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Operator: Good day, and welcome to the Prospect Capital First Fiscal Quarter 2026 Earnings Release and Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and CEO. Please go ahead. John Barry: Thank you, Danielle. Joining me on the call this morning are Grier Eliasek, our President and Chief Operating Officer; and Kristin Van Dask, our Chief Financial Officer. Kristin? Kristin Van Dask: Thanks, John. This call contains forward-looking statements that are intended to be subject to safe harbor protection. Future results are highly likely to vary materially. We do not undertake to update our forward-looking statements. For additional disclosure, see our earnings press release and 10-Q filed previously and available on our website, prospectstreet.com. Now I'll turn the call back over to John. John Barry: Thank you, Kristin. In the September quarter, our net investment income or NII, was $79.4 million or $0.17 per common share. Our net asset value was $3 billion or $6.45 per common share. At September 30, our net debt to total assets ratio was 28.2%. Unsecured debt plus unsecured perpetual preferred was 80.8% of total debt plus preferred. We are announcing monthly common shareholder distributions of $0.045 per share for each of November, December and January. Since our IPO 20 years ago through our January 2026 declared distribution, we will have distributed over $4.6 billion or $21.79 per share. Our preferred shareholder cash distributions continue at their contracted rates. We continue to make progress repositioning our business, including rotation of assets into an increased focus on our core business of first-lien senior secured middle market loans with our first lien mix increasing 701 basis points to 71.1% from June 2024. We are focusing on new investments in companies with less than $50 million of EBITDA, including companies with smaller funded private equity sponsors, independent sponsors and no third-party financial sponsors where we see less competition, better returns and more protection. Reduction in our second lien senior secured middle market loans with our second lien mix decreasing 292 basis points to 13.5% from June 2024. Exit of our subordinated structured notes with our subordinated structured notes mix decreasing 808 basis points to 0.3% from June 2024. Exit of targeted equity-linked securities, including real estate with 3 additional properties sold since July 1, 2025, and certain corporate investments, including the sale of significant assets within Echelon Transportation in July 2025. And with remaining assets expected to be sold in the December 2025 quarter with other exits targeted. Enhancement of portfolio company operations and greater utilization of our cost-efficient floating rate revolver, which largely matches our floating rate assets. Thank you. I will now turn the call over to Grier. Michael Eliasek: Thank you, John. Over the past 2 decades, Prospect Capital Corporation has invested approximately $13 billion in nearly 400 exited investments out of over $22 billion in nearly 500 total investments that have earned a 12% unlevered investment level gross cash internal rate of return or IRR to Prospect Capital Corporation. This multi-decade time period includes the GFC and has been dominated in general by low prevailing market interest rates. As of September 2025, we held 92 portfolio companies across 32 different industries with an aggregate fair value of $6.5 billion. We primarily focus on senior and secured debt which was 85% of our portfolio at cost as of September. Our middle market lending strategy is the primary focus of our company. With such strategy as of September 2025, representing 85% of our investments at cost, an increase of 864 basis points from June of 2024. In our middle market lending strategy, we've continued our focus on first lien senior secured loans during the quarter, with such investments totaling 81% of originations during the quarter. Investments during the quarter included a new investments in the Ridge, also known as Healthcare Venture Partners, a provider of health care services and other follow-on investments in existing portfolio companies to support acquisitions, working capital needs, organic growth initiatives and other objectives. We've substantially completed the exit of our subordinated structured notes portfolio as of September 2025. With such portfolio representing only 0.3% of our investment portfolio at cost, which represents a reduction of 808 basis points from 8.4% as of June 2024. In our real estate property portfolio at National Property REIT Corp, or NPRC, which represented 14% of our investments at cost as of September 2025 and which is focused on developed and occupied cash-flowing multifamily investments. Since the inception of this strategy in 2012 and through October 31, 2025. We have now exited 55 property investments that have earned an unlevered investment level, gross cash IRR of 24% and cash-on-cash multiple of 2.4x. We exited three property investments since June 2025, for approximately $59 million of net proceeds to Prospect Capital Corp. and then earned an unlevered investment level gross cash IRR of 23% and cash-on-cash multiple of 2.3x. The remaining real estate property portfolio includes 55 properties, and paid us an income yield of 5.1% for the September quarter. Prospect's aggregate investments in NPRC included a $320 million unrealized gain as of September. We expect to continue to redeploy future asset sale proceeds primarily into more first lien senior secured loans with selected equity-linked investments. Prospect's approach is one that generates attractive risk-adjusted yields and our performing interest-bearing investments, we're generating an annualized yield of 11.8% for the quarter ended September. Our interest income in the September quarter was 97% of total investment income, reflecting a strong and high-quality recurring revenue profile for our business. Payment in kind income for the quarter ended September 2025 was reduced by over 50% from the quarter ended September 2024. Non-accruals as a percentage of total assets as of September stood at approximately 0.7% based on fair market value. Investment originations in the September quarter aggregated $92 million and were comprised of 72% middle market investments with a significant majority of first lien senior secured loans. We also experienced $235 million of repayments and exits as a validation of our capital preservation objective, resulting in net repayments of $143 million. Thank you. And I'll now turn the call over to Kristin. Kristin? Kristin Van Dask: Thanks, Grier. We believe our prudent leverage, diversified access to matched book funding, substantial majority of unencumbered assets, weighting toward unsecured fixed rate debt and avoidance of unfunded asset commitments all demonstrate balance sheet strength as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 26 years into future. On October 30, 2025, we successfully completed the institutional issuance of approximately $168 million in aggregate principal amount of senior unsecured 5.5% Notes due 2030, which mature on December 31, 2030. We expect to use the net proceeds of the offering, primarily for the refinancing of existing indebtedness. Our unfunded eligible commitments to portfolio companies totaled approximately $36 million, of which $15 million are considered at our sole discretion, representing approximately 0.5% and 0.2% of our total assets as of September, respectively. Our combined balance sheet cash and undrawn revolving credit facility commitments stood at $1.5 billion as of September, and we held $4.2 billion of our assets as unencumbered assets, representing approximately 63% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, a nonrecourse SPV. We currently have $2.12 billion of commitments from 48 banks, demonstrating strong support of our company from the lender community with the diversity unmatched by any other company in our industry. The facility does not mature until June 2029. And and revolves until June 2028. Our drawn pricing continues to be SOFR plus 2.05%. Outside of our revolver, we have access to diversified funding sources across multiple investor types and have successfully issued securities in an array of markets. Prospect has issued multiple types of unsecured debt institutional nonconvertible bonds, institutional convertible bonds, retail baby bonds and retail program notes. All of these types of unsecured debt have no financial covenants, no asset restrictions and no cross-defaults with our revolver. We have tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 26 years with our debt maturities extending through 2052. With so many banks and debt investors across so many unsecured and nonrecourse debt tranches, we have substantially reduced our counterparty risk. At September 30, 2025, our weighted average cost of unsecured debt financing was 4.54%. Now I'll turn the call back over to John. John Barry: Thank you, Kristin. We can take calls now, questions now. Operator: [Operator Instructions] The first question comes from Finian O'Shea from Wells Fargo. Finian O'Shea: I want to ask about the equity linked rotation. You've made some good progress there as you sort of embark on that. But seeing if you can give us color on how far it goes and what are maybe the sacred cows within a lot of that's in the control book, particularly one area, consumer finance, you're still putting money in. Those companies are doing well. But are there -- is that sort of what's supposed to remain? And/or how much or how much of the rest is sort of a candidate to move versus what you view as a strategic holding? Michael Eliasek: Sure. I'll take that. Go ahead, John. John Barry: No, no, please take it Grier. Michael Eliasek: Okay. So Finian, yes, we do like to make first lien and senior and secured loans to companies. And we do really increasing percentage of time like to have some portion of our paper as equity linked. Ideally without a trade-off involved, the best type, of course, is penny warrants, the free type. And then the next best is convertible debt that is still senior and secured, has the cash pay coupon pledgeable to our facility, but then has ups as well and then various types of convertible preferred that have coupons and liquidation preferences on top of third-party capital all the way to a some heads up capital. So our strategy is one of evaluating each investment in the book and looking at it on a foregone yield and foregone IRR. Including giving effect to accretion through our roughly S200 secured credit facility for those foregone returns at a price that we think is actionable with a third-party purchaser in the market that's the guidepost we use to make decisions to optimize the portfolio. And what that leads us to is to look to divest over time generally when you've had appreciated equity-linked assets and we're looking forward and maybe there's upside in the future, but not quite as much as we're not foregoing as much. And we're also paying careful attention to foregone yield as well, wanting to rotate and drive and optimize increase revenue, increase income for our business. The best candidate for that in our portfolio is real estate. I mentioned we've sold 55 properties. We have another 50 or so to go. Returns on recent exits sort of backward looking are fairly similar to the overall returns we've generated on the other 50 or so exits with IRRs in the low 20s and a multiple of invested capital generally above 2x cash on cash. But the extant book after giving effect within real estate to appreciation of value is generating about a 5% income yield. That, of course, is much lower than what we can achieve in the market for new originations. We are focused on smaller companies increasingly sub-$50 million EBITDA and really sub-$25 million to $35 million because there's so much competition in the upper middle market that is bid away spreads, that is bid away floors, that is bid away covenants, that is bid away earnings quality, that is bid away on strong documents, so many problems there that we intensely dislike. And so we're focused on the harder to originate but well worth it when you do smaller end. Our last dozen or so deals closed have had an average spread in the 700s compared to the upper middle market, which is decided with a 4 handle by comparison. We're getting much higher floors, generally above 300 basis points on those deals and look at what's happening with short-term rates were down to about 375 and folks are cutting distributions out there experiencing lower yields. What went up can and almost certainly will go down again from a floating rate perspective. So we can put money out at, call it, 10% to 12% unlevered in the lower middle market then we lever that in our S200 facility at a 50%, 60% advance rate. And we're talking about a 15% plus income yield return before giving effect to any equity-linked benefit. That 15% of course, is vastly superior on an income yield perspective, to the 5% I was quoting on real estate. So we view that as an earnings powerhouse that we're unleashing through that rotation that we're pursuing that doesn't mean we're going to dispose of the real estate portfolio liquidity split. We're doing so on a thoughtful, value maximizing basis on a bottoms-up look at different geographies, different properties, we concluded you maximize value by selling individual assets or smaller groups of assets as opposed to the whole. There's just a lot more buyers who can transact with individual assets as opposed to cut a multibillion dollar check. Usually, those guys look for significant bargains that were not too interested in parting with. So that's what's going on with real estate. We're seeing solid NOI growth. We've had about 7% NOI growth. And we're seeing tailwinds there as supply has diminished and look for us to continue to monetize assets in coming quarters. Then you have other assets on the corporate side, I'll divide that into non-financials and financials that you mentioned. We have a number of very successful nonfinancial deals where you have some equity-linked positions that have appreciated significantly. And again, when you look at on a foregone yield and IRR basis, we say, okay, we think it could make sense at the right price, the deal business is dynamic, and you never know exactly what the outcome will be. But at the right price, there's a potential transaction there. So we've got various processes that are ongoing there and we'll disclose that at the appropriate point should we find interesting exit points. And again, an unleashing of earnings power by rotating those appreciated assets into more in a diversified way of income-producing properties. In the financial book that you talked about, those are really, for the most part, long-term holds for multiple reasons. I mean, that doesn't mean we would say no. if some huge outlier bid came along. But we have substantial tax advantages that aren't enjoyed by other public companies because we're a BDC, we're a RIC, we pay no corporate taxes as long as, of course, we meet the regulatory requirements, which we have for our 20-plus year history and intend on continuing to do and we hold these financials as tax partnerships. So there's no taxes at the underlying portfolio company level. If these companies say, First Tower, for example, were to become its own public company, and it's large enough business that perhaps it could or could some day, it would need to be a corporate taxpayer under the regs, and that would be an erosion of value in any potential buyer would keep that in mind for their eventual exit. So we enjoy a very low cost of capital as the natural resting ground for financials. And just more important than that, we've had terrific success focusing on areas that are highly recurring and recession resilience. And I'm talking about installment lending, which is what First Tower and Credit Central and our latest deal, which is QCHI, all transacting. We do have a small auto book very small. That's been a tougher business. That's a scale business. It's less of a customer loyalty recurring cash flow business because in automobile purchase is episodic. But for these installment lenders, they're doing 50% to 75% plus of their business with current customers, and there's a substantial loyalty element that grounds the business and really creates low volatility. And as short-term rates are starting now to subside, that's a further tailwind for those businesses that utilize third-party ABL that's floating rate in nature. I think with Tower something like every 100 basis point reduction in SOFR increases pretax net income by somewhere in the range of $5 million to $10 million. And then, of course, there's a valuation benefit from that as well. So that's what we're after. We've made a lot of progress in the last year, Finian, exiting our structured credit book was a big part of that process. That book could become low yielding on a GAAP basis as well. And we're rotating and having great success with deals like the Ridge, deals like Verify Diagnostics, deals like Druid City, a Discovery Point, Taos and QC as equity link deals have had substantial write-ups year-to-date since we closed each of them. So the strategy is working well, and we're going to continue to execute on that game plan. Finian O'Shea: No, I appreciate that. A lot of color there. And just as a follow-up, progress as well on the liability front, can you talk about the Israeli bond, if that is that sort of a one-off or a new channel? And if you anticipate or are planning more meaningful movement on the unsecured front? Michael Eliasek: Sure. It's a new channel. It's not a one-off. It's something we've evaluated for a very long time. And we thought the timing made sense for us. We've been utilizing our revolver to retire liabilities. We utilized our 48 bank strong $2.1 billion revolver a few months ago to take out our first half of 2026, original issue $400 million bond and could utilize that as well for our next maturity, which isn't until the tail end of 2026. But I thought this was an interesting and strategic place to issue. We have strong relationships there. We've had institutional support from that market on other types of issuance and Prospect. And so it just made a lot of sense and something like 40-plus institutional investors come into that bond and that's a decent-sized market. And I think you'll see us on a thoughtful basis, continue to expand our presence there. And -- but that doesn't mean that's going to be our only source of financing. We're big, big believers in diversified financing. The fact that we have almost 50 banks in our facility shows we're not taking substantial counterparty risk, which can be problematic, especially in downturns. We saw that happen in the GFC with folks. While that's a big reason why we're able to buy Patriot Capital for example, and what happened to that business when we did the first BDC acquisition history. But prospect, of course, created the bond market for BDCs. We're the first issue convertible bonds going back to 2010 and then straight institutional bonds in 2012 and first and only to issue medium-term notes. So we've been doing this for a very long time and are big believers in diversified access to funding and we think that creates a strong credit profile for all, including, of course, equity investors that benefit from that diversified funding. Finian O'Shea: Awesome. Thank you, everybody. Congrats on the quarter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to John Barry for closing remarks. John Barry: Okay. Thank you, everyone. Have a wonderful day. Bye now. Michael Eliasek: Thanks all. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Curis Third Quarter 2025 Business Update Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference over to Diantha Duvall, Chief Financial Officer. Please go ahead. Diantha Duvall: Thank you, and welcome to the Curis Third Quarter 2025 Business Update Call. Before we begin, I would like to encourage everyone to go to the Investors section of our website at www.curis.com to find our third quarter 2025 business update press release and related financial tables. I'd also like to remind everyone that during the call, we will be making forward-looking statements, which are based on current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. For additional details, please see our SEC filings. Joining me on today's call are Jim Dentzer, President and Chief Executive Officer; Dr. Jonathan Zung, Chief Development Officer; and Dr. Ahmed Hamdy, Chief Medical Officer. We will also be available for a question-and-answer period at the end of the call. I'd like to now turn the call over to Jim. James Dentzer: Thank you, Diantha. Good afternoon, everyone, and welcome to Curis' third quarter business update call. We continue to make steady progress in our TakeAim Lymphoma study, which is evaluating emavusertib in combination with ibrutinib in patients with primary CNS lymphoma, one of the most rare and most difficult to treat of the NHL subtypes. As a reminder, the TakeAim Lymphoma study is a single-arm study with an ORR endpoint that adds emavusertib to a patient's BTKi regimen after they have progressed on BTKi monotherapy. And after collaborative discussions with the FDA and EMA, we expect the study to support accelerated submissions in both the U.S. and Europe. Over the next 12 to 18 months, we'll be focused on enrolling the additional patients we'll need to support those submissions. If you recall, last quarter, we engaged with a number of KOLs who are excited and highly supportive of expanding our emavusertib studies into additional NHL subtypes. They were especially interested in exploring emavusertib's potential to fundamentally change the treatment paradigm for CLL patients where the current standard of care is BTKi monotherapy. BTK inhibitors have become the standard of care in CLL and NHL because of their ability to help patients achieve objective responses. However, these responses are typically partial responses, not complete remission. The unsurprising result is that patients who are treated with a BTK inhibitor end up having to stay on it in chronic treatment for the rest of their lives. Additionally, since patients never achieve complete remission, many of these patients develop BTKi resistant mutations and ultimately, their disease progresses. At Curis, we're looking to improve upon the current standard of care by adding emavusertib to a patient's BTKi regimen, enabling patients to achieve deeper responses and potentially come off treatment, reducing the risk of developing BTKi resistant mutations and improving a patient's overall quality of life. The first step in testing this hypothesis in CLL is to initiate a proof-of-concept study in patients currently on BTKi monotherapy who have achieved a PR, but have been unable to achieve complete remission or UMRD. We have submitted the study protocol to the FDA. We're working to activate clinical sites, and we expect to enroll our first patient in late Q4 or early Q1 with initial data expected at the ASH Annual Meeting in December 2026. Now let's turn to AML. Abstracts for the December ASH meeting were released on Tuesday, including the abstract for our ongoing AML triplet study, which is evaluating the triple combination of emavusertib with azacitidine and venetoclax in AML patients who have achieved complete remission on aza-ven but remain MRD positive. The data in the abstract are for the first 2 cohorts, patients who received emavusertib for 7 or 14 days in a 28-day cycle in addition to their aza-ven treatment. As of July 2, 2025, 10 patients with a median age of 71 were enrolled, 4 in the 7-day cohort and 6 in the 14-day cohort. MRD conversion to undetectable levels occurred in 4 of 8 evaluable patients within 5 to 8 weeks of adding emavusertib. Among the patients who remained MRD positive, 1 patient achieved a 40% MRD reduction and none showed disease progression. Two dose-limiting toxicities, CPK increase and neutropenia occurred in the 14-day cohort, but both resolved. We're very encouraged by the initial readout from these first 2 cohorts and the exciting potential of combining emavusertib with aza-ven in frontline AML to enable more patients to achieve undetectable MRD. We continue to explore different dosing regimens for this triplet combination, and we look forward to reporting our progress. As you can see, we've had a very exciting and productive quarter and have a lot of exciting updates coming at the SNO and ASH conferences over the next few weeks. With that, I'll turn the call back over to Diantha for the financial update. Diantha? Diantha Duvall: Thank you, Jim. Curis reported a net loss of $7.7 million or $0.49 per share for the third quarter of 2025 as compared to a net loss of $10.1 million or $1.70 per share for the same period in 2024. Curis reported a net loss of $26.9 million or $2.19 per share for the 9 months ended September 30, 2025, as compared to a net loss of $33.8 million or $5.77 per share for the same period in 2024. Research and development expenses were $6.4 million for the third quarter of 2025 as compared to $9.7 million for the same period in 2024. The decrease was primarily attributable to lower employee-related clinical consulting, research, manufacturing and facility costs. Research and development expenses were $22.4 million for the 9 months ended September 30, 2025, as compared to $29.6 million for the same period in 2024. General and administrative expenses were $3.7 million for the third quarter of 2025 as compared to $3.8 million for the same period in 2024. The decrease was primarily attributable to lower employee-related costs. General and administrative expenses were $11.2 million for the 9 months ended September 30, 2025, as compared to $13.4 million for the same period in 2024. Curis' cash and cash equivalents were $9.1 million as of the end -- as of September 30, 2025, and the company had approximately 12.7 million shares of common stock outstanding. Based on our current operating plan, we believe that our existing cash and cash equivalents should enable us to fund our existing operations into 2026. With that, I'd like to open the call for questions. Operator? Operator: [Operator Instructions] Your first question comes from Sara Nik with H.C. Wainwright. Sara Nik: Congrats on the ongoing progress. My question was regarding your CLL program. And if you -- any color you could provide on the FDA discussions and protocol you submitted. Were you mostly aligned with primary endpoints and study design? Any granularity you can provide as of now would be helpful. James Dentzer: Thank you, Sara. Thanks for the question. I'll start, and I'll ask Dr. Hamdy to chime in as well. So we're very excited about that study. So as you know, we did have a dose escalation study where we tested across different subtypes in NHL. Our first expansion was in PCNSL and the second one is going into CLL. Obviously, as we move into CLL, it's a much larger indication. And of course, there's a much wider circle of interest among the KOLs. Ahmed, do you want to talk a little bit more about the CLL study in particular? Ahmed Hamdy: Sure. Sara, it's Ahmed. So basically, we're trying to address the unmet medical need in the CLL community, which is basically getting patients to a time-limited treatment with the combination of emavusertib plus a BTK inhibitor in patients who are currently on a BTK and have only achieved a PR with MRD positive. So -- and we're aligned with the FDA there, and we intend to have a small dose escalation at 100 milligram and expanding into our 200-milligram Phase II dose. Operator: Your next question comes from Li Watsek with Cantor. Li Wang Watsek: And I guess just for the Phase II CLL trial, can you maybe just talk a little bit about the size of the study and in terms of the delta you want to achieve in terms of the CR rate? And then second is just how you're thinking about resource prioritization at this point, especially as you think about the resources that you might need to move forward with the CLL study versus the frontline AML study? James Dentzer: Sure. So again, why don't I start on CLL, I'll ask Dr. Hamdy to talk a little more detail and then maybe have Diantha talk a little bit about resources. So first, on CLL, we are anticipating a study design at this point in time that anticipates 40 patients. But of course, as we saw in PCNSL, the unmet need is so clear, we're hoping to be able to see a signal long before we get to that point. As a reminder, patients on BTKi monotherapy in CLL, they get PRs. They don't get CRs. They certainly aren't getting MRD either. So what we're looking to do in that population is demonstrate simply that by adding emavusertib, by blocking both pathways, not just one, but both pathways that are driving disease that we can end up seeing deeper responses. So that's deeper PRs, and we hope also that we'll see CRs and MRD. Ahmed, do you want to chime in a little bit more on that? Ahmed Hamdy: I think you said it all, Jim. The whole concept here that you don't see CRs in -- with BTK. And obviously, you don't see MRD negative. So getting patients to a CR, and I think anything north of 20% would be very exciting. But obviously, we're going to have to wait until we see a treatment effect in our trial and plan accordingly. But we are very hopeful that the dual blockade of inhibiting the TLR pathway along with the BCR pathway would have a much more profound effect on the NF-kappaB and therefore, getting patients to a deeper response in MRD negative. James Dentzer: Yes. Thank you. And Diantha, would you mind spending a moment talking about the resources? Diantha Duvall: Absolutely. So Li, as you can appreciate, our current priorities are clearly to continue the PCNSL trial and obviously launch the newly initiated CLL trial. And also, as you can appreciate, we'll be looking to bring in additional capital prior to the end of the year. We've been pretty clear about that over the last 6 months. So neither of those things should be a surprise. So that's sort of where we're thinking about our resource allocations. James Dentzer: Yes. And in overall messaging, Li, we continue to move forward with great progress in PCNSL. And I think the investor interest, not just in PCNSL with the [indiscernible] approval, but the ability to move the needle in CLL. It seems to be a very reachable goal and because of the market opportunity, a very exciting goal. So look forward to hearing from us more about that over the next 8 weeks. Operator: Your next question comes from Yale Jen with Laidlaw & Company. Yale Jen: I've got 2 here. First of all, in terms of the CLL study, what would you think about the safety side? In other words, in the combination, was there any sort of speculated AE may happen? And how would you think about the mitigation for that? And then I have a follow-up. James Dentzer: Okay. Again, let me start, and I'll ask Dr. Hamdy to add to it. So I think the critical issue for us is going to be, do we see any DDI with the BTK inhibitors. And as you know, we have a great deal of confidence given that we've already tested a number of patients in NHL with ibrutinib, and we aren't seeing DDI. In fact, at the doses that we're testing 100 and 200 milligrams with [indiscernible], it seems to be a very clean profile. Ahmed, would you like to add to that? Ahmed Hamdy: Yes. I mean, again, you said it all, Jim. But yes, I mean, we have approximately 25 patients, if not more, combined with ibrutinib. And as you know, ibrutinib is probably would be the most unselective of all approved BTKs, and we have not seen any additive toxicities and we expect not to see any additive toxicity with the other BTK inhibitors. Of course, we're going to be doing some PK work in GDI following any potential toxicities, but I don't think there's any additive toxicities that we expect. Yale Jen: Okay. Great. That's very helpful. And maybe just one more question here. In terms of the SNO meeting in a few days, what should be the investor sort of expectation to talk about? James Dentzer: Yes. So obviously, we're going to have to be a little careful not to front run the conference. But thank you, Yale, for your interest in that. Yes, we're going to have several posters, 3 of them available at the SNO conference in PCNSL, but also SCNSL. Dr. Grommes and Dr. Nayak, in particular, will be talking about PCNSL. So I think what you can expect to see there is learn a little bit more about what we've seen over the last 6 months in that study. And of course, the secondary CNS lymphoma even harder to treat, that will be brand new. So I think on both fronts, it should be a really exciting conference for us. Thank you. Operator: There are no further questions at this time. I will now turn the call over to Jim Dentzer for closing remarks. James Dentzer: Thank you, operator, and thank you, everyone, for joining today's call. And as always, thank you to the patients and the families participating in our clinical trials, to our team at Curis for their hard work and commitment and to our partners at Aurigene, the NCI and the academic community for their ongoing collaboration and support. We look forward to updating you again soon. Operator? Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good day, everyone. My name is Sabrina, and I will be your conference operator today. I would like to welcome you to the First Advantage Third Quarter 2025 Earnings Conference Call and Webcast. Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations. [Operator Instructions] Please note, today's event is being recorded. It is now my pleasure to turn the call over to Stephanie Gorman. You may begin. Stephanie Gorman: Thank you, Sabrina. Good morning, everyone, and welcome to First Advantage's Third Quarter 2025 Earnings Conference Call. In the Investors Section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This webcast is being recorded and will be available for replay on our Investor Relations website. Before we begin our prepared remarks, I would like to remind everyone that our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are discussed in more detail in our filings with the SEC, including our 2024 Form 10-K and our Form 10-Q for the third quarter of 2025 to be filed with the SEC. