earlier that the path on profitability increase is well on way quarter-by-quarter. And we also confirm the free cash flow prognosis mid-double-digit million euro amount. As Oliver said, particularly, the margin is supported strongly by our cost savings for Future Fit by the Service business and of course, by this ever strong Energy business as well as the portfolio measures. So we're showing that we're actually very well on track and quite happy with the progress here. We also currently do not foresee any sort of significant impact from the semiconductor crisis because that's one of the things we're pretty good at. Bottleneck management when there are issues with supply chain, I mean, '22, '21, '22, we've been training quite hard on that, how to deal with difficulties in supply chain, particularly when it comes to semiconductors. So all these activities, which guided us back in days well through these -- the problems is also helping us a lot so that we can actually say that there's no issue to be foreseen at this point in time. All right. With that, yes, this is a confident outlook for the fourth quarter and of course, also for beyond because I said it earlier, when I talked about the outlook on revenue, it's true. There is no tangible recovery in the engine demand in construction and the material handling. However, we are able to -- or we have been able and will continuously to be able to steadily increase our profitability from quarter-to-quarter. Now the 5.8% in the third quarter is a preliminary high point, but we expect to arrive at a higher level in the fourth quarter as well. And that's, of course, due to the Future Fit program, as we just heard from Oliver, the savings -- further savings to materialize in the coming quarters, EUR 50 million. We announced this EUR 50 million a bit more than a year ago. And we just heard it from Oliver, we're very well on track, and that's an important thing. We promised and we deliver the promises. And of course, DEUTZ is now more than just an engine company. The engine remains to be important, but we manage, we guide this transformation towards a much, much broader business model quite successfully. And that's why we are now in a position that despite still struggles in the former core markets, construction, agri and material handling were actually developing so well, particularly, of course, due to the business unit service and energy in particular, demand for gensets is extremely high and strong. So a good start into Q4 that we can already say. I mean we are at 6th of November. So we know already what's happening in the first month. So that's been very good and continues to support our expectation for a very strong last quarter of the year. Revenue growth, which we expect to happen in the fourth quarter compared to the third quarter, supported by the latest portfolio additions in defense and services as well. Margin increase I mentioned already, and our strategic transformation, we continue to implement going forward. With that in mind, 9 months in the books, 3 months to go. And thanks for your attention. And obviously, now, as usual, we are open for questions. Operator: Thank you so much for your presentation, Sebastian and Oliver. So we will now move over to the Q&A session. [Operator Instructions] We move on with the virtual hand we received from Stefan Augustin. Stefan Augustin: Can you hear me? Operator: Yes. Stefan Augustin: Great. Okay. That was a couple of buttons to press. So I would like to then dive already quickly into the Q4 projections. So I don't want to be really nitty-gritty, but we're looking for around EUR 100 million in higher sales versus Q3. And could you help us a little bit of how much of these EUR 100 million we roughly look for would be the additions from SOBEK and the purchased service businesses> And where does in the fourth quarter then otherwise come the demand in the verticals from? So where -- into what vertical do you sell some more engines? Who gets more interesting? And from that would be then the conclusion, can we keep this level going into 2026 roughly on the same level? So let's say, having -- or is there a onetime effect in sales in Q4? Sebastian Schulte: Stefan, thanks for the question. So first of all, when I go through, let's say, the verticals when I talk about verticals, I mean, that's sort of our business units. So obviously, the business unit engines, that will make quite a significant contribution in that fourth quarter. Typically, the fourth quarter is always a little stronger than the third quarter for 2 reasons. First of all, in the third quarter, we have that summer break mainly in August, end of July, beginning of August. So that's why we're always lagging behind a little bit. And when it comes to the verticals within engines, it's pretty much across the 3 verticals, construction, agri and material handling. So there's nothing -- there's no vertical, which particularly stands out. Then as you rightfully said, I mean, the service -- the service is developing quite nicely. We obviously track that on a monthly basis. So the last month is indicated that we're going -- we're getting better month by month as well and then the 2 acquisitions support as well. We don't disclose like the very details of the acquisitions. They're sort of too small to provide like exact million euro numbers for that, but obviously, they add up as well. Energy business, Blue Star is expected to be a bit stronger in the fourth quarter than in the third quarter as well. And then, of course, the most recent acquisition, SOBEK as well, but that's not like we -- we don't talk about like tens of millions. In short, it all adds up together, and that's how we arrived at that outlook