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any obligation to update forward-looking statements. Throughout this conference call, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort appear in today's earnings press release and presentation, which are available on our Investor Relations website. To facilitate comparability, we will also discuss pro forma combined company results consisting of First Advantage and Sterling Check Corp historical results and certain pro forma adjustments as if the acquisition of Sterling had occurred on January 1, 2023. The pro forma information does not constitute Article 11 pro forma information. I'm joined on our call today by Scott Staples, our Chief Executive Officer; and Steven Marks, our Chief Financial Officer. After our prepared remarks, we will take your questions. I will now hand the call over to Scott. Scott Staples: Thank you, Stephanie, and good morning, everyone. Thank you for joining our call. We have 4 key messages for today. First, we delivered another quarter of profitable growth, meeting and exceeding our expectations with revenues up approximately 4% year-over-year on a pro forma basis and achieving adjusted EBITDA margins of 29%. Our performance was driven by continued go-to-market success in new logo and upsell, cross-sell. This demonstrates our ability to generate solid results amid the current macroeconomic environment in which hiring growth has been consistently flat while maintaining our relentless focus on cost discipline. Second, just last week, we celebrated the 1-year anniversary of closing on our Sterling acquisition. I am extremely pleased with the performance of our entire team as our integration is progressing ahead of schedule, and we are delivering strategic and financial benefits as promised. Third, we are continuing to execute on our FA 5.0 strategy, actioning our best-of-breed product and platform approach to accelerate growth through new logos, upsell, cross-sell and improve client retention. Today, we will highlight how our technologies and products are enhancing our value proposition and solving customers' critical needs. And fourth, today, we are narrowing our full year 2025 guidance ranges with refined midpoints at or above our original guidance midpoint. Now turning to Slide 5 and a closer look at our performance in the third quarter. We generated solid results across revenue, adjusted EBITDA and margin, cash flow and EPS. For Q3, combined upsell, cross-sell and new logo rates continued to perform in line with our long-term growth algorithm targets. Retention improved to 97%, an increase from 96% in Q2, demonstrating the success of our customer-centric approach and that our best-of-breed technology and deep vertical expertise are resonating with the market. We are pleased to share that we recently signed an exclusive 5-year contract renewal with a top customer that is expected to generate over $100 million in total revenues, of which a significant portion is guaranteed through minimum annual commitments. Base revenue performance again improved sequentially, remaining just below neutral and consistent with our expectations. In Q3, our large new logo win in health care went live and is the last of the 3 large wins we have discussed with you on past earnings calls to do so. Combined with the 2 wins that went live last quarter, one in the retail gig economy and the other in international win in Australia, all are now live and generating revenue, providing solid momentum going into Q4. We are experiencing tremendous success with our go-to-market teams as further supported by our 17 enterprise bookings in the third quarter and 75 in the last 12 months, each with $500,000 or more of expected annual contract value. These wins give us confidence in our ability to generate new logo and upsell/cross-sell revenue and are an encouraging sign of our sustained go-to-market momentum since closing the Sterling acquisition 1 year ago. Additionally, we are encouraged by the strength of our late-stage pipeline with many large potential new contracts in the works, including several that are incorporating our Digital Identity product for the first time. Looking at our verticals in the third quarter, our balanced and resilient vertical strategy supported our performance with nearly all of our verticals seeing revenue growth in the quarter on a pro forma year-over-year basis. We saw strength in retail and e-commerce, driven by upsell, cross-sell and fueled by a good start to the holiday season. Transportation and logistics also grew, driven by our upsell, cross-sell initiatives with particular demand from last mile and home delivery customers. In addition to serving onboarding needs for new hires within transportation, our broad range of solutions also supports our customers' ongoing compliance requirements, enhancing our results with balance and consistency across the solutions we provide. Health care was slightly down, driven by uncertainty with Medicare and Medicaid funding, particularly with the nonprofit hospital networks, but this was offset, in part, as health care staffing companies stepped in to fill the hiring needs. We remain optimistic about the long-term industry dynamics and fundamentals in health care as the U.S. population ages and requires more health care services. Our other verticals, including general staffing, manufacturing and industrial financial services showed positive growth in Q3, partially powered by the success in our new logo and upsell, cross-sell programs. October order volumes show similar directional trends to what we saw in Q3 continuing. In international, for the sixth quarter in a row, we achieved year-over-year revenue growth with the U.K. as a bright spot and also improving trends in APAC. Looking at the macro environment, we are still seeing a trend where hiring is remaining consistently flat. Macro uncertainty as well as policy changes, including the recent government shutdown, immigration, tariffs and tax policy have resulted in many of our customers remaining in a wait-and-see posture as it relates to their hiring plans. However, as you can see from our results, our customers are still hiring at consistent levels. Our expectation for the fourth quarter and likely into 2026 is for base growth to remain slightly negative as the overall labor market conditions persist. We continue to be confident in our ability to deliver overall revenue growth through upsell, cross-sell and new logos. Our enterprise customers, diverse vertical mix, global reach, mix of hourly and salaried focused customers and diligent focus on controlling the controllables make our business resilient and able to perform well across a variety of macroeconomic scenarios. With regards to the impact of the government shutdown, our view is that the hiring markets have remained stable and active with our core verticals continuing to perform well. The absence of BLS jobs and employment data has not impacted our ability to run our business. I want to take a few minutes to touch on AI's potential impact on our business, building upon what we shared during our May Investor Day. We are taking a proactive and strategic approach to understanding both the benefits and the risks of AI, and we are optimizing our long-term strategy based on the future of work. We recognize the pace at which AI is evolving and can see how it is currently impacting and how some are expecting it to impact the way certain types of jobs and labor are performed. Of note, the World Economic Forum's 2025 Future of Jobs report predicts net positive growth through 2030, even after accounting for the impacts of AI. Specifically, the WEF notes that while AI and automation are leading factors expected to displace; an estimated 92 million jobs, these technologies and other market conditions are also expected to create 170 million new roles as companies and economies adapt to technological change, resulting in an expected global increase of 78 million jobs over the next 5 years. Again, we are confident that our diversified mix of verticals, customer segments and geographies provides a meaningful degree of resiliency to AI impacts and will allow us to capitalize on the future growth opportunities. We are also strategically reviewing where and how we invest in terms of our products and verticals to ensure we are well positioned to lead in a world increasingly influenced by AI with a focus on continuing to generate long-term shareholder value. For example, we are building tools such as our Digital Identity product, which enables our customers to address the increasing dangers of AI-driven identity fraud. At the same time, we are leveraging AI internally to enhance quality and customer experience. As we like to say, we are building good AI to fight bad AI. Additionally, I want to address some of the recent news headlines on corporate headcount reductions as companies claim to gain efficiencies from AI. In some instances, the news you read happens to relate to customers of ours. And what we have observed is that while those companies are reportedly making job cuts motivated by AI, we are seeing stable, if not growing, overall screening volumes from them. This is because many of these news-making reductions are in administrative-type roles, which have a lesser impact on our business as typically a majority of our screening volume comes from normal churn and core hiring in our customers' operations. Additionally, as customers reinvest in their businesses to build out their internal AI and other capabilities, they should also be driving screening demand as they will require roles to manage these changes. This sentiment is further supported by feedback directly from our customers who have told us that while they are currently investing in and leveraging AI in their businesses, they do not expect to meaningfully change their approach to core hiring over the next several years. Now turning to Slide 6. On October 31, we were thrilled to celebrate the 1-year anniversary of the closing on our Sterling acquisition. Over the past year, we have made significant progress on our integration of this strategic acquisition, which has been outperforming our expectations on customer retention, synergy capture and realization, cultural alignment and complementary technologies and products. Importantly, we have delivered a very seamless, nondisruptive customer experience throughout the integration process. This has enabled us to maintain excellent customer satisfaction as evidenced by our high retention levels and the feedback we are receiving from customers. We have also continued to deepen our customer relationships through our growing Collaborate International user conference series, which reflects our expansive global footprint. In 2025, we've hosted events across the U.S., India, Singapore and EMEA with upcoming user conferences in Hong Kong and Australia. These events provide us with direct insight into our customers' needs and emerging industry risks, showcase our subject matter expertise, uncover upsell and cross-sell opportunities and help cement our position as a category leader. Recently, many of our European customers joined us at our London Collaborate to discuss key topics such as identity fraud, AI-driven screening and global compliance. The strong turnout, high-value content and customer engagement underscore the relevance of our solutions and the trust we are building across markets. Feedback confirms that our customers are looking to us for guidance as they plan for 2026, and we're proud to be a strategic partner in helping them navigate evolving workforce risk. Our back-end automation strategy has also been a key driver of operational efficiency throughout the integration process. By consolidating fulfillment into a single global engine, we are leveraging years of investment, engineering and development in robotic process automation, APIs and AI. We have kept 2 front-end platforms for customer continuity, but behind the scenes, we have been able to streamline workflows, cut redundancies and drive efficiency. These efficiencies not only enhance speed and customer satisfaction, but are also expected to create meaningful margin improvement as we grow. Additionally, since announcing the Sterling acquisition, we have increased our synergy target from our original $50 million plus to a range of $65 million to $80 million. We have also made solid progress on deleveraging our balance sheet as we work towards our target net level range of 2 to 3x. Steven will provide additional details shortly on both our synergy progress and deleveraging. Turning to Slide 7. Throughout the integration process, we have been focused on enhancing our customer value proposition to unlock new logo, upsell and cross-sell opportunities while continuing to drive innovation and foster the high-performance culture we are known for. We are consistently leveraging our best-of-breed approach to provide optimal solutions and technology to solve our customers' challenges. Last quarter, we discussed how the expansion of our award-winning Click.Chat.Call. customer care solution and our high-margin First Advantage work opportunity tax credit product has benefited our customers. We have continued this progress, achieving a milestone in Q3 with the increased usage of the millions of records in our proprietary national criminal record fire database across both platforms, something we have been rolling out since Q1 of this year. With our proprietary data and in-house data science teams, we deliver faster insights and a superior experience for everyone from recruiters to HR teams to candidates. This powers our ability to reduce turnaround time while increasing the speed, coverage and effectiveness of our criminal screenings, facilitating comprehensive and timely results for our customers. In October, we made available our criminal and motor vehicle records monitoring solutions to the entire customer base, offering another best-of-breed experience to all of our customers. We are also underway in leveraging our best-of-breed approach to enhance the user experience. Over the past 18 months, we have been rolling out a new applicant portal. Now approximately half of our order volume on the First Advantage front end runs through this portal with customer adoption continuing to grow. This represents the most secure and user-friendly experience we've ever built, featuring device-agnostic design for a seamless experience across devices, customer-specific branding for a familiar and consistent look and AI-powered features that continuously learn from the candidate interactions to deliver a best-in-class rage click-free experience. In November, we are extending the same modern look and feel to the Sterling front end, bringing the benefits to even more customers. This initiative reflects our commitment to delivering an outstanding user experience backed by rigorous data, feedback, sentiment analysis and continuous improvement. It's a win for our customers and their candidates and a key differentiator for First Advantage. On top of this, we are continuing to see solid momentum and interest in our Digital Identity products. Negative use of AI and other technologies are creating new risks for companies and organizations and are driving rapid evolution in the Digital Identity space. Knowing who you're hiring and confirming who they actually are is critical. Our Digital Identity solution is fully linked in the hiring life cycle with some customers using it multiple times through the recruiting, screening and onboarding process, which is creating a competitive advantage for First Advantage. As an early market leader with Digital Identity solutions, we are able to deepen our strategic dialogue with customers, strengthening our relationships and stickiness of our products. We are highly focused on this attractive opportunity, which has a total addressable market of over $10 billion and an expected growth rate in the mid- to high teens. Our Digital Identity products is continuing to build a strong pipeline as customers navigate the early adoption and pilot phase. Digital Identity is a powerful competitive differentiator for First Advantage and indicative of the direction in which our industry is growing. Overall, our customers continue to be excited about the benefits of our best-of-breed platforms, products, data and AI-enabled technologies. This is evident by our strong customer retention and consistent new logo and upsell, cross-sell performance. With that, I will now turn the call over to Steven. Steven Marks: Thank you, Scott, and good morning, everyone. Today, I will provide color on our third quarter results, synergy progress, deleveraging trends and our narrowed 2025 guidance. I'll start with third quarter results on Slide 9. Our third quarter revenues were $409 million, up 3.8% versus last year on a pro forma basis, with our year-over-year revenue growth rate increasing sequentially from Q2 as expected. Our go-to-market success was in line with our long-term growth algorithm targets as the combined contribution of new logo and upsell and cross-sell revenues delivered 9% growth in the quarter, and our retention rate reached 97%. The trends in our base performance continued to moderate on par with how we had forecast the quarter with base remaining negative on a year-over-year basis. Our solid results were supported by consistent execution on our integration and synergy plans, which remain ahead of schedule. Adjusted EBITDA for the third quarter was $118.5 million. Our adjusted EBITDA margin of 29% exceeded our expectations, representing an improvement of 130 basis points versus the prior year on a pro forma basis despite being slightly lower sequentially from Q2 due to mix. Our results were enabled by our continued focus on accelerating synergies, our disciplined approach to cost management and the scalable nature of our business. As part of the integration process, we are applying best-of-breed fulfillment execution, which is helping improve the combined company's operating margins in line with our historical expectations of the business. Adjusted diluted EPS was $0.30, a 15.4% increase over our expectations. The benefits of our greater scale, expense and capital management and lower interest expense as a result of our debt repricing and voluntary debt payments to date have supported our per share earnings. These have more than offset the impact of the incremental interest on the transaction financing and the dilutive impact of the new shares issued for the Sterling acquisition. On Slide 10, you can see how we are making great progress on our synergy program. This quarter, we crossed the original $50 million threshold of action synergies, now having actioned $52 million and exceeding our initial total synergy program goal within only 1 year. We benefited from the realization of $12 million of synergies in the third quarter, bringing our in-year realization to $30 million. We remain committed to and confident that we will achieve our goal of $65 million to $80 million of action synergies within 2 years and are pleased to see the consistent success of our integration and synergy execution. Looking forward, we are focused on scaling, automating and applying AI as we continue to execute on our integration priorities. Moving to Slide 11. You can see our historical revenue growth algorithm results with combined company data beginning in 2025. As previously mentioned, in the third quarter, our results were driven by strong upsell, cross-sell as well as new logos, supported by consistent solid retention. Base results came in as expected with sequential improvement from Q2 despite remaining negative for Q3. Now turning to cash flow, net leverage and our debt paydown progress on Slide 12. During the quarter, we generated adjusted operating cash flows of nearly $81 million, an increase of $35 million or 78% on a year-over-year basis. This was driven by the larger scale of our business, our tight management of our working capital, including collections on receivables, the benefit of the OBBBA, which has reduced our required cash tax payments and our overall focus on cash flow. Our cash balance at September 30, 2025, was $217 million. With this ample liquidity and cash flow, subsequent to the end of the quarter in November, we made a $25 million voluntary repayment on our debt principal, bringing our total year-to-date principal repayment to over $70 million, most of which has been voluntary using excess cash flow. Our synergized pro forma adjusted EBITDA net leverage ratio at quarter end was 4.2x and represents about [ 0.25 ] of a churn decrease from a year ago when we closed the Sterling acquisition. We remain focused on reducing our net leverage towards approximately 3x synergized pro forma adjusted EBITDA within 24 months post close, and our long-term net leverage target remains 2x to 3x. Moving to Slide 13 and our updated 2025 guidance. As a reminder, year-over-year comparisons are on a pro forma basis to allow for easier comparability. Today, we are narrowing our full year 2025 guidance ranges with refined midpoints at or above the midpoint from our original guidance. Our year-to-date results as well as the momentum we have seen heading into the fourth quarter give us confidence in our revised guidance ranges with revenues now in the range of $1.535 billion to $1.570 billion supported by strong synergy execution and our continued focus on efficiently managing our business, we now expect to achieve full year adjusted EBITDA margins of approximately 28%, a meaningful expansion from pro forma 2024. Looking at the fourth quarter as implied in our updated full year guidance today, our revenue outlook for Q4 of around 6% year-over-year growth at the midpoint continues to assume a certain degree of macro stability while keeping in mind that our customers remain in a wait-and-see mode. The impacts of increased tariffs and other policies remain key areas of uncertainty across the global economy, but our customers continue to hire at consistent volumes. We expect Q4 base growth to remain slightly negative, consistent with Q3, with this trend likely to continue into 2026. As Scott mentioned, we saw very consistent volumes in October, which aligns to our updated Q4 expectations. We anticipate continued productivity of combined upsell, cross-sell and new logo growth, consistent with, if not better than, historical trends. Additionally, the go-lives of our recent large wins and robust new contract pipeline support our expectations for the fourth quarter. We also expect customer retention to remain in line with our historical performance of at least 96%. In the fourth quarter, we expect adjusted EBITDA margins to expand versus the prior year period by more than 100 basis points. This is similar to the expansion we saw in Q3 and results in fourth quarter adjusted EBITDA margins of approximately 28%. While this represents a small sequential decline from Q3 2025, it is in line with the historical trends in our business, reflecting the mix shifts driven by seasonally lower December revenues and some movements in verticals and some movements in volumes between our verticals and products. This year, we also anticipate the mix shifts we saw in Q3 towards products with relatively higher out-of-pocket fees will continue to impact adjusted EBITDA margins into Q4, though over time, we expect these impacts to normalize. Even with these trends in mind, we remain confident in our ability to drive year-over-year margin improvements in Q4. We anticipate that our adjusted diluted EPS growth momentum will continue as revenue ramps and synergies are realized. Despite the mix trend previously mentioned, we expect that quarterly adjusted diluted EPS will remain in the mid-$0.20 range in the final quarter of the year, representing meaningful expansion on a year-over-year basis. On a similar note, we now anticipate free cash flow for the year of $110 million to $120 million. This represents a notable increase from our previous commentary as we have been able to generate incremental cash flow from better working capital management and have successfully managed our integration-related costs. As previously noted, the passing of the OBBBA tax law in July doesn't notably impact our effective tax rate. However, we will be able to utilize certain provisions within the new law to materially reduce our 2025 required cash tax payments. We have provided a full chart in the appendix to the earnings presentation with FX, CapEx, interest and other modeling assumptions. Additionally, we do not expect the government shutdown to materially impact our results. While the shutdown itself has affected some operational items such as the government run E-Verify platform resulting in some delayed I-9 verification, we expect any delays in processing I-9 will be resolved in the quarter as soon as the government shutdown concludes, and this is a very small component of our business. Overall, and taking a step back, we are pleased with our refined 2025 guidance ranges we are providing today, particularly amid our ever-changing world. We are expecting to deliver full year revenue growth, a high single to low double-digit adjusted EBITDA growth rate and an even higher adjusted diluted EPS growth rate and meaningful free cash flow generation, all just 1 year after closing our strategic acquisition of Sterling. With that, let me turn it back to Scott for closing remarks before we open the line for questions. Scott Staples: Thank you, Steven. In closing, I would like to reemphasize First Advantage's position as an investment of choice. We are a market leader offering proprietary technology and data in a large and growing market. We have significant organic revenue growth potential, accelerated by the Sterling acquisition. We are resilient with a flexible cost structure and high revenue diversity that comes from our balanced vertical strategy. We have industry-leading operating margins, leading to strong and consistent free cash flow generation, and we have a track record of value-accretive capital deployment and balance sheet management. All of this supports our confidence in our ability to achieve consistently strong results, including delivering on the 4-year financial targets we established during our Investor Day in May. Looking ahead, we remain focused on executing on our strategy to increase share across our target verticals, accelerate international growth and deliver on our best-of-breed product and platform strategy. Thank you to the entire First Advantage team for the great work you do to support our customers every day. With that, we will open the line for questions. Operator: [Operator Instructions] Our first question is coming from Ashish Sabadra with RBC Capital Markets. Ashish Sabadra: So maybe a 2-part question. As we think about this strong new win momentum that you talked about and as you're ramping up these new clients, how should we think about the upsell, cross-sell as well as new logos going into fourth quarter, but also into 2026? And then the second question would be just the pipeline for new logos. Have you seen any changes in the sales cycle? Any elongation in the sales cycle? Also any early conversations with your clients around new win momentum? Steven Marks: Yes, Ashish, I'll start with your comments on the new logo and kind of that impact going forward. I'll let Scott take the pipeline. I think you're right. As I mentioned in the prepared remarks, we're expecting our Q4, the contribution of new logo and upsell, cross-sell to be in line, if not better, than our historical. So we did 9% in Q3 with very consistent so far this year. Assuming those deals ramp according to schedule, there's some room to do a little better than our historical averages. We're seeing some good initial order demand from those bigger contracts. A little early to comment on '26 just overall. But I mean, obviously, the deals that are just going live in the second half would have some rollover, still have to fill out the rest of the pipeline funnel and still have to execute. But it gives us a lot of confidence, certainly in Q4 being able to achieve, if not exceed, the historical norms for upsell, cross-sell and new logo. Scott Staples: Yes, Ashish, on the pipeline, we are extremely happy where the pipeline is right now. It's at the highest value it's ever been at. The late-stage pipeline for large deals is the best we've really ever seen as a company. That doesn't mean it translates into whatever it translates into, but it's a great pipeline. We've obviously got very good win rates historically. So we're feeling pretty bullish heading into 2026 in terms of the things we can control and our ability to grow organically. So very happy with the pipeline. And I think it all comes back to -- again, look at that increase in improvement in client retention, especially after doing a large merger. We are very happy with client retention actually going up. It means that clients have really resonated with the combination of the Sterling and the First Advantage technology platforms. And I think a big shout out to our tech teams who have done a great job of eloquently putting together the back end to the front ends of both the Sterling and First Advantage customer base. And in this industry, it's very simple. Clients love to partner with a company who understands their vertical deeply, which we obviously do and have invested in the key verticals that we're in and have a great technology platform to back it up, that's clearly why the pipeline is growing, while the deal flow has been solid. We've got a great tech story, and we back it up with subject matter experts. Operator: Our next question is coming from Andrew Steinerman with JPMorgan. Andrew Steinerman: Obviously, I've observed over the years that FA is very tech forward, including AI. With that in mind, do you feel that traditional employment background checks has a risk of being disintermediated by AI innovation and how? Scott Staples: Yes. Thanks, Andrew. As you know, we have a very strong tech story. We've got a great team. And I thank you for your question because I don't think we get enough credit in the market for our tech prowess. I mean I feel that we're basically a Silicon Valley tech shop that just happens to be headquartered in Atlanta, Georgia. We've got great architects. We've got great engineering prowess. And I think when you look at where AI can help or influence or impact the industry, I only see it or we only see it in beneficial ways. We don't see it as a competitive threat because it's going to have to be so integrated into the many things that we do. I think the big change is the dramatic rise of the risk of identity fraud in the recruiting process and how that maps into the traditional background screen. So when you think about running criminal checks or verifications or whatever it might be, the future of this industry is really going to be how that flows from a digital identity check. And that's where a lot of the AI is going to sit because you're going to be leveraging AI to make sure that our customers feel comfortable that they are onboarding the same person that they interviewed. So going from a recruitment to interview to onboarding and to finally I-9, all that has to be tied together with technology and consistent databases. And we are really the glue behind the scenes that can do that for our customers. And that's where a lot of our customer dialogue is going right now. And I think a lot of that's going to be AI-driven. There's going to be a lot of good AI that are used in that solution to offset the bad AI that people are using for deepfakes and other identity -- digital identity hacks. So we want to make sure that we help our customers avoid hiring imposters which, as we told you on our last call, is an extremely increasing risk for them. So that's also driving client stickiness. It's driving upsell, cross-sell. And again, it goes back to the fact that our customers see us as a tech powerhouse that can pull this all together for them. Operator: Our next question is coming from Andrew Nicholas with William Blair. Andrew Nicholas: Scott, I think you mentioned as part of the comment on your 5-year contract renewal that a portion of that $100 million is guaranteed. So I was just hoping to kind of figure out maybe a little bit more background on that contract, what led to that particular structure? I think that's relatively unique within your broader business. And whether or not that's a one-off or something you'd expect to pursue more regularly going forward? Scott Staples: Andrew, I love the question because this has been a really big focus for us in 2025 and will continue in years to come. Now the caveat here is that this will be a little bit of a long road, but this is not a one-off. This was the first of what we think will be the future contract status in this industry where we do get more stickiness with contracts with guaranteed minimums in our contracts. Again, the caveat is it will take a long time for this to kind of flow and run out because we're not going to go to existing customers and ask them to change existing contracts. We are trying to put this new clause into all new logo wins and renewals with existing customers. To date, we have had very little pushback on this concept. And I think it's -- there's other things that we're working on to put more teeth into the contracts, but this is clearly where the industry is now going. And we even think things like Digital Identity and some of our other solutions can actually lead to subscription revenue, and that would then also be included in contracts going forward. So I'm glad you picked up on it because it's definitely a change that we're seeing in the industry, and we're kind of leading the charge here. Andrew Nicholas: Understood. And just for a follow-up, kind of back to the digital identity piece. Is that something -- I don't think you've sized it recently, but is that something that can move the needle on upsell, cross-sell next year? Or is it still too early to be adding percentages of growth to the algo? Scott Staples: Yes. First of all, it is the hottest, hottest, hottest topic with our customers right now. We've -- as you know, we've had Digital Identity products out in the market now for 2, almost 3 years. In the early stages, it was us educating our customers as to the risks associated with imposters and deepfakes and all the things that come with identity fraud. But something has changed. Over the last, I'd say, roughly 6 months, our customers are now showing us actual instances of where they've either stopped a fraudster from entering their company or that they've actually hired an imposter and don't want it to happen ever again. So this is completely dominating the conversation right now, and we've got a fantastic product. And I would call it products because it literally is a series of 6, 7-plus offerings that are all under the umbrella of digital identity. So the -- a couple of things then. One, at some point in 2026, we do plan on quantifying this for you. As soon as we get -- we're still in early sales stages, and we're doing pilots and customers are now ramping up on that product. So I think at some point in 2026, we'll be able to quantify it. There's going to be 3 major impacts to digital identity. One, yes, it will drive upsell, cross-sell revenue. And again, we'll quantify that in the future. Two, it makes us really sticky with the customers because now we're actually in different workflows. When you do digital identity, you're now up in the front of their recruiting workflow and you're really then sticky throughout the whole process. Three, so the byproduct of that is increases in customer retention, which, as Steven said, we -- the bare minimum is 96%. But as you can see, we're now at 97% and hopefully stick there going forward and maybe even higher through the stickiness of this. And the last thing is it also helps sell other products. For example, customers are worried about the person that they are interviewing is the same person that they actually run the background screen on is the same person they actually onboard and do the I-9 with. So Digital Identity is actually giving us a boost to our I-9 sales because we're sitting behind the scenes, and we can triangulate all that data for them if we're the service provider for them. If we're not the service provider for their I-9 product, they have to figure out if it's the same person that filled out the I-9. And the customers don't want to do this. They want us to do that. So this is real stickiness. This is driving multiple levels of upsell, cross-sell. And it's a huge issue with clients right now. This is, again, the hottest, hottest, hottest topic in this industry. That was a long answer, but great question. Operator: Our next question is coming from Manav Patnaik with Barclays. Ronan Kennedy: This is Ronan Kennedy on for Manav. Can I just ask that you unpacked the commentary around October order volumes continuing the directional trends that you experienced for the quarter. It sounds like that reconciles to this week's ADP jobs report, which showed a swing into positive territory, I think, after some back-to-back months of job losses. But also had a question in relation to -- there was a report released earlier this morning that showed October had the highest increase in layoffs since '23. And I think year-to-date, layoffs are up 65%. Just wanted to know if you're seeing that as well. I think AI and the macro factors you referenced were given as drivers. But I know you said with your diversification and resiliency, you're not actually seeing AI impacts and highlighted specific clients as well. So I just want to understand those dynamics as you see them and potential impacts of that for base and the other components of your growth into '26. Scott Staples: Yes, Ronan. So obviously, the macro is on everyone's mind. And I'm going to answer your question, but I'm going to put in a couple of other things to give you the picture that we see. So a couple of things. Specifically to October, yes, we are -- we had a very good October. The order volume trends were similar to what we saw in Q3, meaning that they were above our expectations. Now that doesn't mean November, December will be. It just is a snapshot that October was. We're still in a wait-and-see mode for November and December, but off to a great start in Q4 with the things that we mentioned. We're seeing a good holiday season. We're seeing our key customers driving a lot of volume growth. I think the world is starved for data right now or better data right now on this. And I will remind people that -- I'll remind the market that we are enterprise focused. So a lot of what you hear maybe SMB focused, but we're not experiencing at the enterprise level what is being portrayed in the media. And I think we've got a unique advantage on the data side. And the fact that we can actually see our own order volume, so we know exactly who's being hired and when. And obviously, with the government shutdown, there's no BLS data being reported. And we've talked in the past about how unreliable the BLS data is anyway. It had gotten to a point where there was only about 35% participation rate from companies in the BLS data, and it was primarily from SMB. So it wasn't a very accurate depiction of what we see from the macro standpoint. So one, we've got the ability and the uniqueness of seeing actual hiring data real time. We know exactly when -- what companies in what industries and what geographies are hiring people. And the BLS data was always a few months behind, and every 6 months did a major revision of the numbers because they didn't get it right. But I think our Q3 results and what we're saying on forward thinking about the pipeline and where we are with order volumes is actually showing a very consistent labor market, not a declining labor market. It doesn't mean that there's huge job growth or -- and it doesn't mean that there's huge job losses. It just means that it's consistent. And as we get into 2026, and we'll talk more about this in our next earnings call next quarter, but we're basically thinking that 2026 is going to be very similar to 2025. Consistent hiring, not big decreases, not big increases, just more of the same. And Ronan, one more point. So I gave you -- we obviously have the ability to do qualitative analysis of order volumes and other data sources that we look at. But we also have -- we've also speak to our customers on a regular basis. And I think we've made this point many, many times. Just this year alone, we've had over 1,500 formal business reviews with our customers. Now that may be the same customer 2 or 3 times. But it just shows you that we are formally sitting down with our customers to review their programs, to optimize their screening, to talk about upsell, cross-sell opportunities and to get their views on their hiring. And what we're hearing doesn't necessarily jive with what is being reported in the media. So that's what we're basing our business on. Ronan Kennedy: And then if I may, just to shift gears a little bit. Can you help with how we should think about the cadence of synergy realization in '26? And just a reminder on timing for Sterling EPS accretion and also deleveraging? Steven Marks: Yes, Ronan, great question. So as we mentioned, we're at $52 million. Our target is $65 million to $80 million. We obviously lapped the anniversary as of this week. That remaining, somewhere between $15 million and $25 million, will come fairly ratably over the next year. It's a lot of operational and fulfillment and then data projects that have some of a little bit just more plumbing, more prerequisites that need to be checked off. But we still are very confident that we'll achieve it. And it should hit fairly ratably over the next 12 months or so as we just complete one optimization, one efficiency project after another. In terms of EPS accretion, I mean, you're starting to already see some of that flow through pretty strongly, right? We've got certainly relative to the pre-acquisition period, really strong EPS numbers in the second half of the year. Some of that is just the operational scale. The fact that we've got to consecutive quarters of revenue growth, we've got the synergies flowing through, and then we also have all the work we're doing on the cash flow and debt side of house. So the repricing, obviously, lower interest rates helps a little bit and just working capital management. So we're driving really strong cash flow. So that's going to obviously support your interest expense and help flow things down to EPS. And then I think to your last point on deleveraging, I think we're seeing those trends already kick in. As I mentioned, strong free cash flow, strong EBITDA accretion. As we build more cash and -- which ultimately reduces net leverage, we'll continue to see that number start to accelerate. And we still feel like we'll be getting towards that 3x synergized net leverage ratio by the end of next year, effectively at the 2-year anniversary of the deal. So I think we're on schedule on all 3 fronts there, Ronan. Operator: Our next question is coming from Scott Wurtzel with Wolfe Research. Scott Wurtzel: I just wanted to go back to some of the commentary around base growth for 2026 and your expectations for it to continue to remain negative. Is that right now sort of an expectation that it will remain negative throughout 2026? Or given we are obviously comping a lot of years of negative growth, could we potentially see an inflection as we get sort of into the second half of the year? Steven Marks: Yes, Scott, it's a good question. I mean we're not -- we're not at the point yet where we can kind of give very specific 2026 commentary. I think really, our main focus now is kind of looking at the exit velocity, if you will, of our order volumes in '25 and what that implies for at least the start to '26. I just wanted to make sure that people understand that, to Scott's point, it's been a consistently flat hiring environment now for a period of time. And we expect that dynamic to continue. I mean base has improved dramatically already through the year. It was negative 5.5% Q1, negative 3.7% last quarter, now only negative 1.8%. Negative 1.8% is that slightly negative that we've been talking about the last couple of quarters, and that's kind of that ballpark that our current expectation that persists for the next few quarters. We'll obviously give out a little bit more refined view as we get into our next earnings call for the '26 guide. But you also have to remember at a slightly negative base with the new logo and upsell, cross-sell consistency and the momentum we have, and where we're hitting all cylinders on retention, even with a slightly negative base, you're set up for a pretty good overall growth. But we do see just kind of this macro environment persisting. There's not really any kind of formal outlook on where tariffs are going to take us on immigration policy and all these other things that are kind of impacting just that wait-and-see mode that customers are in. So a little too early to get specific, but certainly, for the foreseeable future, we kind of see that wait and see consistently flat overarching hiring environment. Scott Wurtzel: And then just as a follow-up, going back to the kind of the identity market opportunity, and you mentioned mid- to high teens market growth rate. I mean, given your position in the screening market and everything, do you think you guys can outgrow that sort of market growth rate over the near to medium term as you sort of bring these solutions into your customer base? Scott Staples: Yes. Well, I mean, I think the short answer is we don't know because it's so new. I think we're really well positioned. Our customers can go out and buy point solutions to fix some of this. But we're in a really unique position about being -- we feel one of the only that can sit behind the scenes and help them triangulate all of these things into one solution. So the discussions with customers have been phenomenal. And obviously, we're very happy about the wins and the pilots and the launches that we've done recently. But it's just so early. It's hard for us to sit back and quantify that it will be a certain number and a certain growth rate. But as I said, when we get into 2026 a little bit and these numbers become clearer and we start looking at win rates and pipeline and start doing some math behind the scenes, we will report that out to you because we know it's an important piece of our growth algorithm. Operator: [Operator Instructions] Our next question is coming from Jeff Silber with BMO. Jeffrey Silber: You noted the retention improvement sequentially. I think you cited a few factors that are kind of buried in the Q&A. But if I had to focus on a few things, why do you think you saw that retention improve? And is that something you think is sustainable? Scott Staples: I think there's a lot that goes into it. I mean, first thing, we're a very, very, very customer-focused, customer-centric, customer-inspired company. We spend a lot of time with our customers, as I mentioned with our formal business reviews, and those are only the formal ones. We're talking to our customers daily, weekly, monthly. The Collaborate sessions that we talked about in the script have been phenomenally attended. We've got lots, if not most of our large customers attending these Collaborate events around the world. So we're spending a lot of time with our customers. And I think there's a couple of things that are driving retention. One is we are considered thought leaders in their industry. We pick certain industry verticals to focus on, and we go deep, deep, deep into those so that we know what they're dealing with from a compliance standpoint, from an onboarding standpoint, from a cost pressure standpoint, whatever it might be. We know their industry well. And in most cases, we have most of their peers as customers, so we can help them benchmark. So we can help them say, okay, here's what the industry is doing, and here's where you're best-in-class and here's where there's gaps. And those gaps are great to point out because what that means is upsell, cross-sell opportunity. And that's why package density has been such a great driver of growth for us. So vertical knowledge, industry expertise is clearly one of the drivers of retention. The other one is tech. I mean, as I mentioned earlier, we're a great tech company. We've got agile pods all around the world. We've got solution engineers. I mean we're really good at tech. Our products demo really well, which leads to a lot of new logo wins. And customers are very happy with the products. And also, we've really nailed the Sterling integration from a product and platform standpoint. Our vision, our theory from the very beginning of the acquisition was single back end, leveraging all of the great First Advantage automation that's been out there for literally 9, 10 years now. Single back end, but the front ends don't change for the customers. So that kept customers from attritting. Usually, when you do an M&A, that's the biggest thing that they worry about is, are you going to force migrate me onto a new platform? And the answer was no. And it was even better than no. It was like not only are we not going to force migrate you, but you're actually going to get a series of upgrades because we're taking best-of-breed from both platforms and giving it to the other platform. So there were some things that the Sterling platform did really well that are now becoming available to the First Advantage installed base. And there are some of the things that First Advantage did really well that are now becoming available to the Sterling installed base. And those are things that are visible. So we're talking about functionality. We're talking about best-of-breed user experiences, et cetera. And the things that are invisible to them are the things that we're leveraging on that First Advantage back end. So it's the First Advantage back end with all that great automation, which is driving faster turnaround times. If you look at our turnaround times, which is a key KPI for our customers, our turnaround times are coming down with customers because of the automation. So we're enabling them to onboard faster. And onboarding faster is critical for them, especially in high-volume hires because they need the people to do the job. So I think it's the combination of our vertical expertise and the fact that we actually nailed the technology and the future promises of technology, like how we're rolling out digital ID, how you can integrate your I-9, all that stuff is being eloquently explained to our customers, and I think they like the story. Operator: Our next question is coming from Harold Antor with Jefferies. Harold Antor: Harold Antor on for Stephanie Moore. I guess real quick one for me. Just in terms of international growth, I know international growth has seen several quarters of robust growth. If you could just provide any more color on, I guess, how that's shaping up. It seems as though the U.K. has been a bright spot even though we've heard that the U.K. still is -- in some areas is still weak. So just I guess, anything you're doing there? And then I guess on your verticals, I think you called out weaker health care trends, but I believe you see some seasonal pickup in transportation. So is the seasonal pickup in transportation in line with what you saw historically or just anything there that would be helpful. Scott Staples: Harold.... okay, Steven, go ahead. Steven Marks: Yes, Harold. On international, I mean, look, we're still seeing the momentum we've seen in the last few quarters sustained, if not accelerate a little bit. International was up a little over 11% in total. So again, like the trend we had last quarter, outpacing the consolidated business. And you're right, the U.K. market has been certainly a strong point there, and some of the underlying verticals are still [Audio Gap] some government regulation that's also helping us out. But honestly, we saw growth across all 3 of our international regions. And you remember, we've had that larger financial services win in Australia. We've had some other go-to-market success over the course of the year as well. So really strong base, really strong upsell, cross-sell, new logo type winning there in international. I'll let Scott fill on the verticals, but I think international has been kind of ahead of the curve and continued showing that growth and that accelerate a little bit in the third quarter. Scott Staples: Yes, Harold, on the verticals, so you mentioned health care. I think it's important to note, health care for us is really 4 sub-businesses. So it's acute care, think of hospital networks; post-acute care; life sciences; and health care staffing. Post-acute care, life sciences and especially health care staffing really did well in the quarter. It was really just the hospital networks, and it's completely 100% tied to what's going on in Washington, D.C. with Medicare and Medicaid. It's not like there's less demand for their services. In fact, there's more demand. You've got an aging U.S. population, and you probably know from your own experiences that there's a tremendous demand in health care. It's just that a lot of these smaller regional, even rural hospital networks are dependent upon Medicare and Medicaid funding. And there's a lot of uncertainty in that right now. So they've cut back their hiring just because they don't know where the funding is going to come from. Now health care staffers have filled in the gap because they still need the services. So I think this is just an aberration. I think this is something that will play out over the next couple of quarters, will stabilize. We're very bullish on health care because of the aging population, the incredible need for services. And even though it's slightly down, I would say our strategy is actually to double down in this industry because it could be a tremendous growth industry long term. It's just having a little bit of an aberration right now, and it's completely tied to the smaller and midsized hospital networks. It doesn't really affect the larger hospital networks and affects mostly the nonprofits. Operator: Our next question is coming from Pete Christiansen with Citi. Peter Christiansen: Nice execution here, some nice trends. Scott, a quick question. I want to double tap on the AI disruption kind of concern, which I think you laid out really well. I think there is a slight nuance to the argument though that at least on the fringe and maybe in certain pockets of your base with AI, then maybe those employers can actually in-house some of their onboarding or screening type of duties there. How would you respond to that? What's your opinion there? And then as a quick follow-up, great to see that you combine the databases here and building up your proprietary database. Can you just talk us through how that's delivering on data cost savings? And is there a point where -- of mass criticality where you really could see an inflection in your data cost because of the years that you've built up your proprietary database? Scott Staples: Steven, I'll take the first part, if you take the second part. So on the AI disruption, Pete, I mean, my short answer is no chance. Customers do not want to do this. This is not where they want to spend their engineering dollars and resources, and it's extremely complicated. It's loaded with compliance. There's not a lot that they're going to do internally with AI through the screening process. Now that's not true with recruiting. I think AI is fully in play with recruiting, and it's having great results. So using AI-driven recruiting tools in the front end of the recruiting process makes a lot of sense. But that only feeds then better information to us. We see AI as a real lift in quality because AI should improve the intake of data at the very front end of the recruiting process so that when it then comes to us, to then run a digital identity, to then kick off a background screen to then onboard an I-9, we have better data because AI has helped with the quality of that data. So whether it's a picture capture, whether it's a biometric capture that the AI is doing, whether AI is helping the candidate fill out the application to make sure that they're putting in their address correctly, their name is -- all instances of their name are captured, first name, middle initial or -- and last name and capturing maiden names, all that kind of stuff, it only helps us. But it doesn't infringe any way on our business model. In fact, it's an improvement in quality, which actually also could help with an improvement in turnaround times because the better data we get from an ATS or from an AI-enhanced recruiting engine, it makes our job that much easier. But I think with all of the FCRA compliance laws, with all of the unique thousands and thousands of data sources that need to be hit, I don't see customers doing this themselves in any scenario. Steven Marks: Yes. And then, Pete, on your data question, I think there are 2 things there. One, I mean, leveraging the data assets and resources of the 2 combined companies has been a core part of our cost of sales component of our synergy program. And as you can see, where we're at on that time line, we're already above and beyond the original $50 million target. So we're doing well there and leveraging those in many places in the business. But to Scott's earlier point on the Q&A, we're a tech company at heart and tech companies love data. And we'll continue to invest in ways to grow our databases. And when we give out the full year numbers at the end of the year on the Q4 call. You'll see growth in our NCRS, you'll see growth in our verified databases. And then it's not just growing the databases, it's leveraging them in as many ways as possible, but that will continue to be a storyline in a way that we improve the quality of our products, improve the quality of our P&L and cash flow, but it's always going to be a part of our story here. Scott Staples: Pete, yes, one other thing I'll add to it is -- and again, this kind of ties back to retention. I know I didn't mention this when I got the retention question earlier. But we have literally been automating internal processes and automating our APIs to data sources literally for 10 years now. And for some reason, over the last year or so, we are starting to get amazing accelerated payback on this. So clients are actually feeling our fast turnaround times. And we've also particularly solved some of the sticky data source -- known data source issues in our industry, certain counties or certain states or whatever it might be. And so when you sit down and do these business reviews with customers and you show them that their turnaround times are coming down and they feel that their turnaround times are coming down because of our investments in automation. And again, that's all in the First Advantage back end that we talked about. And now Sterling customers, our legacy customers are starting to feel this now too because we're using our fulfillment engine on the back end for them. That helps with customer retention. And that is just -- the power of that is showing up in the retention numbers. And again, this is something that our competitors just don't have. We are light years ahead of them. And this is a big competitive moat for us. Operator: Thank you. I see no further questions in the queue. Thank you all for joining us today and for your participation. This concludes the First Advantage Third Quarter 2025 Earnings Conference Call and Webcast. At this time, you may now disconnect your line. Have a wonderful day.
Operator: Good morning, and welcome to the Perella Weinberg Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I will now turn the call over to Taylor Reinhardt, Head of Communications and Marketing. You may begin. Taylor Reinhardt: Thank you, operator, and welcome, all. Joining me today are Andrew Bednar, Chief Executive Officer; and Alex Gottschalk, Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Perella Weinberg's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to Perella Weinberg's most recent SEC filings for a discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations, and the firm undertakes no obligation to update any forward-looking statements. During the call, there will also be a discussion of some metrics which are non-GAAP financial measures which management believes are relevant in assessing the financial performance of the business. Perella Weinberg has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results. Andrew Bednar: Thank you, Taylor, and good morning. Today, we reported third quarter revenues of $165 million and year-to-date revenues of $532 million. While not records as we reported last year at this time, the underlying fundamentals of our business remain strong and continue to strengthen. The number of active engagements is at a record, our overall pipeline is at a record and our European business is up over 50% from last year. In addition, the number of fees above our target has increased meaningfully, and both our average fee and median fee across engagements are up as well. We've been deliberate in pursuing clients and assignments where we can add the most value, focusing our teams on complex, consequential transactions where our advice to clients matters the most. Year-to-date, we have made the most significant annual investment in our firm's history, adding 25 senior bankers across sectors and regions. The partners who joined us in 2025 alone represent 18% of our total partner base, a clear signal of our commitment to scale and a large source of potential future revenue. On October 1, we closed our acquisition of Devon Park, and the impact has been both immediate and notable. This transaction brought us a new capability, new capital relationships and new sponsor clients overnight, meaningfully expanding our addressable market and revenue potential. The timing of our acquisition could not have been better, with the secondaries market expected to exceed $200 billion this year as sponsors increasingly turn to continuation vehicles and other creative solutions to manage liquidity needs. Additionally, we are seeing private equity moving off the sidelines with a substantial exit backlog building for 2026. The business building we've done this year is significant, expanding our client coverage and capabilities in strategically active industries for both corporates and private equity. We remain confident in our scaling strategy and believe these investments will drive significant revenue growth for our firm and create value for our shareholders. With that, I'll now turn the call over to Alex to review our financial results and capital management in more detail. Alexandra Gottschalk: Thank you, Andrew. Our third quarter revenues of $165 million included $8.5 million related to a closing that occurred within the first few days of the fourth quarter, in which in accordance with relevant accounting principles, was recorded in the third quarter. Consistent with the first 2 quarters, our adjusted compensation margin remained at 67% of revenues. Our adjusted noncompensation expense of $37 million for the quarter was down from last year and roughly flat with Q2. For the 9-month period, noncompensation expenses totaled $122 million, up 5% from last year. Given our continued expense discipline, we are lowering our guidance further to a low single-digit increase for the full year 2025. Our adjusted tax rate for the first 9 months was 4%. Excluding the benefit from stock-based compensation vesting at a higher price than the grant date, the adjusted tax rate would have been 32%. Turning to capital management. In the third quarter, we returned an additional $12 million to equity holders, primarily through the net settlement of RSUs and through dividends. Share repurchase activity during this quarter was limited as we prioritize deploying capital towards strategic investments, including the Devon Park acquisition. Year-to-date, we have returned more than $157 million to equity holders through dividends, the net settlement of RSUs, open market repurchases and unit exchanges. In 2025, we have retired more than 6 million shares, and our commitment to proactively managing our share count remains unchanged. At the end of the third quarter, we had 65 million shares of Class A common stock and 23.5 million partnership units outstanding. Finally, we closed the quarter with $186 million in cash and no debt. And this morning, we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions. Operator: [Operator Instructions] We'll take our first question from Devin Ryan of Citizens Bank. Devin Ryan: First question, kind of a two-parter here. Just on -- Andrew, some of the pipeline commentary, so obviously heard kind of the record point. We're seeing a lot of non-M&A activity that doesn't seem to be getting picked up in the public data sources like debt advisory, et cetera. Can you talk about the mix of the pipeline? Is it more geared toward non-M&A right now? Or maybe it's just the M&A is less visible? And that's kind of the point -- part 1 of the question. And part 2 is on the timing of the pipeline, should we expect normal fourth quarter seasonality, positive? Or is it more geared toward 2026? Andrew Bednar: Yes. Thanks, Devin. I think on the look back, the mix is a bit more in the nontraditional M&A. So if you look back in the last 3 quarters, our liability management business, our capital raising business, Rx business are all showing very good growth through the course of the year. The pipeline, however, continues to show a significant increase in traditional M&A business. And as you know, it's really challenging to predict when transactions will get announced and closed. And as you also know, we are very much still early innings in scaling our business. But when I look at those indicators that you guys don't see in terms of new business reviews, engagement letters, the mandates, the announcements that we expect in the course of the next several weeks and months, those all look very positive. And they're all much more weighted to traditional M&A versus our other products and services that we provide. Devin Ryan: Okay. Great. And then just a follow-up on the recruiting environment, but then also the success you've had today, both external recruiting in 2025, but then also the acquisition as well. So 25 bankers, obviously, is a lot to digest in a year, but great for kind of forward momentum. Can you just talk about how these bankers are ramping on the platform? Are they going to be additive to 2026? Or is it further out than that? And then just more broadly, kind of the momentum in recruiting, can you do another kind of big year in 2026? Is that the expectation? Andrew Bednar: Yes. Of the 25 senior banker adds, 9 are already on the platform. So they will just continue to grow and expand their client base and hopefully contribute to revenue more near term. The external hires are the remainder, so we've got 16, including Devon Park. And we're very excited about those adds. They're in terrific industries and in areas where we have a right to win. And we think that they will be contributing to our business during the course of '26. I think with 7 weeks left of '25, it will be a bit of a high bar to have them announce and close transactions by the end of the year. But again, looking at the forward indicators, these new partners where we have about now, 25% of our partners are here less than 2 years, that cohort seems to be hitting the ground running. And with the addition of Devon Park, as I said, that's different because that provides us with a new product category and a new group of clients that we didn't have prior to the acquisition. So that, for us, is a game changer because you get nonlinear growth and synergy out of that type of transaction where that product capability now is across 75 partners. So we're really excited about Devon Park and that capability. Our clients have been very excited that we have that capability. And that's, as I said in my upfront comments, Devin, that the timing of that feels quite good. Operator: Our next question is from Alex Bond of KBW. Alexander Bond: I just wanted to ask on the restructuring backdrop. Can you just maybe update us on what you're seeing in terms of the broader backdrop here in overall client engagement levels? Some of your peers have sounded a little bit more upbeat around restructuring volumes, while others have noted they've seen somewhat of a slowdown in new activity recently. Maybe have you seen any slowdown in recent weeks? And also, has there been any shift in terms of the mix between in-quarter, more traditional restructurings versus LME activity? Andrew Bednar: Yes. Thanks, Alex. We're seeing just a very steady pace of activity in our broad liability management business. I know there's been a lot of press reported about some cracks in credit markets and a couple of high-profile bankruptcies. We don't see that as something that's systemic. Those feel more isolated. But there are still a large amount of clients, a large number of clients that need assistance with managing balance sheet, in some cases, managing liquidity, and in some cases, going through a traditional workout or bankruptcy. So for us, that business continues to grow. That will be a higher contributing business this year than last year, and that team continues to generate increasing revenue. We feel very, very good about our setup for '26. Alexander Bond: Okay. Great. That's helpful. And then maybe just on the private capital side, now that the Devon Park deal has closed and those folks are on the platform, just trying to think about how soon or maybe how quickly we should expect that area of the business to meaningfully contribute to the revenue base? And maybe if there's any way to size up the potential contribution from that team relative to the M&A and restructuring sides once that team is fully up and running? Andrew Bednar: Yes. So we're doing our planning in terms of looking at targets and what our expectations will be for our groups heading into 2026, and we are going to treat the Devon Park business now, fully part of Perella Weinberg as a group in terms of the expectations we have. And we think this will be a significant contributor, much like our other groups. We have 6 groups that are across our platform, plus our restructuring business. So we're expecting that we just do the simple math on our revenue, and we expect Devon Park business to be that kind of contributor to our overall franchise. And as I said earlier, we have 75 partners, all of whom have private equity relationships and relationships with private credit, infrastructure and real estate, which is where we really cover in the Devon Park business. So we're very excited about the product capability, which, again, a couple of months ago, we didn't have. And last year, we had 0 revenue in this area. So we're very excited about the setup there. Operator: This concludes the Q&A portion of today's call. I would now like to turn the call back over to Andrew Bednar for any additional or closing remarks. Andrew Bednar: Okay. Thank you, Leo, and thanks, everyone, for joining us today. I also want to specifically thank our exceptional team. They have been working tirelessly, both in recruiting top talent for our firm this year, but also of course, in covering our clients and their unwavering and very enthusiastic dedication and commitment to our mission, as these are the things that make our firm great. So we look forward to updating you on our progress next quarter, and thank you for your continued support. Operator: This concludes the Perella Weinberg Third Quarter 2025 Earnings Call and Webcast. You may now disconnect your line at this time, and have a wonderful day.