for the fourth quarter. Sorry, I forgot to answer. And then, of course, you asked, which is sort of the million-dollar question for 2026. We are currently putting the plans together for 2026. And the fourth quarter right now, I don't expect to be a one-off to make that clear. However, to be able to arrive at a guidance for 2026, that's too early. Stefan Augustin: So sure. I understand that one, but that was already giving me an idea. Second is then this larger order at Energy that has been hinted. Is that something we should look for in the scope of something like between EUR 5 million to EUR 10 million? Or is that rather an annual big order of EUR 20 million, EUR 30 million, EUR 40 million or something like that? That would be the second question. Sebastian Schulte: This order, which Oliver hinted to is the first, sort of, let's say, the first third of the year order from our major customer in the United States. So it came expected because they don't order on a weekly or monthly basis. They order, let's say, 3 times per year, 2 times per year. And I believe Oliver will talk about something -- EUR 20 million to EUR 30 million, yes. Stefan Augustin: All right. That's quite some scope here then. All right. And lastly, maybe on the tax rate in the third quarter. This has been a bit unusually high, but is there -- is this something that has to do with the structural changes from where we generate the profits? Or is it rather a onetime effect? Oliver Neu: No, that are typical onetime effects. I mean, overall, the tax rate on a group level is at around 17%. That is mainly -- in general, that's mainly driven because we have a significant amount of tax loss carryforward from the past from the 1990s basically, but we are benefiting from that still. And so that in Germany itself, we are rather on 11% minimum taxation. So there are no structural changes to that and the tax loss carryforward is going to last some years in the future. Operator: So Mr. Ringel was a bit surprised that I muted him, but he sent me his questions. So I'm happy to ask the questions for him. So his first question is, is the adjusted EBIT margin level now achieved a sustainable cruise level that can be assumed going forward? Sebastian Schulte: Well, we want to improve it further. So I mean, very clearly, we want to get better. And obviously, with the current structure of the company, with the current demand in engines, you may consider that as a cruise level, but we are not up for cruising, we're up for speed. So that's why, obviously, with further expectation in market recovery in the next year in the engines business and further growth in the verticals, which we entered into. Yes, we want to clearly depart from that cruise level towards a bit of more of a full throttle way of traveling. Operator: All right. So has [indiscernible] 2 further questions. [Operator Instructions] And his second question is, what is your view on the expected recovery of the markets in the coming months also with regards to the German infrastructure package? Sebastian Schulte: Yes. I mean that's what I tried to say earlier when Stefan asked a similar question. We don't see it -- still, we don't see it in the incoming orders as you saw it here in our numbers yet. We're still like book-to-bill around or slightly above 1. But yes, we will see. We cannot say yet. That brings me back to what you just said before. It's good to have such a high cruise level now on this low occupation in the engine business. But the good news is, obviously, we're bringing also some new products into the market. We're bringing this 3.9 liter engines into the market. The demand from our customers is quite strong. So one thing is how is the general market developing in the engine business. And that's again the million-dollar question for next year. We do expect a recovery, but everyone expects a recovery, but it's just not materializing. However, we're working also quite strongly on winning market share with the new products that we bring into the market, 3.9, as I just mentioned, but also the 24-liter engine in energy and utilizing also our JV partner engines from Asia in particular. So we're actually quite positive looking forward. Operator: All right. And his last question is, when will you be in a position to carry out larger M&A transactions again? Will the focus remain on the energy sector? Or are they currently concentrating in particular, on the defense tech sector? Sebastian Schulte: Both verticals are extremely interesting for us. And you will understand that there's not much more to say in a public earnings call on M&A strategy, but both energy and defense are very interesting verticals. And we are observing and pursuing a lot of different avenues. But as we have shown very clearly in the last 2.5, 3 years, if we do M&A, we want to do it very successfully. And I think the acquisition of Blue Star and the Daimler Truck Engine business and all the others have shown that we're actually pretty good at it now. So that's why we are very picky, and we will only do the things which make a lot of sense. But in order to arrive there, you need to follow lots of opportunities, but we're pretty confident that we continue to work on that track. Operator: All right. And then we have next question or raised virtual hand from Klaus Soer. [Operator Instructions] Then in the meantime, we will move on with Mr. Jansen. So same for you, Mr. Jansen. [Operator Instructions] Unknown Analyst: Okay. Just one question regarding Arx Robotics. You spoke about the investment round. And just for clarification, you don't plan to have a major stake afterwards, right, because there are so many other investors. And with SOBEK, you already had a big investment