Operator: Good morning, ladies and gentlemen, and welcome to the Emera Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Friday, November 7, 2025. I would now like to turn the conference over to Dave Bezanson. Please go ahead. David Bezanson: Thank you, Joanna, and thank you all for joining us this morning for Emera's Third Quarter 2025 Conference Call and Live Webcast. Emera's third quarter earnings release was distributed this morning via Newswire and the financial statements, management's discussion and analysis and the presentation being referenced on this call are available on our website at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer; Greg Blunden, Emera's Chief Financial Officer; and other members of Emera's management team. Before we begin, I'd like to advise you that this morning's discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide. Today's discussion and presentation will also include reference to non-GAAP financial measures. You should refer to the appendix for a reconciliation of historical non-GAAP measures to the closest GAAP financial measure. And now I will turn things over to Scott. Scott Balfour: Thank you, Dave, and good morning, everyone. Emera enters these last months of 2025 with solid momentum. Our third quarter marked our fifth consecutive quarter of strong adjusted earnings growth, which has been underpinned by disciplined execution and customer-focused investments and reflects both the strength of our strategy and the quality of our portfolio. With a record $3.6 billion in capital investment this year and a newly extended 7% to 8% rate base growth profile, and a $20 billion capital plan through 2030, we're confident in our ability to continue to deliver sustainable value for customers and shareholders alike. This morning, we reported third quarter adjusted earnings per share of $0.88, a nearly 9% increase over the same period in 2024. Year-to-date, adjusted earnings per share of $2.94 represents a 14% increase over the same period in 2024. The progress this year sets us up well to deliver on our 5% to 7% adjusted earnings per share growth guidance through 2027. In September, our Board of Directors approved a 1% dividend increase, our 19th consecutive year of annual increases. This continued growth in our dividend reflects our confidence in the strength of our premium asset portfolio and our ability to deliver consistent earnings and cash flow growth. We remain focused on delivering value to all stakeholders and we're delivering. We're on track to deliver our largest annual capital spend of $3.6 billion in 2025, with more than $2.6 billion already deployed across key projects, including solar and reliability investments at Tampa Electric, energy storage and transmission upgrades in Nova Scotia, and gas infrastructure at Peoples Gas, and we remain on track to fully execute on our full year plan. Looking forward, our 2026 to 2030 capital plan adds $20 billion of essential investment across our portfolio, enabling us to continue to deliver the reliable energy our customers expect. Like many across the sector, we see increased demand for core investments in reliability, resilience, modernization and generation capacity driven by key market conditions, such as accelerating demand growth, changing grid configuration, renewables integration and of course, electrification. Put simply, there is no shortage of investment opportunity across our portfolio. Our capital plan thoughtfully maintains our 7% to 8% rate base growth trajectory as we remain focused on pacing our capital investment in a way that best delivers value and manages cost impacts for customers while also delivering solid and sustainable growth for investors. Affordability for customers is an important consideration that we must balance with the need to invest in our systems to ensure we were able to reliably deliver the energy our customers need. Since our acquisition of Tampa Electric in 2016, Tampa Electric's rate base has grown by more than 8% annually, driven by investments to support the delivery of essential service to our customers. Over the same period, Tampa Electric's bill increases have remained below the national average. Our success in managing customer cost impacts is driven by prudent cost management, smart investments and a focus on strategic initiatives that deliver value for customers. For example, our solar investments in Florida have saved customers more than USD 350 million in avoided fuel costs. In Nova Scotia, investments required to meet growth in the province to maintain reliability in the face of increasing severe weather and to support government policies of closing coal plants are also driving rate base investment and growth. And we're working to find creative solutions to minimize the impact on customer rates. Last year, Nova Scotia Power is supported by both federal and provincial governments, we securitized more than $600 million in fuel costs and the recently filed consensus general rate application proposes an additional $700 million of securitization related to a portion of Nova Scotia Power's thermal generation assets. These steps are helping to minimize near-term customer cost impacts and demonstrate the thoughtful approach we continue to take in managing rates for customers. Florida continues to be a powerful engine of growth, with robust population and economic expansion driving increased demand for electricity and natural gas. In the last 5 years, Florida has experienced nearly 38% GDP growth. And in 2024, it was the #1 state for net migration and experienced the second highest population growth in the country. To support that growth, more than 80% of our capital plan will be deployed here. The influx of new customers has translated into increased demand for both electricity and natural gas across both residential and commercial sectors. At Tampa Electric's capacity needs grow as a result of economic development, our 2026 to 2030 capital plan includes approximately $1.2 billion of transmission expansion and capacity improvements, averaging approximately $240 million of investment per year. This is in addition to the more than $2 billion of anticipated ongoing spend on solar and complementary energy storage projects, which will result in 2,100 megawatts of solar to be in service by the end of 2028. At Peoples Gas, our investments will be targeted at bringing new customers online as we see continued growth in natural gas demand. In addition, our investments will continue to focus on hardening the system and increasing reliability for customers. As a direct result of the growth we continue to see in Florida, we expect rate base growth from our local utilities to outpace the average of our consolidated plan with these investments driving 8% to 9% rate base growth through 2030. And with the recently approved settlement of Peoples Gas and last year's Tampa Electric rate case, both of which include subsequent year adjustments, we are pleased to have regulatory clarity in support of our investment in rate base over the next 3 years. I'd like to acknowledge that a capital plan of this size is not just numbers on a page. It requires a team of dedicated professionals to execute on. I'm very proud of our teams across all our companies that year after year developed thoughtful plans to take our customers' current and future needs and government regulations and policies into consideration, anticipate what it will take to execute and then go out and deliver on these plans, safely and efficiently. We made a meaningful regulatory process in 2025. The Florida Public Service Commission approved the Peoples Gas settlement with USD 67 million of new rates to go into effect in 2026 and subsequent year adjustments of USD 25 million and USD 5 million in 2027 and 2028, respectively. The settlement agreement also reflects a 15 basis point increase in return on equity, bringing it to 10.3%. This agreement helps to manage regulatory lag and the recovery of investments and important reliability and distribution expansion needs across the state. Earlier this week, the FPSC formalized Tampa Electric's 2026 base rate increase of USD 88 million, which was approved as part of their 2024 decision. In Nova Scotia, the utility filed a consensus general rate application with the Nova Scotia Energy Board in September, requesting new rates for 2026 and 2027. This consensus GRA reflects agreement reached with all customer representatives following extensive engagement and constructive collaboration with key stakeholders across the province. The hearing has been scheduled for January 2026, and we expect a decision and new rates early next year. The GRA enables critical reliability and infrastructure investments necessary to support the needs of Nova Scotians, which are reflected in our updated capital plan. If approved as filed, the settlement provides Nova Scotia Power with a path to return to earning its approved ROE in 2026 and 2027. Finally, at New Mexico Gas, the sales process is proceeding. The regulatory hearing began earlier this week, and we remain confident in obtaining regulatory approval in early 2026. Before turning the call over to Greg, I wanted to highlight that while we extended our rate base growth forecast today through 2030, we've maintained our 5% to 7% adjusted earnings per share growth guidance through 2027. We plan to roll forward our EPS guidance on our fourth quarter call in February of 2026. And with that, I'll turn the call over to Greg. Gregory Blunden: Thank you, Scott and all of you for joining us this morning. Turning to our financial highlights. This morning, we reported third quarter adjusted earnings of $263 million and adjusted earnings per share of $0.88, compared to $236 million and $0.81 in the third quarter of 2024. This represents a 9% increase in our Q3 earnings per share. Year-to-date, we reported adjusted earnings of $878 million and adjusted earnings per share of $2.94, compared to $603 million and $2.10 per share in 2024, representing a 40% increase in earnings per share over the same period in 2024. The robust earnings growth the business has delivered so far has translated into a 23% increase in operating cash flow compared to the same period last year when normalized for fuel and storm deferrals. In addition, recently, we issued USD 750 million in hybrids, effectively replacing the expected proceeds from the sale of New Mexico Gas this year and derisking our hybrid maturity in 2026. This quarter's cash flow growth, in addition to the hybrid offering in late September has delivered an over 150 basis point improvement in our key credit metrics since this time last year, bringing us to 11.9% on a trailing 12-month basis for the must-watch Moody's metric. Turning to the drivers of our third quarter results. Adjusted earnings per share increased $0.07 to $0.88 compared to $0.81 in Q3 2024. At Tampa Electric, new rates in 2025, reflecting the level of capital we've invested on behalf of customers and continued customer growth increased contributions by $0.16 compared to the third quarter of 2024. Contributions from our other electric utilities modestly increased due to lower operating costs and a slightly stronger U.S. dollar increased adjusted earnings by $0.01 during the quarter, while a higher share count decreased adjusted earnings per share by $0.03 compared to 2024. Contributions from our Canadian Electric Utilities decreased $0.04 compared to the third quarter of 2024, primarily driven by higher operating costs and higher depreciation expense. Timing differences in the valuation of long-term compensation and related hedges primarily related to a large gain recognized in 2024 drove a $0.02 increase in corporate costs compared to the third quarter of 2024. And at Emera Energy, favorable weather conditions that led to higher natural gas prices and increased volatility, modestly increased contributions from marketing and trading, but this was offset by lower earnings at Bear Swamp due to an outage. And at our Gas Utilities, lower contributions from New Mexico Gas and Peoples Gas decreased earnings by $0.02 compared to the third quarter of last year. Year-to-date adjusted earnings per share is up $0.84 compared to the same period in 2024, many of the drivers for the quarter are the same as for the year, but there are a few items I'd like to highlight. In addition to new rates at Tampa Electric in 2025, driving increased earnings year-to-date, favorable weather conditions in Florida contributed $0.07 year-over-year. The timing differences in the valuation of long-term compensation related hedges and the reversal of a valuation allowance on deferred tax assets, also drove lower corporate costs. The weakening Canadian dollar increased the earnings contribution from our U.S. operations by $25 million for the year, contributing $0.09 year-to-date. Emera Energy's year-to-date performance reflects the record first quarter where cold weather in the Northeast early this year brought higher pricing and market volatility that the business was able to capitalize on. As a result, in the first quarter of this year, we adjusted Emera Energy's earnings guidance up to a range of USD 35 million to USD 45 million. And contributions from Canadian Electric Utilities benefit from the recognition of investment tax credits related to the ongoing energy storage projects and favorable weather in Nova Scotia in the first quarter of 2025. This was partially offset by the sale of our equity interest in Labrador Island Link in June of 2024. Our capital plan for 2026 to 2030 is similar in size to our previous capital plan, and that is true for our funding plan as well. The only change in our funding plan this year is the inclusion of the proposed asset securitization at Nova Scotia Power that Scott mentioned earlier. The largest source of funding for our new $20 billion capital plan will continue to be reinvested cash flows from our operations. We expect organic cash flow generation to provide 45% to 50% of our funding needs. We expect debt to be issued by our operating companies to support staying in line with the regulated capital structures. And at the holding company, we expect to maintain our holding company debt at 30% to 35% of total debt. As Scott mentioned in his regulatory update, a final decision on the sale of New Mexico Gas is expected in early 2026, and we remain confident in a constructive outcome. Proceeds from the sale will be used to fund approximately USD 700 million of our capital plan. And in addition, Nova Scotia, the expected securitization of thermal assets will contribute an additional CAD 700 million for our funding needs. We continue to expect to access equity markets through our DRIP and ATM programs for up to 10% of our funding needs, supporting the strong profile of organic growth reflected in our $20 billion capital plan. On average, this represents approximately $400 million of equity annually. And we believe hybrid capital has an important role to play in meeting our funding requirements and are pleased with the competitive rates we accessed in the hybrid market a few weeks ago. The 50-50 debt equity treatment by rating agencies makes them attractive tools that we will strategically access to fund up to 5% of our funding plan. And with that, I'll now turn it back over to Scott. Scott Balfour: Thanks, Greg. Before I move into my closing remarks, I want to take a moment to acknowledge that after nearly 10 years, this will be Greg's last earnings call as CFO. On behalf of all of us at Emera, I'd like to thank Greg for his significant contributions over the last decade. Over his tenure, Greg helped the company to navigate a challenging macro environment, unexpected headwinds driven by policy changes and help to absorb our transformative acquisition of TECO. Thanks to Greg's leadership today, Emera is on solid financial footing and well positioned to execute on the organic growth we see ahead. And importantly, I'm pleased that Greg will continue to be part of the team in his new role of Executive Vice President, Finance for our U.S. Utilities supporting our largest and fastest-growing businesses. We also look forward to welcoming Jared Green to the Emera team as our CFO as of December 1. Greg will, of course, work closely with him to ensure a smooth and seamless transition of finance responsibilities, as Jared steps into his new leadership role at Emera. More broadly, for everyone in our industry, this is a critical time to invest in meeting growing demand while strengthening resilience and improving efficiency and, of course, being focused on affordability for customers. Emera will continue to build on our strong momentum, executing our customer-focused $20 billion capital plan at a pace that best manages cost impact for customers. With a strong foundation, premium portfolio of assets and expert teams, we will continue to deliver value for customers and shareholders alike and achieve our targeted adjusted per earnings per share growth. This concludes our formal presentation, and we now open the call for questions from our analysts. Operator: [Operator Instructions] The first question comes from Rob Hope at Scotiabank. Robert Hope: And Greg, all the best. Thanks for all the years. Okay. Maybe just taking a look at the capital forecast. So if we compare the capital forecast that you put forward today versus your prior one, there seems to be a little bit of a different shape specifically a little bit less capital here in the next couple of years, looks like across the board and maybe a little bit more in kind of that '29, 2030 time frame. Can you maybe speak to kind of how some of the capital has been shifted as well as kind of what the key drivers are there? Gregory Blunden: Yes. Rob, it's Greg. I think there's a couple of things. One of the things that you may notice is that some of the planned capital at Tampa Electric for the '26 and '27 period. Some of that has been accelerated into 2025, in particular, around some of our solar investments and getting in front of some of the uncertainty that we see from a policy perspective a couple of years out. And secondly, as part of the rate settlement at Peoples Gas, there was an agreement with intervenors that some of the capital we had planned to spend, it would be better to profile that out over a little bit longer period of time. So that would be an example of a couple of things. Robert Hope: All right. Appreciate that. And then maybe once again on the capital forecast. What -- how do you think about your credit metrics as being a governor or maybe to ask us a different way, are you seeing potential upside to the forecast? And would you be willing to go there if it did require some incremental equity? Gregory Blunden: I think as Scott said, Rob, there's no shortage of opportunities to deploy capital in our business. I think it's a question of pace. And when we look at that, we look through all lenses in terms of the ability to execute the lead times on certain equipment, the impact on customer rates and whether there's any kind of regulatory lag associated with large capital projects and, of course, funding and credit metrics are part of that as well. But like I think many companies in our sector, we're not going to shy away from issuing equity if we need to, to fund accretive capital projects in our businesses. Operator: Next question comes from John Mould at TD Cowen. John Mould: First, best wishes to Greg on the next step, and thanks very much for your assistance. I'd like to just start appreciating it's early days here, but starting with Wind West. It continues to be topical across political levels came up in the federal budget. I appreciate any involvement by yourselves would be on the transmission side. But wondering what conversations have you been a part of on this initiative? How are you thinking about potential scale and timing? And maybe just higher level comments on the broader opportunity for Emera that could come from this push on projects of national importance. Scott Balfour: Yes, John, thanks for the question. And I may get Peter to add on to perspective you hear from me here. So first of all, obviously, it's still very early days on all of these projects of national interest that are all at various stages of planning activity, some -- as you know, the SMR program in Ontario is already under construction. And I think from a broad perspective, from Emera's perspective, we're here, we're interested in seeing how this progresses. We're cheering the premier on certainly for his bold vision as it relates to the Wind West initiative. I'm pleased that the federal government seems to have been captured with that vision and enthusiasm. But of course, it is still very early days, we'll be looking to support the premier's initiative in any way that we can. You're right, we would not naturally look to be participating in offshore wind development. That's not our game. But if we can be assisting those developers with subsea connection into Mainland Nova Scotia, we can be assisting and participate in the transmission build requiring to bring that energy to broader markets beyond Nova Scotia. Of course, we're interested to be doing that. We'll be paying attention, of course, to the Budget Implementation Act, which is expected in the coming weeks. It will increasingly provide more clarity. We will support the office of the -- that is organizing these projects of national interest led by Dan Farrell in any way we can. So at this point, we're early days. We're trying to be helpful to the parties that are there, and there's still a lot of questions to answer as to where this project sits and its timing. But overall, I think it's exciting to see that the focus of the federal government and many premiers is on enhancing and building national infrastructure in Canada, and we'll be pleased to play any part in that, that we can. Peter, anything you want to sort of add a little more Nova Scotia perspective within that? Peter Gregg: I think you covered it really well, Scott. But I'd just say, I think the potential for that East-West transmission is real. We've looked at that in the past. I think it's an exciting opportunity getting a lot of attention at both the provincial and federal level. I think the opportunity to start optimizing generation resources through transmission links in the region is something we should look at. I think it's good for Nova Scotia, and I think it's good for Atlantic Canada. So we'll continue to stay close to the conversation and see what happens. John Mould: Okay. Great. And then just going back to the capital plan and the generation aspect in Florida, you commented earlier about the magnitude of customer savings that solar investments in Florida have brought through avoided fuel costs. Just curious, as you work through your capital plan, how did all the moving pieces with the federal tax credits and some of the [ FEEAC ] concerns or uncertainty effect where you landed in terms of the timing of generation spend and whether there's potential for further customer saving investments there if you do get further clarity on some pieces of that puzzle. Gregory Blunden: Yes, John, it's Greg. Yes, the fuel savings that Scott referred to, obviously, is related to the build of the solar in our service territory that is obviously economic for customers, and part of that is the availability of tax credits. And if I go back to my comments in response to Rob, that's one of the reasons why we've accelerated some of the otherwise planned solar investments for the next couple of years is to advance those projects, realize the savings for customers earlier and also just get in front of what could be some policy uncertainty in the next couple of years. So it hasn't changed our overall plans, but on solar, in particular, a little bit more sooner rather than later. Operator: The next question comes from Maurice Choy at RBC Capital Markets. Maurice Choy: Can I just start with the Nova Scotia rate case? I wanted to specifically ask about your engagement with the Nova Scotia government proceeding up to the settlement and even after the filing with the regulator, particularly given the government's public comments about the rate impact, and with that, what can be done to avoid the outcome that we saw in 2022? Peter Gregg: Thanks, Maurice. It's Peter again. I think obviously, affordability is on a lot of people's minds, including our premier. I won't speak for the premier. But when we look at how we came to this filing, and I think it's important to underline that it's a consensus filing, as Scott mentioned, with all of the customer representatives. So we spent several months working with them. I think we found the path to balancing reliability and affordability through this rate case. So I think it's significant that it is a consensus agreement that was filed. And we're on a path to that hearing in early January. Obviously, you would imagine there have been ongoing discussions with provincial officials for months, those continue. We do have a productive relationship with officials inside the government, and we continue those discussions. I think it's important, too, that the premier statements, while he's concerned about affordability and I understand that, his statements have also been that they will become intervenors in the process, the regulatory process, which is normal, that the government does have a lawyer that participates in that. So that's our expectation. We'll continue to prepare for the hearing in January. Maurice Choy: Maybe as a quick follow-up. Are you detecting any differences in, say, body language or engagement that would avoid the legislative intervention? Peter Gregg: No, no. We continue to have those discussions with, I'd say, partners in government on a number of files, a number of issues. We'll stay close to that. But again, I think the strength of the filing in front of the regulator because we spent all of that time with all the customer representatives. I think, has struck that right balance between reliability and affordability. Maurice Choy: That's great. And if I could just finish up with a discussion about credit metrics and payout ratio, I wasn't much mentioned here about credit metrics. And I remember, Greg, that previously, you mentioned that the funding plan supports about a 50 bps improvement annually in your cash flow to debt metrics as well as payout ratio towards 80% by 2027. Just thoughts on what the funding plan and CapEx plan today... Gregory Blunden: Yes, I think -- thanks for the question, Maurice. Yes, nothing has changed from our view with the funding plan is consistent with what we had before and with the soon to be closing of the sale of New Mexico and the securitization of the thermal plants or assets at Nova Scotia Power. We fully expect to continue to have that level of improvement in our credit metrics over the next couple of years. So we're very pleased about that. On a trailing 12-month basis, we are at our downgrade threshold or a threshold with Fitch now who has us at stable. We've got about 150-plus basis point cushion on our downgrade threshold at S&P, they have us at stable. And as I mentioned in my remarks, we are effectively at the 12% with Moody's as well. So albeit we're still on negative outlook. So all to say is we've accomplished what we needed to do and the path for further improvement over the next couple of years has not changed. Operator: The next question comes from Eli Jossen at JPMorgan. Elias Jossen: Just wanted to kind of start on the strategic leadership changes. Congrats to Greg on next steps and Jared and the rest of the team just top priorities going forward. I think the release highlighted a lot of the strategic goals for the business, but just from a very high level, how should we think about this leadership transition moving forward? Scott Balfour: Yes. Eli, thanks for the question, and welcome to Emera. So yes, I mean, this is really just about continuing to strengthen the bench as we've shared with others in the past, Greg and I are within months of the same age and looking to bring Jared in and just continue to strengthen the bench. We're blessed with -- I'm blessed with working with a great team. And as I say, pleased that Greg can continue to contribute to the team and adding Jared on just continues to bring some fresh talent and fresh perspective and position us well for the future. And we've got great talent those that are on this call and their teams underneath them. We're, as I say, blessed with a team of really terrific people. We don't -- I don't use that term in the call script, expert teams lately, I really believe that we've got a deep bench and a strong team and just continue to think about ensuring that succession planning in the years ahead, continues to be thoughtful as we've navigated in the past with a number of executives retiring and not missing a beat and keeping the momentum that we've got a strong performance through the piece. So just looking to continue to do that. Elias Jossen: Great. And then maybe just pivoting to some of the attractive growth that's been discussed on this call in Florida. So I guess, can we just talk a little bit about potential pockets of upside beyond the plan that you see, whether that's in the near or longer term? What do those look like from a mix shift industrial possible data center opportunities across your service territory? Scott Balfour: Yes. I think Eli, I would say, first of all, I'd anchor back to the point that Greg made, which is there is no shortage of capital for us to invest. We could easily put forward a capital plan that saw significant more CapEx over the next couple of years. But we're working really hard to balance that capital investment profile with the impact on affordability for customers. And at the same time to make sure that we can execute it both safely, but also cost effectively and construction capacity and supply chains in this market are constrained. And so there's risk that in the ability to execute with excellence as I think we have over the years in our capital programs. And so that is sort of home base for us. Now as you mentioned, data centers, data centers have not yet been a part of our story. But I would say that we continue to see active interest in and by the data center side of things in our service territories, of course, particularly in Florida. And there's nothing material that we're in a place to share now, but it continue to be encouraged by the conversations. And I would like to think that we may see some opportunity to grow at the very least to make sure that we're sustaining that 7% to 8% rate base growth for durable time, which I continue to believe. But over time, we may see some opportunity to upside that. But as we sit today, we've continued to believe that 7% to 8% rate base growth profile is kind of the sweet spot, and data center growth may help to support the affordability impacts on broader customers if we can use some of that revenue generation from data centers to mitigate cost impacts for the broader system. This is all part of the equation that every utility I know is dealing with. And as we sit today, as I say, that 7% to 8% growth is home base for us, and we see that as durable for a long time. Operator: The next question comes from Mark Jarvi at CIBC Capital Markets. Mark Jarvi: Scott, when you guys gave EPS guidance, I think you said you wanted walk before you run and weren't comfortable going out to sort of 5 years. As you think about rolling over guidance next year, is the plan to stay with that 3-year guidance? Or would you line that up with the capital plan to 5 years? Scott Balfour: I mean, we haven't fully landed on that yet, Mark, but I would reasonably expect that we'll stick with the 3-year forecast for now. Mark Jarvi: Got it. And then just one question on Maritime Link. It's depreciating asset kind of a bit of a drag on the rate base CAGR. It doesn't require capital. But what's your view on that asset? Are you wedded to it? Is there a lot of strategic value when you think about potentially some of the transmission opportunities in the Atlantic provinces, just sort of long-term view on that asset? Scott Balfour: Yes. It's a pretty strategic asset, I think. I mean it really is just an extension of Nova Scotia Power. It's regulated by the same regulator as Nova Scotia Power, all of that cost profile effectively it is, in a way, a generation source for Nova Scotia Power through import through the Maritime Link. So it really is tagged with Nova Scotia Power. And the only reason really it was separated into its own distinct entity was for financing purposes, and being able to secure the federal loan guarantee. The federal government was looking to ensure that, that asset was physically separated -- legally structurally separated from Nova Scotia Power. So I'd really think of it as an extension of Nova Scotia Power. Mark Jarvi: Would there be an opportunity to maybe do like a minority sale if you saw some other opportunities to continue to push rate base investments across your portfolio? Scott Balfour: We've always got options like that, Mark, but not something that we're thinking of or pursuing at the current time. Operator: [Operator Instructions] The next question comes from Ben Pham at BMO. Benjamin Pham: I have a follow-up question on the Mark's query on the EPS CAGR. I'm wondering from the Emera perspective, when you think about setting the CAGRs and that starting year, you roll forward. How do you guys thinking about '25 as a base just because you had the marketing trading benefit and Tampa rates going up, like it's a high starting point that it's tough to get a CAGR that looks similar to the last or the current CAGR that you have right now? Scott Balfour: And I think -- sorry, go ahead Greg, if you want it. Gregory Blunden: Yes, Ben, I think if you think back to when we first established it, there was a couple of, I'd call it, baseline assumptions that was embedded on the 5% to 7%, and that was that Emera Energy would earn kind of their midpoint of their earnings range of $15 million to $30 million, and it was also based off a consistent foreign exchange rate over the period. So again, I don't want to get over our skis in terms of what we're thinking about for February. But I think it's fair to assume that when we talk about going forward, EPS guidance, it would be normalizing for some of those things that were a bit of a tailwind in 2025. Benjamin Pham: Okay. That makes sense. And what we're seeing from other companies as well. Can you talk about -- I'm not sure if on Nova Scotia Power, the rate base CAGR you have here, it's been quietly creeping up over the years in a good way. What's in that rate case? What's driving that? And I assume you note here, you're normalizing for the thermal securitization, it's apples-to-apples? Gregory Blunden: Yes. We are, Ben. The rate base investments going forward in Nova Scotia Power are really focused on reliability investments. And predominantly, if I take even a step back, transmission and distribution investments. And what I would include in that also is like battery projects, battery storage. So transmission upgrades between Nova Scotia and New Brunswick, strengthening the backbone of the transmission system in the province, more vegetation management and other distribution things all the things to support the transition to an ISO in New England and ultimately getting to our 2030 renewable energy targets in Nova Scotia. Benjamin Pham: Okay. Maybe just one last cleanup question. I know there's a -- I think I saw a positive contribution from BlockEnergy, which I thought your Emera shutdown a while back, is that different now in terms of where that business is? Gregory Blunden: No, we had a settlement on a contract that we had accrued last year as part of the wind up and the settlement was more favorable than we would have anticipated. So basically, just adjusting for an over accrual from 2024. Operator: We have no further questions. I will turn the call back over for closing comments. David Bezanson: That concludes our call for today. Thank you all for joining us. Please reach out to the Investor Relations team if you have any further questions. Have a great weekend. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome you to The Hain Celestial Group First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Alexis Tessier, Head of Investor Relations. Alexis, you may begin. Alexis Tessier: Good morning, and thank you for joining us for a review of our fiscal first quarter 2026 results. I am joined this morning by Alison Lewis, our Interim President and Chief Executive Officer; and Lee Boyce, our Chief Financial Officer. Slide 2 shows our forward-looking statements disclaimer. As you are aware, during the course of this call, we may make forward-looking statements within the meaning of federal securities laws. These include expectations and assumptions regarding the company's future operations and financial performance. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations. 