in the defense market, right? Sebastian Schulte: Yes, that's correct. I mean we plan to participate in an investment round, but that does not -- that would not turn us into a major investor. That's absolutely correct, yes. This is an investment which is rather underlining our ambition or our strategic partnership, but we do not plan to takeover or anything like that. Unknown Analyst: And is there an indication on how big the round overall could be? Sebastian Schulte: Of course, there is an indication, but that's in the court of Arx Robotics. So you will understand that I can and do not want to comment on an investment round of another company, right? Operator: And now Mr. Soer, I'm not sure if you're able to speak. Klaus Soer: I hope so. Operator: Great. Then we're happy to take your questions. Klaus Soer: Just coming back to the announcement that you are introducing the large 24-liter engine into the market. Could you be a bit more specific what your expectation is in terms of sales or market entry in '26? Is this material or small size, big-size units? Any indication what type of impact this might have? Sebastian Schulte: Yes. First of all, we don't talk about huge unit sizes here because it doesn't go into sort of serial mobile equipment such as, let's say, material handling, where sometimes we sell 5,000, 6,000, 7,000 engines to one customer a year. But we also talk about a significantly larger engine. So the unit price is a multiple of the unit -- of the average unit price of what we typically bring into the market. So we do not talk about thousands per year. We talk about after the ramp-up, probably hundreds per year -- per year at least in the next year. But from a revenue and especially also from a profitability point of view, there is sort of a rule of thumb in the engine business, the larger the engine, the more the financial attractiveness as well. Klaus Soer: Okay. And if I may add one question on Arx. In your statements and in the presentation, it always says you intend to participate. Is there still an open question, if you participate in the financing round? Sebastian Schulte: No, we have decided to participate, but this is a cautiously legally checked wording because we are one party to participate. And as in the financing rounds, there are also other parties to participate. And typically, in these sort of investment rounds, the financing round is concluded when every investor who wants to participate signed sort of the legal agreements. And that's currently, as far as I understand, being negotiated with many investors. So it's more like a process point of view. So that's why we have this very cautious statement, but we are very clearly committed to do so because we are very convinced of the outlook of the company and also of the areas of cooperation between Arx and DEUTZ. It's an amazing opportunity, where DEUTZ can bring the industrialization expertise, scaling expertise, management of supply chain expertise to the fantastic technology expertise coming from dev tech company. Operator: And then we have a follow-up question from Mr. Augustin. So please ask your question. Stefan Augustin: Yes. Just 2 smaller ones. I recall that you mentioned you had a new customer with comparatively higher amounts of unit volumes. Can you just remind me, if there is the expectation that this customer should ramp-up the business in '26? Or will that be a bit later? And the other one would be, when do you expect the LOIs of UMS to materialize into orders? Is that also expected maybe for the year-end already or rather going into '26? Sebastian Schulte: Yes. For the first question, that larger, I believe you referred to the larger order for our 3.9 engine in construction. And yes, for confidentiality reasons, we were -- we're still not allowed by the customer to announce who it is, but it's a very relevant construction equipment company. The ramp-up is expected to kick in at '27, not in '26. So that's the following the ramp-up of their respective products. With UMS, we expect first orders or we are already gaining orders yes, but first larger orders potentially to be -- to kick in, in '26 already. We're still at the sort of smaller pre-series orders right now, but we're having very promising conversations also, particularly in the field of multinational construction equipment companies. And I'm pretty hopeful or pretty positive on good developments and news already early '26. Operator: And in the meantime, we did not receive any further questions. So I see no further virtual hands. And that means we will come to the end of today's earnings call. And thank you very much for attending and to shown interest in the DEUTZ AG. And also a big thank you to you. Sebastian and Oliver, we appreciate the time you took and for guiding us through your presentation and for answering all the questions. So yes, from my side, I wish you all a lovely remaining week. All the best for you for the remaining quarter. And Sebastian, as always, some final remarks from your side. Sebastian Schulte: Yes. Thank you very much also from my side. Again, still in some areas difficult market environment, but we're doing well. Transformation is on track and the results clearly show that this is the case. We're looking forward to be in touch with all of you in the next touch points, financial calendar here is very clear, 2025 annual results end of March, Q1, May 7 and so on and so forth. But on the road to there, we'll be around at many investors conference and hosting a couple of roadshows. So looking forward to be in touch with all of you, and thanks for your interest, for your confidence in DEUTZ. And yes, it's happy -- we're happy to continue rocking this thing here. Thank you.