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 this morning for a detailed discussion of the risks. We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at hain.com under the Investors heading. As we discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and the slide presentation accompanying the call. This call is being webcast, and an archive will be made available on the website. And now, I'd like to turn the call over to Alison. Alison Lewis: Good morning, everyone, and thank you for joining today's call. I will start by providing commentary on Q1 results and will then discuss the progress we are making on our turnaround journey. Then Lee will provide a more detailed review of our quarterly results along with our outlook. First quarter results were in line with our expectations on the top and bottom line, and we have building blocks in place to drive improved trends in the back half. In the quarter, we demonstrated sequential improvement in organic net sales trends in both of our segments. In North America, Beverages, Baby and Kids and Meal Prep all turned to growth, partially offsetting the continued year-over-year decline in Snacks. The Snacks relaunch entered its execution phase in the quarter, which included the first launch of our revamped Garden Veggie platform with upgrades to oil ingredients and taste profiles, which I'll discuss more in a minute. And in International, growth in the Meal Prep category partially offset the impact from continued industry-wide softness in wet baby food following recent media coverage, which created temporary noise across the category. Ella's Kitchen remains the #1 baby food brand in the U.K. market, reinforcing the importance of our continued leadership in transparency, trust and nutritional quality through accelerated marketing and innovation. Throughout the quarter, we made tangible progress laying the operational and financial foundations necessary to drive improved performance. Our near-term priorities remain clear: stabilizing sales, improving profitability, optimizing cash and deleveraging our balance sheet. Cost discipline and the decisive actions we have taken to streamline our cost structure drove a reduction in SG&A in the quarter, and we are seeing early results from the execution against our '5 actions to win', including benefits from pricing initiatives beginning to build. As we discussed last quarter, we are committed to improving our financial flexibility through resetting our cost structure to better align with our current business. We have unwound much of our global infrastructure and have implemented an operating model designed to empower the regions and prioritize speed, simplicity and impact across the organization. We are already beginning to see results with an improvement in forecast accuracy, a reduction in inventory in North America and an acceleration in the innovation pipeline across the business. The changes to work design have been actioned and should benefit SG&A going forward, particularly in the back half. As previously mentioned, we expect these cost initiatives to drive over 12% cost reduction in people-related SG&A expenses. We expect to have additional opportunities to refine the operating model based on the outcome of the previously announced strategic review work. Further, every dollar spend across the P&L is being scrutinized to eliminate waste and ensure greater return on investments. In the quarter, we drove improvement in rate and trade by eliminating poor ROI events and inefficient spend, and we continue to see positive return on ad spend as we shift to a digital-first marketing model. Our turnaround strategy is focused on five key actions to win in the marketplace: streamlining our portfolio; accelerating brand renovation and innovation; implementing strategic revenue growth management and pricing; driving productivity and working capital efficiency; and strengthening our digital capabilities. Complexity has hampered our ability to move with speed and efficiency. We remain committed to building a winning simpler portfolio by exiting unprofitable or low-margin tail SKUs, refocusing resources on brands and categories with the highest growth and margin potential and managing product life cycles for improved long-term value. During the quarter, we executed the previously announced exit of the meat-free category in North America. Looking ahead, we are targeting the elimination of approximately 30% of our SKUs in North America through fiscal 2027, representing low value in our portfolio and enabling us to improve supply chain efficiency and shelf productivity. This includes the SKU reduction in tea we discussed last quarter. We have implemented a disciplined portfolio management review process designed to continuously assess, add or retire SKUs, maintaining an optimized winning portfolio and eliminating reliance on large episodic rationalization efforts. These actions enable us to sharpen our focus and resources to accelerate growth in our highest potential brands and categories. This year, we have accelerated our innovation pipeline and have new products launching in every category in our portfolio. Let me give you several examples. We recently relaunched Garden Veggie Snacks with the boldest renovation in its history, elevating attributes of high importance to consumers. Our new straws and puffs are made with avocado oil. We introduced a fourth straw made from sweet potato, which was the most requested new vegetable. And our cheddar recipes are now crafted with real cheese. In consumer testing, our new Garden Veggie Straws were significantly preferred compared to a leading competitor. We debuted the new items in breakthrough new packaging in late September at a key national retail partner and will expand to additional national retailers this winter and into the new year. In Greek Gods, momentum is accelerating and the brand pivoted to share growth in the quarter. Contributing to the acceleration was expanded regional availability of a larger 48-ounce format in a key club partner in the quarter. More recently, we started shipping our new single-serve offering to a key retailer and are supporting the launch with expanded digital advertising. Single-serve represents nearly 30% of the category, so the potential opportunity is large. In Earth's Best, we are continuing to build upon our strength in Snacks with the launch of the big kids snacks platform in the second half. We are expanding into new backpack territory with snacks designed to bridge the gap between toddlerhood and big kid independents. With organic power bites, organic veggie waves, organic crispy sticks, we deliver protein and fiber for high-density nutrition while balancing portability, taste and fun. In formula, we will be sponsoring a leading retailer's baby registry, the #1 registry destination in the second quarter, and we are leaning into the brand's commitment to quality. Earth's Best recently received the discerning Clean Label Project Purity Award across its full line, underscoring trust with parents and caregivers. Additionally, the brand was highlighted by Consumer Reports in August as one of the most transparent baby food brands. These accolades are important claims for our marketing to parents and caregivers. In International, Hartley's Juicy Jelly on-the-go pouches launched in the first quarter with strong retailer support helping to drive share growth in the first full 4 weeks of launch. In addition, we launched new Covent Garden 1-kilogram value pack designed to recruit larger families and rolled out flavor refreshes across the soup brands. We've extended our successful soup and the Rosseto innovation into more retailers, delivering sales growth over 25% for Cully & Sully along with share gains. Innovation planned for the back half in International include Ella's Kitchen Nutty Blends, a range of three fruit and vegetable blends with a touch of nuts, perfect to stretch taste or provide a more filling snack for 6 months and up. In addition, we're launching Ella's Kitchen Kids aimed at older kids from 18 months up. The range extends the brand into new occasions with strong nutritional standards for better-for-you alternatives. A 10-SKU range of Oaty Bars, Wild Crackers and Crispy Sticks will hit the shelves in the back half of the year. We also have two exciting nondairy beverage launches for Joya Protein. We are upgrading our existing protein range to include even more protein per serving, and we are launching ready-to-drink protein in two delicious flavors. With accelerated pipelines and launches, innovation will be a much larger part of our story going forward. We will support these launches with marketing funded by margin improvements from our revenue growth management and productivity cost savings initiatives. We are encouraged that we have one of the strongest innovation pipelines in our recent history as we aim to significantly increase our contribution from innovation to growth. As discussed, this year, we have pricing actions planned across every category in our portfolio, following a long period where our pricing did not keep pace with inflation, particularly in North America. Our International price increases implemented in late Q4 are overall delivering on plan. While there are some puts and takes by subcategory and SKU, elasticities are generally in line with expectations. In North America, as noted in our last earnings call, we are actively accelerating pricing and revenue growth management as critical levers to cover inflation, a meaningful shift from prior years. We are beginning to see the benefits contributing to Tea and Baby and Kids turning to growth in the quarter. While we executed our Tea and Baby and Kids pricing in Q1, we have accelerated revenue growth management activities for Meal Prep and Snacks through a combination of pricing, price pack architecture and premiumization. We expect the benefit from pricing to ramp up throughout the fiscal year. Further, we are making headway in optimizing trade spending. In the quarter, we reduced trade spend as a percentage of gross revenue by 40 basis points year-over-year. We expect to deliver improvement in our trade for the rest of the year as we actively analyze gross to net opportunities to maximize the efficiency and effectiveness of our trade investments. Generating operational productivity and improving working capital management have been bright spots for Hain. Last year, we delivered operational productivity savings of approximately $67 million. We have a strong productivity pipeline and are targeting more than $60 million in fiscal 2026. In addition to that operational productivity, we expect to realize substantial future cost savings from our realignment of our overhead structure that we began to implement during the quarter. From a working capital perspective, we have been deliberate in our focus on inventory reduction for the fiscal year, resetting weeks of coverage for both raw and pack and finished goods. In North America, we reduced net inventory by nearly 10% from Q4 as a result of our improved internal forecast accuracy. Further, we continue to make progress on extending terms with strategic suppliers. As I mentioned earlier, our shift to a digital-first marketing model is delivering positive return on advertising spend overall. We are engaging in new digital partnerships to drive community relationships and household penetration. New this quarter are programs like Earth's Besties, a digital CRM community marketing program, leveraging best practices from the successful Ella's Kitchen program and providing advice, support and resources to parents. And we are piloting an Ibotta partnership, utilizing performance marketing and incentives with promising early results in driving new users and incremental sales across key snack brands and soon in formula. We are heightening our e-commerce focus and continue to expect sales growth at or above category rates in fiscal 2026. In the International segment, we are growing Hartley's Jelly Pot and Sun-Pat with overall performance and momentum accelerating in September behind back-to-school execution. And in North America, tea and yogurt are growing double digits at key online retailers. We are encouraged by the early progress we are making. We have taken decisive action to strengthen our financial health, streamline operations and energize our brands, balancing near-term financial flexibility with future growth. We are focused on consistent delivery and building momentum. Our near-term priorities remain clear: stabilizing sales, improving profitability, optimizing cash and deleveraging the balance sheet. We will achieve this by creating greater financial flexibility, enabling us to invest in our brands and by executing our turnaround strategy anchored in the '5 actions to win' in the marketplace. In parallel, we continue to make good progress on our previously announced strategic review work with Goldman Sachs. We have completed our analysis and evaluation of the portfolio. We have a large number of brands with strong value where we have a right to win, and we have other areas that we are actively addressing that could further streamline our portfolio. We look forward to updating you when we are in a position to provide further detail. Now I'll hand the call over to Lee to discuss our first quarter financial results and outlook in more detail. Lee Boyce: Thank you, Alison, and good morning, everyone. As Alison mentioned earlier, our first quarter net sales of $368 million and adjusted EBITDA of $20 million were consistent with our expectations of a quarter that would be similar in absolute dollars to Q4 2025, as discussed on our last earnings call. For the first quarter, we saw an organic net sales decline of 6% year-over-year, driven by lower sales in both the North America and International segments. While not yet where we want to be, results were in line with our expectations and represented a sequential improvement from the 11% decline in Q4. The decline in organic net sales growth reflects a 7-point decrease in volume mix and a 1-point increase in price. Adjusted gross margin was 19.5% in the first quarter, a decrease of approximately 120 basis points year-over-year. The decrease was driven by lower volume mix and cost inflation, partially offset by productivity and pricing and trade efficiencies. SG&A decreased 8% year-over-year to $66 million in the first quarter, driven by a reduction in employee-related and nonpeople cost discipline as we began to implement overhead reduction actions. SG&A represented 17.8% of net sales for the quarter as compared to 18.1% in the year ago period. During the quarter, we took charges totaling $14 million associated with actions under the restructuring program, including employee-related costs, contract termination costs, asset write-downs and other transformation-related expenses. To date, we have taken $103 million in charges associated with the transformation program, which is comprised of $100 million of restructuring charges and $3 million of expenses associated with inventory write-downs. Of these charges, $35 million were noncash. Restructuring charges, excluding inventory write-downs, are expected to be $100 million to $110 million by fiscal 2027. These charges are excluded from adjusted operating results. Interest expense rose 13% year-over-year to $15 million in the quarter, primarily due to higher financing fees related to the amendment of our credit agreement. We have hedged our rate exposure on more than 50% of our loan facility with fixed rates at 7.1%. We continue to prioritize reducing net debt over time. Adjusted net loss, which excludes the effect of restructuring charges amongst other items, was $7 million in the quarter or $0.08 per diluted share as compared to adjusted net loss of $4 million or $0.04 per diluted share in the prior year period. We delivered adjusted EBITDA of $20 million in the first quarter compared to $22 million a year ago. The decline was driven by a decline in volume mix and cost inflation, partially offset by productivity, a reduction in SG&A and pricing and trade efficiencies. Adjusted EBITDA margin was 5.4%. Turning now to our individual reporting segments. In North America, organic net sales declined 7% year-over-year. The decrease was primarily driven by lower volume in Snacks, partially offset by growth in Beverages, Baby and Kids, and Meal Prep. First quarter adjusted gross margin in North America was 22.7%, a 200 basis point increase versus the prior year period. This improvement was driven primarily by productivity savings and pricing and trade efficiencies, partially offset by lower volume mix and cost inflation. Adjusted EBITDA in North America was $17 million, an increase of 37% from the year ago period. The increase resulted primarily from productivity savings, a reduction in SG&A expenses and pricing and trade efficiencies, partially offset by the impact of lower volume mix and cost inflation. Adjusted EBITDA margin was 8.3%. In our International business, organic net sales declined 4% in the quarter, primarily driven by lower sales in Baby and Kids, partially offset by growth in Meal Prep. International adjusted gross margin was 15.7%, approximately 530 basis points below the prior year period. And adjusted EBITDA was $13 million or 7.7% of net sales, reflecting a decrease of 38% compared to the prior year period. These decreases were primarily driven by lower volume mix and cost inflation, partially offset by productivity savings and pricing and trade efficiencies. We expect our margin in International to improve, particularly in the second half behind three key drivers: one, improved performance of our higher-margin Ella's business with accelerated marketing and innovation to drive improvement in the category behind our trusted, high-quality and nutritious products; two, operational efficiency initiatives in our manufacturing network; and three, the full realization of benefits from our focus on revenue growth management. Now turning to category performance. Organic net sales growth in Snacks was down 17% year-over-year, driven by velocity challenges and distribution losses in North America. As Alison mentioned, we have entered the execution phase of our Snacks turnaround plan with the relaunch of Garden Veggie, which will be rolling out to additional retailers throughout the fiscal year. Additionally, our price pack architecture work on Garden Veggie multipacks is driving early velocity improvements at key retailers. And we've seen strong performance from our Garden Veggie seasonal offering, particularly Ghost and Bats. Lastly, Garden Veggie is seeing encouraging momentum in the convenience channel, where sales are up 24% as distribution expands. In Baby and Kids, organic net sales growth was down 10% year-over-year, driven primarily by industry-wide softness in purees in the U.K. that Alison mentioned. In North America, we have continued to see strength in Earth's Best snacks and cereal with dollar sales growth of high single-digit and low double-digit percent, respectively. In the Beverages category, organic net sales growth was 2% year-over-year, driven by Tea in North America. Celestial Seasonings bag tea gained distribution in the quarter, in part due to the recent launch of wellness innovation. In Meal Prep, organic net sales growth was flat year-over-year as strength in yogurt in North America was offset by softness in meat-free products in the U.K. and soup in North America. Greek Gods grew dollar sales in the quarter by mid-teens percent. Shifting to cash flow and the balance sheet. Free cash flow for the quarter was an outflow of $14 million compared to an outflow of $17 million in the year ago period. The improvement was primarily driven by improved inventory delivery, partially offset by lower recovery of accounts receivable and a decline in cash earnings. We continue to be pleased with the progress we have made improving our days payable outstanding. Days payable outstanding was 57 days in the quarter, down from 65 days in Q4 2025, but an improvement from 55 days in the year ago period. We have made significant progress towards our goal of 70-plus days payable outstanding by fiscal year 2027. Inventory is an opportunity for improvement and an area of focus for fiscal 2026. Days inventory outstanding improved to 83 days in the quarter from 88 days in Q4 2025, though it is up from 80 days in the year ago period. CapEx of $5 million in the quarter was down from $6 million in the prior year period. We continue to expect capital expenditures to be approximately $30 million for fiscal 2026. Finally, we closed the quarter with cash on hand of $48 million and net debt of $668 million as compared to $650 million in the beginning of the fiscal year. The increase in net debt was driven by seasonal funding of working capital and capital expenditures. Paying down debt and strategically investing in the business continue to be our priorities for cash. Our net leverage ratio as calculated under our credit agreement, increased slightly to 4.8x, comfortably below the 5.5x maximum. Our long-term goal is to reduce balance sheet leverage to 3x adjusted EBITDA or less as calculated under our credit agreement. Turning now to the outlook. As stated last quarter, we are not providing numeric guidance on fiscal 2026 operating results at this time, given the uncertainty around the outcome and timing of the completion of our strategic review other than to say we expect free cash flow to be positive. With respect to the shape of the year, we continue to expect aggressive cost cutting and execution against our '5 actions to win' in the marketplace to drive stronger top and bottom line performance in the second half of the year as compared to the first half. To put a finer point on it, I want to call out some of the dynamics that are driving the shape of the year. First, we are stepping up our marketing investment in the second quarter of 2026 compared to the first quarter of this fiscal year, and by approximately $2 million from the year ago period. This will support the accelerated innovation across the portfolio throughout the year that Alison discussed. Investment in our brands is a critical element for improved performance as we move into the second half. Second, we have an approximately $3 million headwind in the second quarter from our bonus accrual this year that was zeroed out last year. Third, the benefits from both the SG&A work we have actioned and pricing we have taken should build throughout the year. And lastly, Ella's Kitchen, one of our highest margin businesses, has been under pressure driven by industry-wide category softness. We expect our accelerated marketing efforts and innovation to drive improvement in Ella's in the second half. Now I'll turn it back to Alison for some closing remarks. Alison Lewis: Thanks, Lee. Our first quarter results were consistent with our prior indication that Q1 performance would be broadly comparable to Q4 in absolute dollars. In North America, we delivered margin and profit growth despite top line headwinds in our largest category in the region, Snacks, which we are relaunching to restore both growth and profitability over time. Internationally, the baby food category remained soft industry-wide. However, as category leader, we have accelerated marketing and innovation to drive category momentum over the balance of the year. Across the portfolio, we are seeing encouraging contribution to revenue and margin as we take disciplined RGM and pricing actions. And we continue to execute strongly on productivity, delivering consistent savings that will build as the year progresses. In addition, we have implemented a step change in our overhead cost reduction, ensuring our organization is rightsized for the current business. We are moving with speed and determination to strengthen our financial flexibility and lay the groundwork for improved performance as we move from the first half of the fiscal year to the second half. We remain focused on executing our '5 actions to win'. Streamlining our portfolio; accelerating brand renovation and innovation; implementing strategic revenue growth management and pricing; driving productivity and working capital efficiency; and strengthening our digital capabilities. We are executing with focus and discipline, placing Hain firmly on the path towards sustainable growth. Before I close, I want to thank the entire Hain team for their commitment to our mission, our brands, our consumers and our customers and for driving meaningful progress against our five actions to win. That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line. Operator: [Operator Instructions] And your first question comes from the line of Andrew Lazar with Barclays. Andrew Lazar: I think, Lee, you laid out some discrete dynamics to keep in mind that impact EBITDA for the most part in 2Q. As you think about organic sales in 2Q, would you anticipate, just given the incremental investment and such that the year-over-year, rate of -- the year-over-year rate of decline in organic sales can continue to moderate sequentially in 2Q versus what you saw in the first quarter, even though I realize there are some discrete issues around EBITDA? Lee Boyce: Yes. I mean I think you can see some moderation. I would say the biggest focus is on the second half versus the first half, and we kind of outlined that. But you would see, especially as you go into the second half, an improvement in areas such as in snacks, or a moderation of declines there. The other thing we kind of outlined in the call is in Baby and Kids, particularly in Ella's. So we would -- based on the programming we put in, we would expect to see an improvement in Baby and Kids, moderation in Earth's Best. And then also looking at Beverages, we would expect an improvement in tea and then private label, nondairy beverage. I'd say Meal Prep overall has been stable. So our big focus is really on the second half versus the first half. That's where you'll see that improvement. Andrew Lazar: Okay. And then, Alison, you talked about elasticities so far with the pricing you've taken in International being, again, broadly on average, sort of in line with your expectations. I know it's still early around some of the pricing actions you're taking in North America, but where you've gotten some of the pricing in? What are you seeing around elasticity as a starting point? I think you mentioned last quarter, you would anticipate elasticities in North America being around 1% and around, I think, 0.5% in international. So I guess, what are you seeing in North America so far? And maybe how have those announced price increases gone over with respect to your key retail partners? Alison Lewis: Yes, I mean the pricing on tea and baby flowed through in North America in the quarter. And on tea, we're pretty much flowed through with all retailers and the price points that are on the shelf are in line with what we expected. Baby has been a little bit slower to roll through only because we have multiple categories. But again, pricing that we've seen so far flow through on baby is in line with the category. You're right, it's early days on elasticity, but we are able to get an early read. On tea, we're seeing that it's generally in line with the 1% elasticity expectation that we set. I mean, obviously, you know that elasticity is a dynamic thing because it depends a lot on sort of the overall competitive dynamic, the marketing and innovation that you do, et cetera. So we'll continue to monitor, but so far in line with what we expected. On baby, it's a little harder to read right now, again, because it hasn't flowed through quite as quickly. But what we are seeing, again, early data is it looks like it is in line. We are seeing more competitive dynamics in the baby category. So again, we're going to be monitoring both closely. And as you know, you need to sort of be dynamic in the marketplace, and we'll be dynamic as we need to in order to protect what we have in terms of our expectations on the growth of those businesses. Operator: Your next question comes from the line of Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: If we could just talk a little bit about the consumer seems to be getting increasingly challenged period to period to period. And because so many -- because the bulk of your portfolio is in health and wellness, it often can also have a price premium to maybe the non-health and wellness items. So how do you think through that calculus in today's consumer environment, especially in the context of what you just talked about related to taking additional pricing? Alison Lewis: Yes. So I would say, overall, you're right, the consumer dynamic is one where we have more value-seeking behavior as consumer pocket books are a little tighter than usual. I think what we're seeing in the market is broadly what we've always seen when we hit these kind of speed bumps where we see a movement in terms of shopping patterns, so fewer -- more trips, less dollars per trip. We see a shift to some of the more value channels, whether that is club, mass, dollar. We see a shift in terms of the packages that they're buying, again, looking at kind of lower overall price point. But the thing that I would say about our portfolio is that it brings value to the consumer in terms of those better-for-you credentials. So the other thing that we're seeing in terms of the behavior is that when a consumer is putting a $1 down, they want to make sure that they're getting something that has value to them. And because our better-for-you brands have value to them because they taste great, they've got better nutritional profile, they're willing to stay in those brands. And so that's probably why we see sort of relatively low private label development across our categories. And then as you look at the private label where there is private label, there is some growth in private label, but it's not -- you're not seeing substantial shifts in private label. It's small increases or in some categories, actually, you're seeing decreases. So again, I think the most important thing that we can do is continue to deliver value to the consumer, value that consumers are willing to pay for and then ensure that our price pack architecture has price points across various sizing that allows for everyone to participate no matter what the disposable income level is. Operator: [Operator Instructions] We have no further questions in our queue at this time. I will now turn the conference back over to Alison Lewis for closing comments. Alison Lewis: So thank you for joining us today. I'll just reiterate a few things we said in our overall messages. But overall, as an organization and company, we're moving with speed and determination to strengthen our financial flexibility and lay the groundwork for improved performance as we move from the first half to the second half. We remain focused on our '5 actions to win', and we're executing with focus and discipline to put Hain firmly on the path to sustainable growth. So thank you, everyone, for joining today. Operator: And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Welcome to the Avino Silver & Gold Mines Third Quarter 2025 Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jennifer North, Head of Investor Relations. Please go ahead. Jennifer North: Thank you, operator. Good morning, everyone, and welcome to our Q3 earnings call and webcast. To join this webcast and conference call, there is a link in our news release of yesterday's date, which can be found on our website under News 2025. In addition, a link can be found on the homepage of the Avino website. The full financial statements and MD&A are now available on our website under the Investors tab and then click on Financial Statements. In addition, the full statements are available on Avino's profile on SEDAR+ and on EDGAR. Before we get started, I remind you to view our precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. And note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties and other facts that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements. For additional information, we refer you to the detailed cautionary note in this presentation for this call or on our press release of yesterday's date. On the call today, we have the company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; and our VP of Technical Services, Peter Latta. I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides from this conference call and webcast will be available on our website. Also, please note that all figures stated are in U.S. dollars unless otherwise noted. Thank you. I will now hand over the call to Avino's President and CEO, David Wolfin. David? David Wolfin: Thanks, Jen. Good morning, everyone, and welcome to Avino's Third Quarter 2025 Financial Results Conference Call and Webcast. We will cover the highlights of our financial and operating performance, and then we will go over the work that we are currently doing, followed by a Q&A. I will start with a discussion on operations and overall performance and then I will turn it over to Nathan Harte, Avino's CFO, to discuss the financial performance for the period. And then Jennifer North, our Head of Investor Relations, will present an overview of the Q3 CSR/ESG initiatives. Please turn to Slide 5. Our strategic vision for transformational growth remains focused on transitioning from a single production operation to a multi-asset Mexican mid-tier producer. We have had eventful third quarter, and our performance was guided by 5 key drivers: number one, operational excellence; number two, portfolio optimization; number three, a disciplined approach to financial management and capital allocation; number four, strategic exploration and drilling to unlock further resource potential; number five, continued growth and strengthened market recognition. The first driver is operational excellence. Our team at site advanced automation and process upgrades, which has been reflected in our strong mill performance and sustained throughput. In addition, the progress at La Preciosa has been exceptional. Operations management have expanded the workforce with ongoing equipment training to support operational efficiency. Subsequent to the end of the quarter, we had started processing La Preciosa's material through Circuit #1, which is well ahead of expectations. Portfolio optimization, our second key driver, is reflected in the August announcement where we reported the acquisition of the outstanding royalties and contingent payments on La Preciosa. Acquiring these consolidates ownership, improving project economics and enhancing operational flexibility at La Preciosa. By removing third-party obligations, this reduces financial and operational complexity, strengthening Avino's overall asset portfolio. We believe that this enhances shareholder value by optimizing our portfolio and positioning Avino for sustained growth. Our third driver focuses on our disciplined approach to financial management and capital allocation. Avino achieved another quarter of strong financial performance, which is reflective of improved mill availability and consistent operational discipline demonstrated by our team. With record cash of $57 million and working capital of $51 million, our balance sheet continues to build strength. Nathan will provide a detailed overview of the financials later in the call. Fourth, we remain committed to strategic exploration and drilling to unlock additional resource potential. In August, we reported results of 4 drill holes from La Preciosa, which were drilled to twin previous drilling. The assay results from the intercepts of La Gloria and Abundancia were very positive. Highlights include from hole 2503, 1,638 grams of silver and 1.92 grams of gold over 7.9 meters of true width. Included in that is 15,352 grams of silver and 1.55 grams of gold over 0.37 meters of true width. The intercept grades are significantly higher than the average grades outlined in our current resource, highlighting the potential we aim to capture by using underground mining methods. In addition, the larger widths encountered at both La Gloria and Abundancia were a welcome surprise, underscoring that there is still much to learn about the deposit despite the 1,500 drill holes and substantial exploration investment performed by previous operators. We just released a further 4 holes on October 27, which have also returned excellent grades. The full results for both news releases are on our website under the News Release tab. Our final driver for the quarter reflects continued growth and strengthened market recognition. Avino was proud to be included in the Toronto Stock Exchange 2025 TSX30, distinguishing itself by ranking fifth among top-performing companies. For the 3 years ended June 30, 2025, Avino's share price performance increased 610% and market capitalization increased 778%. In addition to this, Avino was added to the Market Vectors Junior Gold Miners Index and VanEck Junior Gold Miners ETF, GDXJ, effective market close on September 19, 2025. These achievements underscore the decisive steps we've taken to advance Avino's transformational growth strategy and reinforce the investment case for Avino. Moving to Slide 6. We turn to Avino's Q2 2025 production results, which were released in mid-October, reflecting steady operational performance. Overall results continue to support the company's original production estimate of 2.5 million to 2.8 million silver equivalent ounces. On Slide 7, we put together various photos of recent development activity at La Preciosa. We are very pleased with the progress we are making. At this time, I will now hand it over to Nathan Harte, Avino's CFO, to present our record financial performance for Q3 2025. Nathan? Nathan Harte: Thank you, David. It is my pleasure to be presenting another quarter of strong financial and operating results to everyone who has joined us and is viewing our presentation today. Here on Slide 8, we have an overview of our financial and operating highlights and improved balance sheet with the full table on the next slide. Our third quarter results demonstrated -- continue to demonstrate profitability and the ability to grow. We generated $21 million in revenues, up 44% from Q3 of last year and consistent with the last quarter, despite lower sliver equivalent ounces sold. Gross profit was just shy of $10 million and on a cash basis was $11.1 million after removing noncash expenses. Gross profit margin was 47%, inclusive of the noncash items. This was significantly improved from the 39% we saw in Q3 of last year; and on a cash basis, this margin was 53% compared to 45% in Q3 of last year. Avino earned its highest ever quarterly profit with $7.7 million in net income after taxes or $0.05 per share in the third quarter. This was up significantly compared to Q3 of last year, where we earned $1.2 million or $0.01 per share. Adjusted earnings were $11.6 million or $0.07 per share compared to $5 million or $0.04 per share in Q3 of last year, representing a significant improvement. Cash flow from operating activities and free cash flow both improved from Q3 of last year as well. We generated $8.3 million from operating activities or $0.05 per share, and free cash flow after all capital expenditures came in at $4.5 million. Included in these capital expenditures were some development costs at La Preciosa for the third quarter. And on a stand-alone basis, free cash flow from Avino was $5.4 million. Our cash cost per silver equivalent ounce was $17.06, up 14% from Q3 last year. On an all-in basis, we came in at $24 per silver equivalent ounce sold, 9% higher than the third quarter of last year. I will discuss the increase in per ounce cost in an upcoming slide and explain how the movement in silver price in relation to gold and copper prices during the third quarter did impact our silver equivalent ounces sold calculations and added to our cost per ounce figures. Now on to the balance sheet. Our cash position was a record $57.3 million at the end of the quarter, it was up $20 million from last quarter and $30 million from the end of the year. Working capital increased by over $10 million in the quarter as a result of the increased cash offset by the deferred consideration on the royalty retirement transaction. Subsequent to the quarter end and as of today, our cash position is approximately $65 million. With our improved balance sheet and La Preciosa moving forward, Avino is in its most stable financial position in its 57-year history. With no debt, excluding operating equipment and the deferred consideration payable, we continue to be well positioned to execute on our 5-year organic growth plan and are continuing with the reviews for accelerating the time line of these plans. With La Preciosa now processing in our Mill Circuit 1 at between 200 tonnes and 250 tonnes per day, we're excited for 2026, as we embark on the transition to being a multi-asset producer with the synergies of one centralized milling location. Turning over to Slide 9, we see some other financial metrics and the significant increases compared to Q3 and year-to-date amounts in 2024. Just wanted to highlight again the per share metrics where we see $0.05 earned on a cash flow basis, $0.07 earned on an adjusted earnings basis and free cash flow generated again was $5.4 million, excluding just under $1 million spent on La Preciosa. Here on Slide 10, you can see our cost per ounce figures did increase when compared to Q3 of last year as well as last quarter, coming in again at $17.09 per silver equivalent payable ounce. For the year-to-date cash costs were $14.95, 3% lower than the first 9 months of last year. As I mentioned before, I do want to highlight that the movement in silver price did have an impact on our silver equivalent payable ounces calculation and that did also impact our cost per ounce figures. Using the prices from our forecast at the beginning of 2025 of $30 per ounce silver, $2,700 per ounce gold and $9,200 per ounce -- per tonne copper, our cash cost per ounce for the third quarter and year-to-date would have been $15.88 and $14.56, respectively, which is in line with our expectations that we set out at the beginning of the year. On an all-in sustaining cost basis, our third quarter costs were $24.06 per silver equivalent ounce, up 9% from Q3 of last year. Year-to-date, the costs were $21.64 per ounce, which were very similar to the first 9 months of 2024. Again, highlighting the silver price impact on these figures. Using the same method, our all-in sustaining cost per silver equivalent payable ounce was $22.36 for the third quarter and is fairly consistent with Q3 of last year. The year-to-date figure would be $21.08, which would have been 2% lower than last year. As we manage the first stage of growth, we are pleased that our cost structure continues to remain intact even with the increased activity arising from bringing a second mine online. We look forward to further economies of scale, as La Preciosa is now in production and it continues to contribute to our overall production profile. Coming to Slide 11, you can see our cost per tonne processed for the quarter and year-to-date continue to remain consistent, further reinforcing the points made on the last slide. Cost per tonne processed on a cash basis was $53.18, down 2% compared to Q3 of last year. On the year-to-date figures, we came in 8% lower than the comparable period as a result of better mill availability and solid mining rates. On the all-in side for the quarter, a very similar story with a 3% reduction per tonne processed for the quarter and 7% reduction overall on the year-to-date figure. Our cost per tonne remains extremely competitive for an underground operation. As shown by our profit margins, our cost structure continues to remain intact. We are poised to take advantage of the increased metal price environment, as we make the transition to being a multi-asset producer. As we touched on last quarter, tariff discussions continue to put uncertainty in the currencies in which we operate in and reducing our risk associated with costs has been top of mind over the year. There are no direct significant impacts to our operations from these tariffs. However, we are subject to movements between the U.S. dollar and the Mexican peso. Our hedging program for the Mexican peso impacted the bottom line positively by about $1 million, as we had made USD to Mexican peso hedges earlier in the year and at the end of 2024 to protect our budget. We also currently have a $1 million, $1.5 million derivative asset on our balance sheet, which represents the mark-to-market balance at the end of the quarter, as most of our hedges are still well in the money even after realizing $1 million in foreign exchange gain in the quarter. And with that, I'll turn it over to Jennifer North, Head of Investor Relations, for an overview of our recent ESG and CSR initiatives. Jennifer North: Thank you, Nathan. Please follow along to Slide 12 for an update of our ESG/CSR initiatives. Avino follows the ESG standards and aligns with the United Nations sustainable development goals, or the SDGs. Avino's efforts throughout the quarter contributed to progress on multiple SDGs, reflecting our ongoing commitment to responsible and sustainable development. During the third quarter, the CSR teams led the following strategic projects in the communities: Several school graduation sponsorships, donations of scrap material for further use in the communities, road maintenance and rehabilitation, delivery of low-cost water tanks and cisterns, organized and sponsored a second health fair that was held in the communities offering free access to specialized medical services and preventative care. This event was coordinated with the state government, civil associations, medical units and volunteers providing much needed care and services. This initiative reaffirms Avino's commitment to health equity as a fundamental right, particularly in rural areas where access to medical services is limited. Mining and historic -- sorry, mining and history museum project in Durango, a promotional video was produced and historical photographs were selected to be exhibited as part of Avino's display in the museum. This project is approaching the final delivery stage of materials for the exhibition. A new subsidized access program for construction materials, cement, mortar, roofing sheets and school footwear was introduced, facilitating access for interested families. Avino participated in an employment fair, providing 50 individual consultations to share information about the company and receive job applications from interested people. Avino continued developing activities focused on strengthening community ties, improving basic infrastructure, facilitating access to social support programs and supporting long-term institutional and strategic projects. Our CSR teams continue to do phenomenal work, and we're excited to share these initiatives with our shareholders as a reflection of how we're creating meaningful impact beyond our operations. I will now turn it back over to David to continue with the presentation providing our activities for the coming quarter. David? David Wolfin: Thanks, Jen. Moving to Slide 13. Summarizing our current and upcoming activities, I mentioned earlier, our focus on strategic exploration and drilling to realize the full potential of our resource base. This includes our recent commitment to AI integration, which is designed to improve data analysis, target generation and overall exploration efficiency. With the support of VRIFY's AI software, almost 6 gigabytes of data was compiled for analysis. Using the data, VRIFY generated 211 additional feature engineered data layers, including rock and soil geochemistry maps, vein and fault distant grids, strike field maps, lineaments, density and complexity maps. This is exciting technology, and we are looking forward to the implementation of future drill programs at Avino and La Preciosa. Over to Slide 14. At Avino, the 2025 drilling commenced in April with the program consisting of 9 planned holes from surface with 6 now completed. The objective of the ET area drill program is twofold: one, to test the down dip extension of the system below the current lowest mining level and as well as to test the extension of the system along strike to the west. The Avino vein remains open at depth and along strike and earlier results have shown comparable grades and widths to those currently being mined. Drilling continues with over 3,500 meters drilled to date. The latest results will be publicized when the assays have been received and all data has been verified. At Avino, we are currently mining and hauling from level 12.5 at Elena Tolosa; and as just mentioned, exploration drilling is ongoing on the Avino vein below the ET mine. Over at La Preciosa, a second surface drill was deployed at La Preciosa to confirm prior drill results from previous operators to improve the understanding of grade zonation close to the scheduled mining areas near the ramp. Earlier drill core from previous operators were extensively utilized to provide sample data for earlier technical reports, so remaining samples were limited. Drilling information will be utilized in underground mine planning, 3D modeling as well as an update to the resource estimate that is due Q1 2026. In addition, Avino is planning on releasing its first mineral reserve estimate at the same time. As outlined on Slide 15, I'd like to highlight the company's growth strategy. Within a 20-kilometer footprint, we have 3 key assets, including our operating mill complex, which currently processes material from Avino mine. We also have access to water, power and tailing storage, critical infrastructure that supports our ability to expand production efficiently. Collectively, our assets host 277 million silver equivalent ounces in measured and indicated mineral resources and an additional 94 million silver equivalent ounces in inferred mineral resources, providing a strong foundation for future production growth. As you can see on this slide, our goal is to scale up by 2029 through production from these 3 assets. Leveraging our existing assets and resources, we are well positioned to execute our growth plans efficiently and effectively. We concluded the quarter with more record-breaking financial metrics, which reflect the strength of our strategy and dedication of our team, both which drive our success as we pursue the next phase of growth. On behalf of leadership, thank you to our entire team for your efforts and contributions. We appreciate the continued confidence of our shareholders. With a clear vision and disciplined approach, we are confident that long-term shareholders will be well positioned to share in the success we are working hard to achieve. We'd now like to move the call to the question-and-answer portion. Operator? Operator: [Operator Instructions] Your first question for today is from Jake Sekelsky with Alliance Global Partners. Jacob Sekelsky: So just at La Preciosa, you mentioned that fresh ore is now being processed at Circuit 1. Can you just remind us what the targeted throughput rate is there from La Preciosa over the next few quarters and what that ramp looks like? Peter Latta: Yes, Jake, this is Peter here. So we're starting at 1 circuit, Circuit 1. If you recall, we have 4 independent circuits there at site and we are just filling 1 circuit and we'll be ramping up to filling 2 circuits, the 2 smaller circuits next year. Jacob Sekelsky: Got it. Okay. And I guess, are there any specific levers you think you might be able to pull here over the next quarter or 2 that might accelerate those plans? Nathan Harte: Yes, Jake, Nathan here. I think we've been messaging to the market kind of all year and before is that we want to start with Circuit 1, make sure we've got enough tonnage to get ahead of the mill for a little while to make sure we don't have to do any start and stopping and then try and run -- with the goal of running Circuit 1 and Circuit 2 for pretty much the entirety of 2026. So for now, we're just going to start with Circuit 1, and then we're continuing a lot of development, which I think we've alluded to a few times, we're developing in 4 different areas right now. So yes, the goal is really just 1 circuit for the rest of the quarter and then into 2026 will be 2 circuits. Operator: Your next question is from Heiko Ihle with H.C. Wainwright. Heiko Ihle: Excited to hear at La Preciosa ore getting processed. And obviously, I was at the site last week, it was really nice to be there. But given the strong potential of La Preciosa, can you give a bit of color on what you're seeing with the drilling there versus your prior expectations? I think it'd be helpful to just see like not just as it pertains to grades, but also how you're advancing versus your expectations, rock stability, all that kind of stuff? Peter Latta: Yes. Sure, Heiko. Obviously, we put out those drill results, those 8 holes and some of those are very significant and high grade. So what we're seeing is kind of that -- and there's a great slide in it, but we really see some hotspots in the deposit. And that's kind of what we knew or kind of what we expected, and that's exactly what we're seeing. Also, when it comes to the width, this deposit does pinch and swell. So we're seeing some significant improvements in width in some areas, but that is going to be quite variable. So intervals of beyond 5 meters, which are a typical mining width is what we've seen in some of those drill holes. So that's really positive news. With regards to ground support. This is -- we're still pretty high up in the system. So there is some oxidation, which does require a little bit more ground support, but that's something, once again, that we kind of expected, and we do expect that to decrease as we go further and deeper into the mine. Heiko Ihle: Cool. Nate, hey, earlier on this call, you mentioned accelerating some longer-term plans. I mean this got me a bit curious, what exactly could be accelerated? You have obviously the balance sheet to do it right now, but how much would it all cost? Nathan Harte: Yes. I mean hard to put a number on it right now because the plan -- there's no final plans or anything. Obviously, judging by our balance sheet, you can tell that we have a lot of flexibility moving forward. So we're just undertaking some internal studies that if we get into a position where they get a little more further down the path, we will go public with. But for now, it's -- we're just entertaining on a number of expansion opportunities either at the Avino Mill or potentially some other opportunities on both sides. That's essentially it for now. I can't really put a number on it. Heiko Ihle: I'll phrase the question differently then. What kind of number would you be willing to spend given your current balance sheet? Nathan Harte: We've been pretty disciplined, and it's nice to be in the position we're in. And we do expect to continue to generate pretty solid cash flow quarter-over-quarter, especially as La Preciosa ramps up. So I think we're going to continue to be disciplined in that approach. But if the right expansion opportunity is there and the IRR is there, then we will definitely go forward with it. Again, I don't want to put a number, again, on the call, but we can chat about it later, if you want, Heiko. Peter Latta: Heiko, just to reiterate, we've been laser-focused on developing La Preciosa and bringing it into production. So that's where we're focusing the majority of our energies as far as execution is concerned. And as Nathan mentioned, there is in the background doing some additional optimization studies. Heiko Ihle: Fair enough. Cool. And then one really quick one for Nate. You had a nice FX gain in the past quarter. What are you seeing in Q4 so far that given in a week we'll be halfway through the Q4? Nathan Harte: Sorry, can you repeat the first part, Heiko, I think I just missed that. Heiko Ihle: Yes, no worries. Yes, you had a really good FX gain in Q3, what were you seeing in Q4 so far? Nathan Harte: Sorry, again, I'm not quite sure I understand X, I can't hear it maybe. Heiko Ihle: Foreign exchange, foreign exchange, you made like $1 million... Nathan Harte: Yes. So that's -- thanks for highlighting that. And we did try and highlight that a little bit on the call. But we did -- when we put together a 2025 budget, we did some hedging on a portion between the peso and USD just to protect our cost structure. But yes, we got about $1 million in income from that. And as well, we still have a fairly sizable derivative asset on the balance sheet that will start getting realized in the fourth quarter and into Q1 of next year as well. But we've got a lot of hedges that are in the money that now we started to top up, and we're getting closer to where spot is over the last few months. But yes, moving forward, we should continue to see some more benefits from those over the next 6 months. Operator: Your next question for today is from Joseph Reagor with ROTH Capital Partners. Joseph Reagor: I guess on La Preciosa, 2 questions there. One, Nate, this is probably one for you. From an accounting standpoint, at what point or what factors will make you reach this point where you'll begin to report it as commercial production as opposed to like a CapEx offset? Nathan Harte: Yes. So that's a pretty good question. So that -- the standard of that's kind of changed, like you will -- under IFRS, so which we report on based on the Canadian standards, international standards, I guess. So we will be reporting revenue offset with costs of sales as soon as we start selling, so you don't really -- not like previously, I know with the Avino Mine, probably about 8 or 9 years back. So no, that will be -- we'll be presenting that separately in the MD&A as well to -- as soon as we can and then everything will be attributable to cost of sales. Joseph Reagor: Okay. So immediately. And then on the actual mine plan there, when will we get kind of an official either financial study or guidance or both from you guys as far as tonnes, grade, recovery rate expectations, et cetera? Nathan Harte: So I'll let Peter probably handle the study part of that. But yes, we are moving forward with that. And on the financial side, we will be putting out guidance for 2026 that includes both. And then on public studies, I'll pass it over to Peter. Peter Latta: Yes. No, we'll be looking at putting out reserves next year, I think David mentioned that in the call. That's something we're focused on, so we will have an idea of grades and recoveries and that sort of thing in that study. We won't require, just being a producing issuer, to issue any sort of financial results. That's one of the requirements from Section 22 of the technical report that's not required to issue, but we will have everything else in that report. Operator: Your next question is from Chen Lin with Lin Asset Management. Chen Lin: A great year, guys, congratulations for this; job well done. David Wolfin: Thank you. Chen Lin: Yes. Many of my questions has been answered. I just want to just drill down on La Preciosa. What is the limiting factor, the development or the mill or to limit -- and what do you see the maximum tonnage per day, you can go through process -- mine and process from La Preciosa for the next [indiscernible]? Peter Latta: Yes. Thanks, Chen. Thanks for your question. This is Peter here. So the mill is limited to 2,500 tonnes per day within those 4 circuits, those 2 smaller circuits of 250 tonnes each and then 2 larger circuits of 1,000 tonnes each. And so we are contemplating an expansion of the mill as well. But we're trying to match, obviously, the mining rate and the milling rate. And as we've just gotten into La Preciosa in the last couple of months here, this is -- we've done -- we're ahead of schedule as far as development is concerned. But it's understanding how the rock behaves and the mining rate that we can achieve on a consistent basis before we ramp that up. So that's really what we're doing and keeping in mind that we want to match that mining throughput and mill throughput. Chen Lin: Right. Do you have any -- well, what's the mining limit? Do you have some idea now with 2 circuits supposedly? Peter Latta: Yes. I mean the goal is to ramp to the -- using the 2 small circuits as of next year, as I think Nathan mentioned earlier with the question. And then there are plans that we could potentially fill the entire circuit with La Preciosa. David Wolfin: It's in our long-term mine plan, but we're going to look to shrink that. Chen Lin: Okay. Entire circuit, so I mean entire 1,000 tonnes per day, you are talking about. Nathan Harte: No, 2,500 tonnes. So we're looking -- yes, long term, there is the ability to get up to 2,500 tonnes just at La Preciosa, but as we've all kind of been alluding to, we're looking at expansion plans where we can produce from both assets at a higher rate. Chen Lin: Right. And it seems to be La Preciosa the grade is, it seems to be much higher... David Wolfin: Yes, I can speak to that. So the previous operators drilled approximately 0.5 million meters, 1,500 drill holes, but most of that was on Martha. So there's a lot of potential infill drilling and expansion drilling on La Gloria and Abundancia and some other near surface veins that we're going to go after next year. Chen Lin: Okay. Great. Finally, what's like the permit you have on La Preciosa? What's the maximum you can pull the ore out of La Preciosa from... Peter Latta: The permit isn't restricted by the throughput to pull out of the mine. David Wolfin: And we've tasked our engineers to look at further expansion, underground development for next year. So we're heading to site in a few weeks for budgeting season. I'm sure we're going to be dealing with that. And so we'll make that public once we have it. Chen Lin: Congratulations, again. David Wolfin: Thank you. Peter Latta: Thanks, Chen. Operator: [Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to David Wolfin for closing remarks. David Wolfin: Thank you. With another strong quarter behind us, which included excellent operational performance, a very healthy cash position, an additional quarter of cash of over $57 million and working capital of $51 million, Avino is well positioned to capitalize on the positive market trends in the precious metals sector. We are focused and on track to deliver sustainable growth and long-term value for all stakeholders and shareholders. Thank you for joining the Avino Q3 call today. Have a nice day. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, and welcome to F&G's Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President, Investor Relations and External Relations. Please go ahead. Lisa Foxworthy-Parker: Thanks, operator, and welcome, everyone. I'm joined today by Chris Blunt, Chief Executive Officer; and Conor Murphy, President and Chief Financial Officer. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures, which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for a webcast replay. And with that, I'll hand the call over to Chris Blunt. Christopher Blunt: Good morning, everyone, and thanks for joining our call. We delivered strong third quarter results with record AUM before flow reinsurance, fueled by one of our best sales quarters in history, the launch of our new reinsurance sidecar, and strong performance across the business as we execute on our strategy and make continued progress toward our 2023 Investor Day targets. F&G is uniquely positioned in the industry with a profitable and growing $56 billion in-force block. We generate spread-based earnings from fixed annuities and pension risk transfer, and we have multiple sources of fee-based earnings with the sidecar in place alongside our flow reinsurance, middle-market life insurance and well-performing own distribution portfolio. As our business grows, we're becoming a more fee-based, higher-margin and capital-light business, leveraging our position as one of the industry's largest sellers of annuities and life insurance. We are balancing this with continuing to grow our spread-based business prioritizing pricing discipline and allocating capital to the highest return opportunities. As we execute on our strategy, we expect both gross and net AUM to continue to grow. F&G reported a record $71.4 billion of AUM before flow reinsurance at the end of the third quarter, including retained assets under management of $56.6 billion. Compared to the third quarter of 2024, AUM increased 14% and 8%, respectively, driven by net new business flows. For the first 9 months of the year, we generated $11 billion of gross sales. This reflects $6 billion of core sales, which include index annuities, index life and pension risk transfer and $5 billion of opportunistic sales, including MYGA and funding agreements. Looking at the third quarter, we delivered one of our best sales quarters with $4.2 billion of gross sales and strength across all products and distribution channels. Core sales were half of the total at $2.2 billion, modestly above both the second quarter of 2025 and the third quarter of 2024. Highlights for our core sales include indexed annuities of $1.7 billion in the quarter and $4.8 billion year-to-date. FIA is our largest contributor to index annuity sales and with the launch of the reinsurance sidecar in August, we have started flowing a portion of our accumulation-focused FIA sales during the quarter. RILA continues to be a modest but growing contributor to our sales as we are gaining momentum. IUL sales were over $40 million in the quarter and $137 million year-to-date, up 10% over the prior year-to-date period as our life insurance solutions are meeting the needs of the underserved multicultural middle market. And PRT sales were more than $500 million in the quarter, including a multiple repeat client and $1.3 billion year-to-date, in line with the prior year-to-date period. The PRT market continues to see a robust pipeline for midsized deals between $100 million to $500 million where F&G competes well, and we're on track to achieve our targeted $1.5 billion to $2.5 billion of PRT sales for the full year. Opportunistic sales were $2 billion in the third quarter with over $1 billion of funding agreements and nearly $1 billion of MYGA sales. Opportunistic sales volumes will fluctuate quarter-to-quarter depending on economics and market opportunity. Here's a few details. We took advantage of an attractive market window and executed a record $800 million FABN issuance in the third quarter and expanded our high-quality investor base, bringing our third quarter and year-to-date funding agreement placements to $1 billion and $1.6 billion, respectively. Coming off a record second quarter, MYGA sales were nearly $1 billion in the third quarter and $3.4 billion year-to-date. We optimize our level of flow reinsurance in line with our capital targets by dynamically adjusting MYGA volumes up and down as market economics change. While short-term interest rates declined following the recent Fed cuts, the shape of the yield curve has a bigger impact on our business. We do not have significant exposure to changes in short-term interest rates as we have hedged the majority of our floating rate portfolio to lock in higher rates over the past couple of years. Our floating rate assets are now only $2.4 billion or 5% of our total portfolio, net of hedging. We expect continued strong demand for retirement savings products, including a growing demand for annuities by consumers and financial advisors for retirement security. Demographic trends remain a powerful secular driver as the growing retirement population seeks guaranteed lifetime income streams. And the continued macroeconomic volatility increases the relative attractiveness of fixed annuity products for consumers that want guaranteed tax deferred growth and principal protection. Next, turning to the investment portfolio. Our portfolio is diversified, well positioned and high quality with 96% of fixed maturities being investment grade. Credit-related impairments have remained low and stable, averaging 6 basis points over the past 5 years. Through the first 9 months of the year, credit-related impairments remained below our pricing. Given broader market concerns around credit exposure to bank loans, we don't have any direct holdings in First Brands, Tricolor or PrimaLend and our exposure to the subprime auto and regional bank sectors was a modest $20 million and $13 million, respectively, as of September 30. Our fixed income yield of 4.68% increased 10 basis points over the sequential quarter, primarily driven by a prospective floating rate asset model refinement. As a reminder, our fixed income yield excludes alternative investment income as well as variable investment income. Looking at our alternative investment portfolio, we saw improvement in our annualized return at 7% in the quarter, up from 6% in the sequential quarter and as compared to our 10% long-term expected return. Our alternative investment portfolios comprise 30% of all LPs with the remainder of more debt-like in nature. Next, turning to variable investment income. We reported $24 million of pretax, prepaid income in the quarter, which was above our run rate expectation as compared to $26 million in the prior year quarter and $6 million in the sequential quarter. As far as asset managers go, we really think we have the best of both worlds in terms of our competitive positioning and flexibility. This month marks that we are 8 years into our strong and seasoned relationship with a world-class manager in Blackstone. And we have the flexibility to work with other asset managers, whether for flow reinsurance or specialty asset classes that complement Blackstone's capabilities. In summary, F&G's results for the first 9 months of the year have positioned us well for a strong finish for the remainder of 2025. We are executing on our strategy, leveraging the strength of our distribution partners to continue to grow our spread-based business alongside our growing sources of fee-based, higher-margin and capital-light earnings through our flow reinsurance, middle-market life insurance and own distribution strategies. I'm excited about the future and our ability to continue to further expand our return on equity to deliver long-term shareholder value. Let me now turn the call over to Conor to provide further details on F&G's third quarter highlights. Conor Murphy: Thank you, Chris. I'd like to start by thanking our employees for their efforts in delivering an all-around strong quarter. Our solid foundation and focused execution continue to drive results across the business. Looking at our third quarter results more closely. On a reported basis, adjusted net earnings were $165 million or $1.22 per share in the third quarter. Alternative investment income was $67 million or $0.48 per share below management's long-term expected return for the quarter. Adjusted net earnings included two significant items, a $10 million or $0.07 per share benefit from a tax valuation allowance release as well as $4 million or $0.03 per share from an actuarial reserve release. Additionally, our third quarter adjusted net earnings benefited by approximately $25 million as a result of two other items in the quarter, strong prepayment fees as well as a lower effective tax rate. We completed our annual actuarial assumption review in the third quarter. As a result, amortization expense was approximately $6 million after-tax higher in the third quarter and we expect higher amortization over the next year with approximately $5 million after tax in the fourth quarter, incrementally diminishing through the first half of 2026. Overall, as compared to the prior year quarter, third quarter adjusted net earnings reflect asset growth, growing fees from accretive flow reinsurance, steady own distribution margin and operating expense discipline driving scale benefit. Our results have generated sustainable returns. As reported, adjusted ROA on a last 12-month basis was 92 basis points, including short-term fluctuations from alternative investment income. This is stable and in line with the last 12-month period for the prior year and sequential quarters of 95 and 92 basis points, respectively. All else equal, we expect this is indicative of our current run rate for adjusted ROA on a reported basis. Our adjusted ROA reflects meaningful contributions from our fee-based flow reinsurance and own distribution strategies. As reported, our adjusted return on equity, excluding AOCI, was 8.8%, in line with the sequential quarter. Our fee income from accretive flow reinsurance has grown to $41 million in the first 9 months, up 46% over $28 million in the first 9 months of 2024. F&G launched its flow reinsurance strategy in 2020, which builds on our core competencies, enables us to scale in an accretive and capital-efficient manner and produces diversifying fee income which generates strong cash flows. Our flow reinsurance strategy, augmented by the new reinsurance sidecar effective August 1, provides third-party capital for a portion of F&G's FIA and MYGA sales. Today, we expect to reinsure the vast majority of MYGA sales depending on economics. As discussed on last quarter's call, the economics for FIA sales are relatively more attractive with the sidecar and we expect we will evolve toward 50-50 retained versus flow for FIA sales. Importantly, we will continue to grow retained AUM as we balance retaining business versus optimizing flow reinsurance and preserving capital flexibility. Our own distribution portfolio is performing well and creating value. We have invested nearly $700 million in our four own distribution investments and expect to generate over $80 million of EBITDA for the full year 2025. Our holdings are diversified by product and market and reflect growing businesses with strong leadership. Two of our holdings are life IMOs that produce about 50% of F&G's IUL sales as the majority of their sales mix. The other two holdings are annuity IMOs that produce approximately 15% of F&G's annuity sales as the minority of their sales mix. In the future, we have plenty of opportunity to expand the value of own distribution through our existing holdings. And as independent agent distribution continues to consolidate in the industry, we expect to be selective in expanding to additional strategic partners, being thoughtful about where it makes sense and where it's the right fit with our long-standing relationships. We are benefiting from increased scale as our ratio of operating expense to AUM before flow reinsurance has decreased to 52 basis points in the quarter, down from 62 basis points in the third quarter of 2024. We expect continued improvement in our operating expense ratio as a result of the expense actions we took earlier this year, moving from 60 basis points at year-end 2024 to approximately 50 basis points by year-end 2025. Further, we see the potential to decrease by an additional 1 basis point per quarter on average in 2026. Two years in, and we have made significant progress towards the medium-term financial targets we laid out at our October '23 Investor Day to grow AUM by 50%, expand adjusted ROA, excluding significant items to 133 to 155 basis points, increase adjusted ROE, excluding AOCI and significant items, to 13% to 14% and expand our multiple. We are well positioned to deliver on our targets as we move further toward a more fee-based, higher-margin and less capital-intensive business model, leveraging our position as one of the industry's largest distributors of annuities and life insurance. This concludes our prepared remarks, and let me now turn the call back to our operator for questions. Operator: Before opening for questions, I'd like to turn it back over to Chris Blunt for some additional remarks. Christopher Blunt: Thanks, operator. Early this morning, we issued a press release with FNF, our majority owner, announcing the FNF Board of Directors has approved a change in FNF's equity ownership stake in F&G. FNF plans to distribute approximately 12% of the outstanding shares of F&G's common stock to FNF shareholders. Following the distribution, FNF will retain control and majority ownership of approximately 70% of the outstanding shares of F&G. This will increase F&G's public float from approximately 18% today to approximately 30% after the distribution, strengthening our positioning within the equity markets and facilitating greater institutional ownership. Operator, please open the call now for questions. Operator: [Operator Instructions] And our first question comes from the line of Wes Carmichael with Autonomous Research. Wesley Carmichael: First question I had, maybe it's a bit broader of a question on capital allocation. But as I think about the stock, it's been under a little bit of pressure this year year-to-date. And I know you raised some growth equity earlier in the year. Now you have the sidecar. So I'm just wondering how you're thinking about prioritizing capital deployment and how are you thinking about share buybacks relative to things like allocation to own distribution or even just faster organic growth? Christopher Blunt: Sure. Thanks, Wes. It's Chris. I'll start. I know Conor will have some views here as well. I would say right now, obviously, we want to continue to grow our fixed index annuity business that's core for us. And so that's always going to be fairly high on the list. Own distribution is attractive and where we've got opportunities to either potentially add a platform, although we want to be selective there or add some capital to help some of our existing ownership stake scale, that's very high on the list. Index Universal Life is a high priority for us and continuing to grow that, although it's not a large consumer of capital right now. You probably also noticed, we increased the dividend by 13.6%. So we're trying to share some of the new capital-light model with our shareholders right away. I would say right now, buybacks would probably be a pretty low priority for us just because, obviously, the distribution of shares by FNF is to try to help us increase our float, not take float out of the market. But I don't know Conor... Conor Murphy: It's a little bit of a reiteration Thanks, Wes. We're seeing very attractive opportunities for our core products. Again, IUL, the FIA, the RILA and the PRT, we've continued to be active in the PRT market as well and expect that momentum across all of that to continue in the near term. So we're very comfortable. We've plenty of capacity from a capital perspective to continue to focus on those. The opportunistic will be just that. It was a pretty active quarter this quarter, but we're watching where MYGA returns are in the near term and we will write as much or as little there depending on the economic opportunity. And yet, we continue to really, really like the own distribution expansion opportunity as well. Wesley Carmichael: It makes sense on the float comments, Chris. Second question I had, I guess, on variable investment income outside of the alternatives portfolio. I think that was pretty strong in the quarter, but I imagine that will bounce around a little bit quarter-to-quarter. But just maybe if you could think about a run rate level of non-alt VII going forward. Is there any help you can give us on that? Conor Murphy: Yes, I'll give you a sense. So you're right. We were higher this quarter. I think we were in the $24 million pretax range and like our expectation near term. You're always going to have an element of this. Our expectation is probably at the high single digits, 10-ish roughly, maybe a little less, but it will move around a little bit, and that's fine, but they were certainly a little bit higher, which is why we called them out in the quarter. Wesley Carmichael: That's helpful from a modeling perspective. And just maybe one final one. Just on the investment portfolio. I guess in recent weeks, there's been more focus on, I guess, private letter rated assets and these private structures, particularly those that are rated by Egan Jones, I'm just wondering if there's any color you can provide on that exposure for F&G maybe as a percentage of the portfolio? And maybe if you would disagree with the spirit of these recent articles in the media on private credit? Christopher Blunt: Yes, maybe to in reverse order. I think, look, everyone is concerned about the same things in the private credit space. So there's been some kind of big, I would say, bold statements made on both sides of the argument here. I think the only thing we can speak to specifically is our own portfolio, which we're feeling quite comfortable with. With respect to Egan Jones, yes, I think like a lot of firms, we're increasingly utilizing two different agencies. Are -- the number of securities or loans that we have that are rated by Egan Jones is quite small, like quite small. And we're trying as a general rule to get two agencies and wherever possible, one of what you would call the big 3 to rate every single deal, not just because of the backdrop or concerns about any one rate -- one rating reliable, so to speak, but also you have turnover. We have an analyst on leave. And so it's always better to have two where you can have that. So I think we've made a ton of progress there. Operator: The next question comes from the line of Joel Hurwitz with Dowling & Partners. Joel Hurwitz: A couple of questions on the alternatives performance. First, can you provide some color on the moving pieces of the $67 million of unfavorable alts in the quarter? And I guess how much of that was just the LPs versus that direct lending? And then what are the targeted returns on the different pieces that fall in that $10.5 billion bucket of alternative assets? Conor Murphy: Yes. I'll give you a sense. I'm not sure we give a complete and full breakdown, but I kind of know what you're going after. And I would say this from an expectation of where we came out, we were pretty close on the whole loan and direct lending parts. And I think we talk about a $10 billion portfolio in total, of which about $3 billion of it is the LP. So the LPs had a stronger performance. And I would -- yes, I would say that the increased performance was broadly there as well, but they are also in the main, the area that are still falling short of the long-term expectation. We were pretty much there or thereabouts on the whole loans and on the direct lending side. Christopher Blunt: And Joel, as you know, some of the LPs, particularly on the PE funds, you get a lot of that information comes with a lag. So that's part of the issue, too. So obviously, the sense is that activity is picking up. Hopefully, that's true and that persists. Joel Hurwitz: Okay. I guess any color on what the targeted return is on the LPs? I guessing it's higher than the 10%, but can you... Conor Murphy: Yes. I mean, look, to get to an average of 10%, yes, I would say that's the case modestly, but it's -- there isn't a wide range when you consider all of the components, but on the margin, not on the statement, correct. Joel Hurwitz: Okay. And then, Conor, just on the base yield jump of 10 basis points. You guys mentioned a floating rate refinement. Just what exactly was that? And how much of the basis point quarter-over-quarter increase was that? Conor Murphy: Yes. I'm not sure if it was 10 basis points, I thought it was probably closer to $10 million and maybe 3 or 4 basis points in terms of the, what I would call, core fixed income impact. But yes, we did have a little bit of a change. We had a change. We were solely using the forward curve, and now we have sort of a decision tree methodology where anything that's like a placeholder or if it's not hedged or if it's an FP -- an FABN, et cetera, it's short, it's spot right, anything that's longer term is forward. So we were really calling out the fact that it was suggesting that the fixed income yield had ticked up a few points. Honestly, I think the fixed income yield in the quarter -- actually, no, I apologize I think it was 10 basis points. I think the fixed income yield in the quarter was pretty flat quarter-over-quarter if you really drilled into the core components. Operator: [Operator Instructions] And the next question comes from the line of Mark Hughes with Truist Securities. Mark Hughes: Conor, I think you had talked about kind of all else equal, a good run rate ROA for the business. On an adjusted basis, what would that number look like? Conor Murphy: We've been -- that's -- on an adjusted basis, we've been in the like kind of high 120s right around that lower end. Remember, we had this -- the target that we put out a couple of years ago at the Investor Day to get into the 130s to 150 range. And we're right around that bottom end of that range currently. So over the last 12 months, adjusted basis, yes, I think we're probably around that 129, 130 mark. Mark Hughes: Okay. And then maybe a two-part question on RILA. Just looking at the Q3 stats out of LIMRA, says that RILA is up 20%, FIAs down a little bit. Just sort of curious, any observations on that dynamic? What's causing it? Is that likely to persist? And then just any update on your progress in the RILA product? Christopher Blunt: Yes, Mark, this is Chris. I'd say a couple of things. I think what's driving it, probably a little bit as rates has come down a bit and cap rates lower on fixed product, markets have obviously been outperforming quite well, equity markets. And so yes, you're always going to see everyone's well some sentiment shift between RILAs and FIAs, which is why we like the product, we want to have it in our portfolio. I would say, as we've acknowledged before, it's taken longer to get on platforms. So once we're on platforms, we're getting good flows and good adoption from advisors. So yes, it's continuing to grow. It's continuing to grow at a healthy clip just off of a small base. And again, given the number of opportunities that we have in FIAs, particularly FIAs that we can utilize the sidecar for, that's been pretty high on our list. So we haven't felt particularly constrained by the growth of it, but it's a strategic product for us, and we want to continue to grow it over time. Mark Hughes: Very good. Maybe another two-parter. The $80 million in EBITDA and own distribution, how does that compare to the prior year? And then you're seeing much private equity activity there. Competition for other deals, how does that stand now? Christopher Blunt: Yes. So the EBITDA number, I think, a couple of quarters ago, we were maybe projecting about $85 million. I'd say it's down a little bit. But honestly, every single month, it's going to bounce around by a little bit. I would just say the portfolio is performing really well, like ahead of our expectations. So we feel great about that in terms of the growth rate going forward. So that's been, I would say, pretty terrific. In terms of activity, I would say it's the same as it has been. There's -- every platform that we purchased, there was private equity competition, either they had turned down one of the roll-up players or had offers from the roll-up players. So I don't think our competitive positioning and how we position ourselves relative to them has changed. So yes, we're still quite optimistic about it. Operator: The next question comes from the line of Alex Scott with Barclays. Taylor Scott: First one for you is just more of a broad question around the competitive landscape. And maybe if you could comment both on the liability side but also even on the asset side and just how you're viewing competition for loan origination and so forth. Conor Murphy: Let me start on the liability side. Again, back to the core versus the opportunistic. I think we're feeling comfortable near term and by near term, I'm kind of giving you -- we get out of a few months out as we kind of look into momentum heading into Q4 and where the markets are currently. I'd say it is okay in the FIA space. It's definitely competitive, but it's -- I think it's also reasonable. That's true of RILA and IUL as well. From a PRT perspective, I would say that's still -- it's fairly active. There generally is a fair amount of activity in the fourth quarter of every year. And I think the environment is still conducive to that. A little hard to predict that too far out. I think in terms of the volume and the pricing in the PRT space currently and that space that we play in the sort of $100 million to $600 million upwards to $1 billion space is pretty good as well. I think near term, from a MYGA point of view, and I alluded to this on an earlier answer as well. That's tighter. I would think that this is, again, back to the opportunistic element of it, I would say, near term, the appetite for that probably wanes a little bit compared with the other opportunities that we're seeing out there. Christopher Blunt: Yes. And on the sort of credit origination side, which is an important engine, right, from a competitiveness standpoint, obviously, that is tighter. There's more competition for deals for sure, but the market is just huge and continues to expand in terms of opportunities. So we've been able to find our spots. Probably takes a little bit longer to get some premiums invested, particularly in the private credit area. But yes, I would agree with Conor's assessment, tighter in spots, but overall, still pretty attractive. Taylor Scott: Got it. All helpful. Second one I have to you is just on the hedging and short-term interest rates. Could you help us think through like how that actually flows through earnings? Like is there a lag? Is it amortized? I mean was there an outsized impact maybe this quarter from rates coming down at the short out of the curve? I just -- I'm not as familiar with how that would flow into adjusted earnings. Conor Murphy: Yes. I don't know that there's anything really significant. I mean I think you know the overarching perspective really for us, it's just we have a floating rate component of the portfolio that's not on to -- and I think it's under -- less than $2.5 million or 5% of the portfolio, but... Christopher Blunt: Yes. And you always want some floaters in there, right? Because when great opportunities come up, this is stuff that's often easiest to move and reposition into something better. And yes, I'm not -- we'll follow up with you on that one, but I don't think there's any meaningful timing lags due to the hedging. Taylor Scott: Okay. And nothing -- like nothing notable in this quarter in terms of [indiscernible] gain flow through or something like that? Christopher Blunt: No. And again, the methodology change was really just trying to be more precise, right? Because we use floaters in different ways, right? There are some that are defeating a longer term, maybe call it a 5-year liability. There are some that are really placeholder assets as a cash surrogate. And so that -- it was just really trying to make sure that when people looked at movements in interest rates are tied to the portfolio results that we're seeing a little bit better. Conor Murphy: That's exactly right. I mean, yes, just to underscore that, it's really just -- it's tied to the purpose of the use of the asset. So it really was -- it was modest. The reason we highlighted it at all is we were really looking to illustrate that the -- from a core fixed income perspective because there's so much focus on the ROA that it was -- I mean it was positive, but it was a flat quarter. It remains the same. We weren't trying to suggest that it had gone higher because of anything we had done in the portfolio. That's why we called it out. Operator: The next question will come again from the line of Wes Carmichael with Autonomous Research. Wesley Carmichael: I just had a couple more for you. But one on operating leverage. If I look at the operating expense line, that's declined over the past couple of quarters, and I think that's a good development. I imagine part of that's related to the actions you took earlier in the year. But how are you thinking about that going forward? Is there more opportunity for reducing costs? Or should we just think about the spend is going to increase less than the pace of AUM going forward? Conor Murphy: Yes, I think it's the latter. Thank you, and I made some of these comments earlier as well. From our perspective, bringing the cost basis as a percentage of AUM down from 60 to 50 basis points. So that is essentially we -- we got to that track with the efforts in the second quarter. My expectation is that it will take down from 50 to 46 roughly over the course of next year. But I would say that's by maintaining, broadly speaking, in sort of inflation side, maintaining where we are now and continuing to grow. I think after that, it will continue to come down, but I think the pace will be more modest. I'm guessing maybe like 0.5 basis point a quarter. So 2027 maybe another 2 basis points after 4 this year. But that's -- so you could view it as an impact of continuously improving expense ratio rather than a declining level of core expenses. Wesley Carmichael: Got it. That's helpful. And just last one, I guess, on the press release with FNF spinning some of the F&G stock to FNF shareholders. I guess my reaction and maybe some of the investors was it's a pretty modest number relative to maybe actions they could have taken. But I just wondered if you had any comments on that from your perspective. Christopher Blunt: Yes. I mean, I guess it is and it isn't, in the sense that if you looked at the amount of free float, it's a very meaningful increase in free float. And I think from a dollar perspective, don't quote me, but I think this gets us over $1 billion now of free float. So we've heard from a number of particularly long-only investors that said, "boy, if you had a bit more float, we'd really like to take a position". So I think over time, it's going to prove to be quite meaningful for us from that perspective. And as to the amount, it was as simple as FNF really likes F&G, sees a lot of promise in our long-term future. And so there was a lot of speculation of, "oh, it's been 5 years, they're going to spin the whole thing out", and they clearly didn't want to do that. And so it was really how much can we spin out to help with the FG float while retaining a large percentage. So we took it as a great vote of confidence in where we are, our capital light strategy and the earnings we can drive going forward. So I think it's a really positive development, I think, for both shareholder basis, frankly. Operator: This will conclude our question-and-answer session. And I'd like to turn the call back to Chris Blunt for closing remarks. Christopher Blunt: Thanks again, everyone, for joining our call this morning. We had a really strong third quarter and have good momentum heading into the end of the year. I'm excited about the future and our ability to deliver strong returns for the shareholders of F&G in the years ahead. We appreciate your interest in F&G and look forward to updating you on our fourth quarter earnings call. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for standing by. My name is Carlie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Six Flags Entertainment Corporation 2025 Third Quarter Earnings Call. [Operator Instructions] I'd now like to turn the call over to Six Flags management. Please go ahead. Michael Russell: Thank you, Carlie, and good morning, everyone. My name is Michael Russell, Corporate Director of Investor Relations for Six Flags. Welcome to today's earnings call to review Six Flags Entertainment Corporation's 2025 Third Quarter Financial Results. Earlier this morning, we distributed via wire service our earnings press release, a copy of which is also available under the News tab of our Investor Relations website at investors.sixflags.com. We have also posted a presentation deck that can be accessed either on the webcast page for today's call or on our IR website's presentation page. The slides offer supplemental information specific to our consolidated results and park portfolio, all of which will be discussed on today's call. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ from those described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC Regulation FD, this webcast is being made available to the media and the general public as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content on this call will be considered fully disclosed. On the call with me this morning are Six Flags Chief Executive Officer, Richard Zimmerman; and Chief Financial Officer, Brian Witherow. With that, I'll turn the call over to Richard. Richard Zimmerman: Thanks, Michael. Good morning, everyone, and thanks for joining us. Today, as we discuss our third quarter results and our expectation for the remainder of the year, I want to acknowledge at the outset that our performance in 2025 has fallen short of our expectations. While we delivered year-over-year attendance growth during the critical third quarter and continue to make meaningful progress on our integration efforts, softer-than-expected demand in September offset much of the momentum we had built in July and August, leading to approximately flat third quarter EBITDA year-over-year. While the 2025 season has been defined by volatility, I remain encouraged by the underlying strength of our business and believe the lessons we're taking from this period help lay the foundation for future success. Even in a year like this one that has challenged our execution and tested our operating model, we have gained deeper clarity about where the portfolio is strongest, where it needs refinement and how we can adapt to challenges and evolve our approach to unlock the full potential of the company. Before we dive into our operating results, and I turn things over to Brian, I want to discuss our ongoing constructive engagement with a group led by JANA Partners, which includes football superstar Travis Kelce. Six Flags has always been open to discussing strategy and opportunities with shareholders. And in that regard, the situation is no different. What is different is the magnitude of consumer interest and response that we have seen following the announcement and that the group has invested in Six Flags. This reaction reinforces our confidence that Six Flags is as exciting and relevant as ever. Six Flags remains a beloved brand, and we are pleased that it is part of the national conversation. We intend to build on that momentum and capitalize on the interest in the company for the 2026 season. We'll have more to say about that on future calls, so stay tuned. Now let me turn the call over to Brian to provide more context around our third quarter and year-to-date results. Brian? Brian Witherow: Thanks, Richard, and good morning, everyone. As Michael mentioned at the outset of the call, in addition to our earnings release, we posted a supplemental presentation on our website, which provides more context around our operating results and which I will reference during my prepared remarks. With that said, let me start with a review of our third quarter results. Starting with Slide 3 in the presentation. For the quarter, we delivered modified EBITDA of approximately $580 million and adjusted EBITDA of approximately $550 million on attendance of 21.1 million guests and revenues of $1.32 billion. The $555 million of adjusted EBITDA was essentially in line with the third quarter last year with attendance up 1% and revenues down 2%. The quarter began on a strong note. Combined attendance in July and August increased approximately 2% or 300,000 visits and guest satisfaction scores continue to improve with our brand-leading parks performing at a high level. However, following Labor Day weekend, we saw a downturn in demand trends as attendance for the month of September declined approximately 5% or roughly 160,000 visits from September last year. This resulted in a 5% decline in net revenues for the month compared to the prior year. Despite the substantial change in attendance trends, we stayed the course and maintained our initiatives and planned level of OpEx reinvestment in many of our parks. Combined with the shortfall in September revenues, this negatively impacted third quarter EBITDA by approximately $20 million. Stepping back, we believe the third quarter results offer a more relevant picture of the underlying business trends compared to the previous quarter. Third quarter results somewhat isolate the severe second quarter weather, which impacted operations, negatively affected demand and disrupted the pace of season pass sales and visitation over the entirety of the core season. Despite those challenges, the third quarter underscores the strength of our best-performing parks. It also highlights those parks that require a fresh strategic approach. With that as the backdrop, please turn to Slide 4. During the 2025 season, we have learned an extraordinary amount about our individual parks. It has, in many ways, been a tale of 2 cohorts. Year-to-date, certain parks representing approximately 70% of property level EBITDA have continued to outperform, while parks representing roughly 30% of property level EBITDA have underperformed. As we've gathered more information and learn more about our underperforming parks, we've gained a clear understanding as to what it takes to turn around most of these properties. Some of these underperforming parks have become non-core to our strategy. And as we've discussed before, we are looking to monetize them. As we move forward, if certain underperforming parks don't respond to our initiatives, we will consider rationalizing our investments in those properties and deem them to be non-core. The bifurcation of outperformers and underperformance is not simply a matter of geography or legacy ownership. It speaks to differences in how our parks are perceived by consumers, which we call brand strength as well as consumer affinity, historical investment patterns and local competitive dynamics. In 2025, we implemented our playbook aggressively in the underperforming parks and invested ahead of attendance growth. Our initiatives included increasing both operating expenses and select promotions, including changes to ticket prices and bring-a-friend offers. Based on past experience, these investments often yield immediate results in attendance growth. Unfortunately, in other cases, it can take time to see a change in consumer perception and growth in demand. We've been actively reviewing each park in our portfolio as we work to optimize revenues, operating costs and capital expenditures going forward. Turning to Slide 5. Through the first 9 months of the year, the outperforming parks in the portfolio have generated incremental modified EBITDA on essentially flat attendance year-over-year. We believe the performance of these parks would be even stronger absent the significant impact of severe weather in the second quarter and the disruption in season pass sales during the critical May, June time frame. Our underperforming parks tell a different story. Through the first 9 months of 2025, modified EBITDA declined as a result of lower attendance and increasing operating expenses. However, we deliberately increased operating expenses to reflect necessary maintenance investments to ensure ride up times in these parks are up to our standards. We made significant progress in this area, but did not yet achieve the commensurate uplift in profits we were targeting. Going forward, we intend to be more nimble and strategic in allocating investment dollars, focusing only on our highest potential underperforming parks and the strongest opportunities to deliver near-term returns. Turning to Slide 6. Performance of the outperforming group of parks was even better during the third quarter. Modified EBITDA for these parks increased double digits, driven in large part by a 5% increase in combined attendance. Third quarter results at these parks were broadly in line with the expectations embedded in our original 2025 guidance, and their performance reaffirms their long-term strategic and financial importance to the company. In the third quarter, our underperforming parks saw attendance decline 5%, although we were able to better protect margin erosion through critical adjustments to variable costs, thereby limiting the modified EBITDA declines. Finally, for all portfolio parks, our third quarter results were also impacted by shifting advertising expenses. We reallocated ad spend from the third quarter to the first half of the year, which helped lower third quarter operating expenses, but most likely also affected demand and impaired our top line during the quarter. Turning to Slide 7, you'll see a good example of a single outperforming park and an underperforming park. Note that both parks began the year with similar margins and both experienced flat attendance year-to-date. Yet as you can tell from the chart, profitability between the parks vary widely. The park on the left, the outperforming location, had been historically well maintained with a loyal customer base that was able to withstand any adversity we face throughout the season. Here, we were able to leverage our reputation and minimize costs without impacting consumer demand or the guest experience. The result is that EBITDA grew 14% and margin improved from 43% to 47%. The park on the right is an underperforming location where we made significant investments in 2025 to address deferred investment needs and support multiyear attendance and EBITDA growth. The nature of the business is that we invest in maintenance and labor expenses in advance of top line attendance and revenue growth to improve customer satisfaction and enhance brand perception. The result is that year-to-date EBITDA at this property fell significantly and margin contracted from 44% to 29%, an unacceptable long-term margin for a park of its scale. However, while profitability clearly remains challenged, we remain excited about the opportunity to drive long-term growth within the portfolio. Our parks are located in attractive high population DMAs, which provide a substantial runway for future attendance growth. As reflected on Slide 8, the largest properties in the underperforming cohort of our portfolio have room to double their penetration rates before reaching the levels we are currently achieving at the largest parks in our outperforming cohort. We also see similar opportunity to increase profitability at these underperforming properties. Turning to Slide 9. Despite not seeing the near-term economic return on every one of our 2025 initiatives, we are beginning to see leading indicators turn positive, and we are excited about the potential upside here. As we look ahead, our road map for the underperforming parks centers on 2 primary pathways: migrating those parks toward the performance profile of our best parks within the portfolio or classifying them as non-core and divesting them where it makes strategic and financial sense. We're approaching this process with objectivity and discipline. We are reevaluating pricing strategies, operating cost structures, capital allocation plans and long-term market potential. These evaluations are underway with the full support of our Board. We are committed to making decisions that strengthen the long-term health of the company even when those decisions are difficult. This isn't new for us. Remember that we have already taken actions to monetize real estate in Northern California, Bowie, Maryland and Richmond, Virginia. Let's quickly touch on October results and our most recent performance trends. Based on preliminary operating results, attendance over the 5-week period end November 2 totaled 5.8 million guests. This represents an 11% decline in attendance versus October last year. However, we think it's important to consider the comparison to 2023 as last year's results benefited from a 5-week weather pattern that was nearly perfect. And as a result, October attendance was up 20% in 2024. Therefore, we believe that 2023 offers a more relevant comparison to assess the current period performance. Against that same 5-week period in 2023, we showed a 7% increase in attendance this October. We find it very encouraging that when compared to October of 2023, results at our outperforming parks were up 11% and the underperforming parks were up 4%. One final note on October performance. In early September, based on the strong attendance trends coming out of July and August, we thought we were well positioned to match last year's October results as we have seen consistent growth in demand for our fall events, and we added both incremental operating days and new IP themed attractions to drive demand this year. However, the difficult comparison to last year's record performance, coupled with our pullback in advertising spend, made our October goals a bridge too far. Based on these results, we are revising our full year outlook. Our updated range reflects discipline, transparency and a realistic assessment of the conditions affecting the business in the back half of the year. It also creates a more stable foundation as we refocus our efforts and reposition for the 2026 season. Based on our updated outlook for the last 2 months of the year, we now expect to deliver full year adjusted EBITDA of $780 million to $805 million. From a balance sheet perspective, our priority is to enhance financial flexibility and improve free cash flow generation. We intend to do this both through organic growth in our core properties and through potential strategic asset sales. We have no meaningful debt maturities until early 2027, and we have adequate liquidity to address near-term cash obligations. And despite this year's challenges, we remain comfortably within our covenant requirements. We currently sit at approximately 3x secured leverage, giving us substantial cushion against our first lien leverage covenant, which steps down to 5x at year-end. Despite the performance volatility over the course of this year, we believe the regional amusement park business remains fundamentally solid as evidenced by the results of our high-performing parks this year. Several of these parks are on track to record or near record performances. These results underscore the long-term viability of the business model and reaffirm the central thesis behind our strategy. When we invest in product quality, operational reliability and the guest experience, consumer demand follows. Our approach coming into 2025 was rooted in a desire to drive recovery as quickly as possible in parks with long-standing demand challenges. We made strategic decisions based on the historical success of implementing our playbook across the portfolio. But in some markets, the pace of change exceeded what our consumers were prepared to absorb within a single season. This reflects the evolving nature of guest behavior and the importance of calibrating change at a market-specific level. As we move forward to 2026, this learning is already reshaping our approach around an understanding that pricing changes, promotions and programming must be phased in sequence with greater precision. Looking ahead to 2026, we are focused on taking the learnings from this past season to inform our strategic initiatives and our priorities. We are reassessing our marketing approach with a focus on returning to fundamentals. That includes reevaluating the allocation of marketing spend by park and channel, improving the pacing of that spend to more effectively align with the seasonal demand curves and sharpening messaging so that it resonates more precisely with consumers in each unique market. Additionally, our integration work remains on track and is yielding meaningful benefits. We have standardized core safety, security and operational protocols across the portfolio, critical steps in the integration process. Earlier this week, we launched our new website, a single unified digital home that brings together what were once 2 separate companies and more than 15 different websites. The launch represents more than just a new look. It's a major step forward in how we present ourselves as one brand and one team. The new website offers a seamless experience for our guests as well as an entirely new platform for the business. It's a platform built to grow with us, which is scalable, data-driven and optimized for evolving needs of the enterprise. In addition, by year-end, all parks will be operating on a unified ticketing platform, an essential component of our future revenue and demand management strategies. And as we move into early 2026, we will complete the migration to a single enterprise resource planning or ERP system, which will deliver material administrative efficiencies and strengthen the infrastructure supporting our next phase of growth. As we tailor our operating plan for 2026, the long-term fundamentals of this business remain solid. We have a core set of highly competitive top-performing parks, a valuable real estate base and a clear understanding of where strategic focus and calibrated investment will have the greatest impact. We have strengthened our operating and technological foundation, and we are better equipped than at any point in the merger process to drive consistency, stability and long-term value creation. Although 2025 has been a difficult year, it's also brought clarity and direction. The insights we gained are already shaping a more disciplined, data-driven and market-specific strategy for 2026. And while the road ahead will require focus and execution, the building blocks for long-term success are firmly in place. We remain confident in the company's prospects for shareholder value creation. Before concluding my remarks, I'd just like to offer a note of thanks to Richard, whose leadership and discipline through this transformative period in our history has set the stage for the company's next chapter of success. With that, I'll turn the call back over to Richard. Richard Zimmerman: Thank you, Brian. As we conclude today's call and I prepare to transition out of the CEO role, I want to speak directly to the realities of our performance and to the opportunities that lie ahead for this company. While we have not yet achieved all we set out to deliver following the merger, the underlying thesis has not changed. We've built a stronger foundation, modernized core capabilities and position Six Flags to operate with greater discipline, better intelligence and a clearer sense of where value will be created. That work is real, and it will endure. This year has challenged every assumption and tested every plan, but challenges tend to reveal the fundamentals and the fundamentals here at Six Flags remain sound. I've spent 4 decades in this industry, and I have seen how quickly momentum can return when strategy, capital and execution all align. Our assets are unique, our operating platform is improving and the long-term demand profile for regional entertainment remains intact. We also know something else to be true. When we invest with focus and creativity, guests respond. This team has consistently demonstrated its ability to reenergize markets, elevate product quality and deliver experiences that drive both attendance and pricing power. Those are muscles this organization knows how to use, and they will be central to its next era of growth. To our shareholders and investment partners, I understand the scrutiny and I understand the expectations. Over this past year, this management team is focused on addressing structural issues, prioritizing initiatives with the highest return and positioning the company to translate that progress into sustained financial performance. Despite our short-term challenges, the core value proposition of this business remains durable, repeatable and underpinned by assets that are not easily replicated. To our park teams and associates, you are the constant in this business. Your work day in and day out is the reason this company has outperformed, recovered quickly from downturns and earned the trust of millions of guests. You are the differentiator. It has been the honor of a lifetime to be trusted to lead this great organization. Thank you for giving me that opportunity. And lastly, I'd also like to thank my wife, [ Carolyn ], of 40 years for her love and support. And with that, we'll open the line up for questions. Operator: [Operator Instructions] Your first question comes from Steve Wieczynski with Stifel. Steven Wieczynski: So a couple of questions here. I guess, first of all, when you guys talked about these outperforming parks versus the underperforming parks, can you actually maybe help us and quantify how many of your parks you're considering these days outperforming versus underperforming? And if we think about some of those underperforming parks, are any of those parks EBITDA negative right now? Brian Witherow: Yes, Steve, it's Brian. We're not going to break out the number of properties that sit in each side other than as we said in our prepared remarks and it was represented in the slide deck, those outperforming parks represent 70% of EBITDA year-to-date in 2025, closer to 60% last year. The underperforming parks would contain the lion's share of the small properties within the portfolio. And some of those parks are maybe in low single digits when it comes to millions of dollars of EBITDA that they generate. But beyond that, we're not going to provide any more specifics on the names or the numbers of parks in each cohort. Steven Wieczynski: Okay. Got you. And then second question, if we go back to February, when you initially gave guidance for the year, which was -- I think it was $1.1 billion at the midpoint. And now we sit here at, let's call it, close to $800 million at the midpoint. Obviously, that's a $300 million difference. Is there any way you can bridge that $300 million delta? Meaning how much of that delta do you attribute to weather versus other factors, whether that's cost or just macro headwinds? Anything you could do to kind of bridge that would be helpful. Richard Zimmerman: Yes, Steve. Listen, as we look at this year, I appreciate the question. There's been a lot of volatility in the year. This has been the year that seems like it's several years rolled into one. So it seems like there's been a lot of challenges throughout that. I think as we look at that, and I'll let Brian weigh in here, I go back to the point that Brian just made. as we've walked through this year, we've tried to really calibrate what we needed to do to build a strong foundation for the future and start to see that demand come back and focus on that market penetration in the underperforming markets where we think the greatest opportunity is. Brian? Brian Witherow: Yes. Without getting into specifics, Steve, in terms of numbers, we're not going to go to that level of detail. But as you know, you've been around the business a long time, and this industry is all built around attendance. I think our expectations coming into this year were for more potential than clearly the business was able to deliver this year, which is why we need to take -- we're taking a step back and we're reevaluating each one of these parks, where they -- current status, what the potential is and what the effort is to get them up to where we know they can be long term. But the majority of this miss is an attendance-driven miss in 2025. Steven Wieczynski: Okay. Got you. And Richard enjoyed working with you and best of luck. Operator: Your next question comes from Ian Zaffino with Oppenheimer & Company. Ian Zaffino: I wanted to also ask about the underperforming parks. I think initially, we identified them as parks didn't really contribute as much, then they became underperforming. At what point do they then become, I guess, non-core? Are there like specific metrics or bogeys you're looking at? And how much time are you willing to spend on fixing these parks before, again, they become maybe more non-core? Richard Zimmerman: Yes, Ian, I understand the question. What I would say is that, as Brian said in his prepared remarks, this is an ongoing process. We're trying to factor in all the latest data. When you look at the overall portfolio, I think we're going through that evaluation. And it really depends on how fast we think we can ramp up the demand and what we see as demand in each market by market specific, but that's an ongoing process right now, and we're refining those criteria with the Board. Ian Zaffino: Okay. And then just as a follow-up on the CEO search. Maybe give us an update there. What type of qualities are you looking for? And then how would you maybe wrap that around one of your newest investors, Travis Kelce? Richard Zimmerman: Here's what I will say. The Board has had a very diligent process ongoing headed by our non-gov committee, Arik Ruchim. And I've been encouraged by the quality of the candidates, the level of interest. And I think that as the Board works through that process, they'll have more to say in the near future, but that's about all I can comment on at this point. Operator: Your next question comes from Ben Chaiken with Mizuho. Benjamin Chaiken: I guess the first one is just maybe for within the year. The remaining of Q4, unless I'm mistaken, has around 60 less operating days than the prior year. You helped us with October. Can you maybe help us with the expectations for attendance for the remainder of the year that you've baked in the guidance, maybe what the range of outcomes are for the low and high end of EBITDA? Brian Witherow: Yes, Ben, it's Brian. Based on what we've seen in September and October and quite frankly, in all honesty, the miss in our expectations of what we could achieve in October, we're trying to be as prudent as possible in our outlook for November and December as we want to live up to those obligations to the Street and these updated guidance range that we put out there. November and December are smaller months. So I think there's a little bit of a higher confidence level in terms of predictability. But we've assumed anywhere from flat to down mid-single digits. I think October, the bar was very high last year. That's not so much the case in November, December. But I think -- which is why you sort of sort to a flat year-over-year. At mid-single digits, that would incorporate a little bit of those same kind of headwinds we saw in October playing out. But maybe just to put it into perspective for you, for each 1 percentage shift in attendance over that 2-month window, that would equate to approximately $3 million in EBITDA over the last 2 months of the year. Benjamin Chaiken: Okay. Maybe just a follow-up there because I think on the last call, you mentioned and maybe I'm conflating or mixing up numbers, but I think you said that there was a $500,000 attendance impact because of the operating days towards the end of the year. And I'm just thinking like if you -- again, maybe that's just like wrong, but if you're having 500,000 from removing operating days, how would... Brian Witherow: Yes. No, that's fair question. Fair follow-up, Ben. The 500 -- my comment on the flat to mid-single digits was on the apples-to-apples comparable operating days. You're exactly right. There's a little bit inside of 500,000 visits associated with 4 winter holiday events that we're unplugging that sit on top of that. So when we're looking at the operating days that we will have at the parks this year versus the comparable days last year, that's the flat to down mid-single digits. There is another loss of attendance associated with those winter events, which will lead to closed days this year versus open days last year. Benjamin Chaiken: Understood. And then maybe back to the underperforming parks. I mean what's the time line that you need to make these decisions here? Like you've kind of seen the performance this year, you guys are able to cut the data on what is weather, what is not? Like is this something that you think within the next 12 months, you'll have an idea of what assets are staying and what assets are going? Or what's the expectation? Brian Witherow: Yes. Well, I think we already have a real -- a pretty good idea of which are the low-hanging fruit when it comes to non-core versus strategic assets going forward. We're moving with a sense of urgency on that process as we're building out our 2026 plans. As we said in our prepared remarks, as parks -- as we roll into '26 and we see how parks perform, there may be a need to pivot in a park that we consider core right now, if we're not seeing the returns on that, we need to remain nimble and shift our thinking that a core park today could become a non-core park going forward. But I think we have a really good idea of which parks fit into which bucket where we stand today, and we'll continue to refine our thinking as we see the business evolve. Benjamin Chaiken: Okay. And if I can just sneak one quick one in. I think legacy Six Flags highlighted 4Q '23 as having some weather in it. I know you guys gave that as a comparison period. I just don't know if that was -- if the weather was in October or November. Clearly, you guys think it's a better comp, but just maybe a few comments there. Brian Witherow: Yes. I think as you look at and comparing into these years, right, what you're highlighting, Ben, is that there's always those macro factors that are at play. '24 was outstanding 5 weeks. '23 did have a little bit of a disruption. Within the portfolio, it was a bit more maybe meaningful for the stand-alone Six Flags entity than on a combined basis. And so this year's weather was probably fairly comparable. We had issues this year with weather across the system. Again, you're not going to hear us lean on that as an excuse. But I'd say that '23 weather impact was certainly more impactful to Six Flags stand-alone than maybe the combined attendance of the Newco Six Flags. Operator: Your next question comes from Thomas Yeh with Morgan Stanley. Thomas Yeh: Yes. Just following up on the underperforming parks piece. It appeared in that one example that price discounting and cost investments didn't really deliver on the attendance growth side. So what's the time line on ROI that you would expect on OpEx investments before deeming it as non-core? And how should we think about maybe just the threshold on investments in an aggregate sense if we can reframe that within the broader OpEx and CapEx targets that you laid out at your Investor Day. I believe this year, you had expected it to decline 3%, excluding COGS. Richard Zimmerman: Yes, Thomas, I'll take the first part. I'll let Brian take the second part. But when we think about demand in any specific market, we've always talked about the dynamic pricing. We really go in and look at where we see demand. And when we make these investments, what we've seen in the past in parks that we've sort of relaunched and reenergized is you start to get traction in year 1, you see more impact in year 2. And then by year 3, you're really running. So as we think about the ramp of it, I go to the last page of the deck, which really showed the metrics that we're trying to monitor that speak to guest satisfaction, guests coming back. Part of this is making sure, as I've always said to the general managers and the folks that run our parks, the greatest measure of your success is not what you do this year, but it's whether your guest comes back this -- next year and how you build a foundation of higher attendance in the future. Brian? Brian Witherow: Yes. As I think, Thomas, about -- specifically about the cost side of things, we are working through the process right now of building out our expectations, as I said in my prepared remarks, on a park-by-park basis. We're going to focus on where those returns on those investments are the greatest and the opportunities are the highest. We're going to prioritize certain parks over other parks. I do think we took a significant step in the right direction this year in rightsizing the cost structure, staying true to the strategy and the initiatives that we deployed at the beginning of the year despite some headwinds around demand. We didn't veer dramatically off course. And so that was a major step in the right direction. We'll assess park by park, each park's capital and OpEx needs going forward and focus our cash spend where those returns will be greatest. As it relates to our expectations for the full year in terms of costs, I think we've continued to deliver where we've had more control. A lot of progress made around labor costs as an example. In other areas of the business, we've seen some more headwinds that were unanticipated, areas like self-insurance reserves, utility costs, things are a little bit more out of our control, property taxes. That's been a little bit more pressure on the business over the course of the year, particularly in the second half than we had necessarily anticipated earlier in the year. Thomas Yeh: Okay. Understood. And can you dig into the drivers of September moderation in attendance? Any macro level signs on consumer softness? I think last quarter, you mentioned some low-end consumer weakness at the margin in addition to the weather, obviously. So how did that evolve over the course of the last few months? Brian Witherow: Yes. I think those macro factors are things that we're always focused on. I'm not going to blame the attendance shortfalls entirely on that. I think attribution is a little hard in the middle of any season. At the end of the season, it's a little bit easier to look back and see over time what might have been at play. There are some missteps. We have to own the decisions that we've made. Not all of our advertising program was as effective as it needed to be. Some of the pricing changes, as I said in my prepared remarks, we may have moved a little too fast and a little too far on some of trying to harmonize and bring some of the Six Flags parks in our system in line with the Cedar Fair pricing structure and program structure around things like season pass. So it's some missteps by management. Those are things that are very correctable and things that we'll be focused on. And we'll continue to just watch the broader macro backdrop. I think we said it on the second quarter call, we knew that the disruption of season pass sales because of the weather in May and June was going to be a bit of a headwind for us over the balance of the year. I think that does play out in these third quarter numbers a bit September and even a little bit in October as well. Thomas Yeh: Got it. Maybe last one, just on season pass adoption to your point, the pricing that's pacing up 5%, is that a reflection of the harmonization that you just mentioned? Or are you seeing maybe just higher uptake on some of the higher tiered pricing products? Brian Witherow: Yes. It's a combination of those 2 things, Thomas. It's a little bit of mix. Folks through the promotions that were -- that we have out there and the pricing structure in place, people migrating up the stack a little bit. We're not satisfied with where season pass sales are at every one of our parks. A lot of work being done by the team behind the scenes as we prepare for the next big sales window, which is spring 2026. I would expect that there'll be changes in how we're marketing those programs as well as what the makeup and pricing structure is as we go forward and try and drive better sales figures over the balance of the program. Richard Zimmerman: And Thomas, let me jump in here and say that I don't want to underplay in any way getting the entire portfolio on a single ticketing system. We've always talked about our CRM system and how we engage with our guests. That will be available to us in the spring as we get into the big spring sales cycle. So I'm really excited to see how the unified backbone of our technology will help us as we get into '26. Operator: Your next question comes from Arpine Kocharyan with UBS. Arpine Kocharyan: You talked about product initiatives sort of outpacing consumers' ability to really absorb those changes in your slides in a single season. What does that exactly mean? Is it mainly about pricing? And how does that change into 2026? And do you also expect a significant reduction in your CapEx for 2026? Brian Witherow: Yes, Arpine, it's Brian. Let me maybe take it backwards and work to your -- that direction. In terms of CapEx, we had already talked about a skinnying up of the '26 capital program that was more so being driven by some challenges time line-wise relative to a couple of big projects. As we've, I think, talked about on previous calls, the lead time of some of these big attractions has gotten elongated for a lot of different reasons that complicate the process, everything from permitting to getting product from overseas in today's environment. And so we had talked about pulling our capital program back by about $100 million relative to what we had originally thought, maybe, say, 12 or 18 months ago. So that -- no further changes beyond that. We will continue to evaluate our capital programs for '26 and '27, always trying to be as efficient and optimized as possible, but no other changes to note on that. In terms of the comment about the consumer, I think it's across a number of layers, Arpine. It's not just pricing. It's the structure, it's how we communicate with the customers. I think we take a step back and we evaluate [ '25 ] and the decisions we made, we can be a little critical, self-critical of the decisions that we made from a standpoint of markets get trained. And by that, I mean consumers get used to a certain structure of communication, when things go on sale, how we're even messaging in advertising as well as the structure of the product. I think in some cases, not necessarily every park, but certainly some parks in the portfolio, we maybe went too fast, too far and deviated from a lesson that we've learned in the past, which is you don't want to shock the market and you don't want to disrupt what they're used to. And so we're going back in and reviewing all that. I think there'll be adjustments. There'll be changes as we go into 2026 as we attempt to rightsize some of those disruptions that we saw this past year. Arpine Kocharyan: Great. That's helpful. And to go back to your strategic review of the portfolio, what are the biggest hurdles? Is it just deciding what is core versus non-core and just -- or just transaction market and ability to absorb kind of portfolio type sales? Or can you look at more alternative uses for these assets? Like what are some of the big hurdles and where you are -- how you're looking at that at this point? Brian Witherow: Yes, I think when you look at the portfolio of parks, and we talked about this all the way back to when we completed the merger that as a combined company of this scale, the ability to sell off and monetize parks that weren't going to contribute a great deal of growth, maybe nice parks from a standpoint of what we would consider the little mini cash cows, so to speak, parks that don't require a lot of capital, generates a nice amount of EBITDA and throw off cash flow. Those had a home, I think, in both stand-alone portfolios in a bigger company where we're trying to narrow our focus and shrink our capital needs as well as our risk or our liability exposures, getting the portfolio smaller and more nimble is a priority. And so we're going to look at the parks where our returns are the greatest, where the opportunities for growth are the highest, and we're going to focus on those parks and the other parks we'll look to monetize and use those proceeds to reduce debt. Operator: Your next question comes from Chris Woronka with Deutsche Bank. Chris Woronka: I guess I'm curious maybe you can share with us how much, I guess, data collection or survey work you do with your customers, I guess, maybe both kind of before and post visit? And are you seeing any trends in terms of what they're telling you, whether it's a price value or whether it's a content issue? Just trying to get a sense as to how much you're interacting with those guests and if you think you're identifying any big holes in the feedback? Richard Zimmerman: Yes, Chris, we really try and rely on research, both normal research that we do concurrent with our operations. So we always are paying our customers and get that research back on a week-by-week basis. That gives us the NPS, the OSAT scores that we rely on. So we're always constantly getting feedback. On top of that, we do periodic research multiple times a year with our brand tracker and look at how things are evolving in each market. And that's a little more detailed feedback on top of that, and you all have seen in the press over the last several days, we always go out to market and research what are the concepts that would most appeal to different consumers in different markets. And then lastly, even on top of that, we do ways of research that are specific to maybe some initiatives we have. So we're constantly trying to get as much information back from our consumers. All of it points to the things that we put in our prepared remarks. And again, I go back to that last slide that we showed, which shows the leading indicators. We know what guests come, they want to be able to ride the rides that they come to the park for. We've really improved the uptime. We've got repeat visitors coming back, particularly at the stronger operating parks. So we're not seeing anything in this consumer research that doesn't validate everything that I think we talked about in our prepared remarks. Brian, anything you want to add? Brian Witherow: Yes. I'd just maybe add to Richard's comments, Chris, the one theme that has been a constant and maybe it's even echoing a little bit louder in the more recent research is that the consumer is becoming increasingly more value conscious. In a world where out-of-home entertainment options has expanded greatly, while at the same time, discretionary free time and maybe a little bit of discretionary dollars has shrunk, consumers are putting a high priority on only doing those things where they see high value. I think when you look at the mix of outperforming versus underperforming parks in our portfolio, it supports that tail or that narrative, right? The parks where we have strong brand recognition, strong consumer strength in terms of the perception of cost value, those parks have performed very well this year. The parks where the brand perception or the consumer perception of the park is not as strong that we're working on rightsizing, those parks have been the ones that have struggled. Chris Woronka: Okay. Very helpful. And then as a follow-up, a question on marketing. We used to talk not that long ago about kind of the right percentage of CapEx that we need to think about as a percentage of revenue. And I'm kind of wondering, do you think we're now kind of asking that same question, but on marketing, is that number going up significantly? Or do you think that's kind of more exogenous to 2025 in terms of weather issues and economic issues and such? Richard Zimmerman: It's one of the things we're looking at, Chris, as we go through this portfolio review is also what's the right media mix. As we said, we're going to really take a look at that in each market, how do the cost factors, is L.A. and New York, more expensive market than potentially some place like Kansas City or Minneapolis. So we're factoring all those things in to get to the optimal mix for each market. And it will be different by each market, but it's one of the things we're looking at. Operator: Your next question comes from Lizzie Dove with Goldman Sachs. Elizabeth Dove: I wanted to ask about the year ahead. I appreciate that we're still kind of ahead of a new CEO, and this is a multiyear transition story. But as we look to the year ahead, like what are the key kind of building blocks that you would kind of expect to achieve? And any kind of early indicators, maybe it's too early to ask this and just how you're kind of framing up what you can achieve next year in terms of attendance, broad strokes, per caps, anything like that? Brian Witherow: Yes, Lizzie, it's Brian. I think it is a little early in terms of putting anything out there as to what we hope to achieve. And even our long lead indicators, the only one that really has any merit at this point is season pass sales. And as we disclosed on the call, we're up in sales a little soft on units with pricing up. And as you would imagine, and as I think I commented before, the performance by park is a little mixed as well. And so more so what I would say as it relates to '26 is we need to take the learnings from '25, the things that worked at certain parks, the missteps that we made at other properties and use that to drive what our focus is in 2026. So we're not letting the challenges and the missteps of '25 go wasted. I think we need to revise our outlook, and that's what the team's focus, the focus is on at this point. Elizabeth Dove: Got it. That makes sense. And then I think based on where you're kind of guiding to for EBITDA for 4Q, it implies that the per cap exit rate will still be down as well, kind of depends on your assumption on cost, but let's say, somewhere similar in the low single-digit range. Is that the kind of right exit rate? Was there a comp factor there, too? And maybe you can kind of broaden out of just like kind of what you're seeing broadly with the consumer in terms of willingness to spend on ticket or in-park? Brian Witherow: Yes. I think, Lizzie, when you look at where the consumer is based on what we're seeing, I'll separate the 2. Guest spending on in-park products, so food and beverage, extra charge, we've remained encouraged by what we've seen there. Of course, that is often influenced by attendance. And so the parks that have performed better at an attendance level, you've heard us talk about the parks being comfortably crowded. The parks that have been done better on that volume metric have also seen a little bit better in-park spend relative to that. But even the parks that have underperformed have still seen good spending for those guests that are showing up. So I think in-park, we remain encouraged by what we're seeing there. And our focus again, as it's been for most of the last year plus is that it's less about taking price in the park, and it's more about transaction efficiency, better offerings, giving the consumer the options to buy up to higher price, better experiences or products. At the gate, it's a bit of a mixed bag, right? We -- the parks that have -- I'll go back to the earlier question and my comment about the strong consumer perception and the strong brands. Those parks that have the better reputation or perception with the consumer have the ability to be a bit more aggressive on price. Those that don't, we have to figure out what the right -- what the sweet spot is for those. What we tried this past year with dynamic pricing didn't work in every case. We found that the consumer didn't respond. It wasn't necessarily a price issue. It was more a value proposition. And so there's work to be done on that front. Operator: Your next question comes from Patrick Scholes with Truist Securities. Charles Scholes: Just wanted to be a little bit more granular on exact expectations for next year's CapEx spend. I believe in the prior conference call, you had said $400 million. Is that still unchanged? And then with your renewed emphasis of late on outperforming parks versus underperforming parks, within that $400 million, has there been, at this point, any major changes over the last couple of months of how you expect to allocate that $400 million given that renewed emphasis? Brian Witherow: Patrick, it's Brian. Yes, for now, our projection still is CapEx spend in calendar year 2026 of approximately $400 million. The mix of that spend has not significantly changed. A lot of the big dollar projects, as I said earlier, are longer lead projects. So those are -- have been in the pipeline and will continue. As some of the smaller projects that have shorter lead times, we will always move those things around. But at this point in time, I wouldn't say that we've deviated dramatically from our plans coming into '25 in preparation for next year. Operator: Your next question comes from James Hardiman with Citi. James Hardiman: But I did want to start by saying, Richard, it's really been a pleasure working with you and learning from your decades of work in the industry and really good luck with what's next. Richard Zimmerman: James, I appreciate that. I've always enjoyed all of our discussions. James Hardiman: Likewise. And so my first question, obviously, there's been a lot of conversation about core versus non-core parks as well as sort of that non-core budget breaking it down between high potential and low potential. I didn't know if there was any way to sort of overlay that conversation with the market value for some of those parks. I guess my question is, how correlated is the performance of the park with what you could get for the park, how you could monetize the park. I would assume that if you're selling it to be an amusement park, those 2 things are highly correlated, whereas if you could find an alternative use for those parks, there could potentially be a mismatch, which could make those decisions a lot easier. Now obviously, as we think about your D.C. park and your Northern California park, maybe you've already exploited those mismatches between performance and real estate value. But just curious how you would speak to the opportunity and how that impacts the decisions that lie ahead. Brian Witherow: Yes, James, it's Brian. I think you sort of answered your question there. The D.C. property and the Santa Clara property were exactly that, right? Parks where we felt that the underlying land outstripped any potential for growth and long-term cash flow generation of those parks based on a number of factors, most notably structural challenges or limitations on the ability to build out those properties. And so I think those were the 2 most obvious. We'll continue to look for more opportunities like we have with the excess land in Richmond. But for the most part, most of that low-hanging fruit has already been plucked. There are always assets in the portfolio that we get inbounds from that are core critical top-performing parks in our system that happen to sit in great markets with high property values, Toronto, Southern California. But those are parks that are critical to the long-term growth of the business. And I think from that perspective, would not be something at least where we sit today, that we would be interested in pursuing. James Hardiman: Got it. That makes a ton of sense. And then I'm not sure how much of this you're going to answer, and I certainly didn't think I'd be asking this question. But as we think about this JANA Partners, announcement. Obviously, it really moved the needle in terms of the stock. I guess I'm trying to figure out how much it is likely to move the needle in terms of the business. You've had a number of active investors involved with this story off and on for some time now. I think this is the first time maybe you've sort of called out one of them. And suffice it to say, there's a significant brand associated as we think about Travis Kelce. I guess the question is, do you actually think that Travis Kelce would consider lending his brand to the cause? Is that ultimately what we're talking about here because that, I think, pretty clearly could move the needle. And then to take it even further into the realm of -- you're probably not going to answer this question. But as we think about Travis Kelce's silent partner, could that be part of the brand association given that so much of the conversation is reinvigorating your brand and sort of making it more relevant in today's time. Richard Zimmerman: James, it's Richard. I understand the question. I'll answer this as a guy that grew up in Kansas City and watch the Chiefs win their Super Bowl in 1970. Listen, I think we live in a different world now. Travis Kelce, influencers of that have tremendous followings. And I think part of where all of society is going is figuring out what the new world looks like. I'll go back to my prepared remarks. We've had extremely constructive dialogues on this front. And I think as we think about how to create shareholder value, it starts with the performance of the parks. And listen, I would put any loyal fan that grew up going to our parks, that's our bread and butter or you've heard me talk about the lifetime customer. Travis Kelce is somebody that's come to our parks in many of our locations and has an affinity for them. So we're going to work very closely with him and his team to make sure that we optimize that opportunity. And I will say, as you said, the interest was enormous, not just in the stock price shooting up, but I think it speaks to -- we live in a different world now and part of -- I've got trust in our team and his team to figure out how we work with them... Operator: There are no further questions at this time. I'll now turn the call back over to Michael Russell for closing remarks. Michael Russell: Thanks, Carlie, and we appreciate our sell side. Thanks for the good questions today. Feel free to contact our Investor Relations department at (419) 627-2233. And our next earnings call will be held in February of 2026 after the release of our '25 fourth quarter results. Carlie, that concludes today's call. Thank you, everyone. Operator: That concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to indie's Q3 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ashish Gupta, Investor Relations. Thank you. You may begin. Ashish Gupta: Thank you, operator. Good afternoon. Welcome to indie's Third Quarter 2025 Earnings Call. Joining me today are Donald McClymont, indie's CEO and Co-Founder; Mark Tyndall, EVP of Corporate Development and Investor Relations; and Naixi Wu, indie's new CFO, whose appointment was announced earlier today. Donald will provide opening remarks and discuss business highlights. Mark will then provide a review of indie's Q3 results and Q4 outlook. Please note that we'll be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today and should not be relied upon as representative of views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For material risks and other important factors that could affect our financial results, please review our risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2024, as supplemented by our quarterly reports on Form 10-Q as well as other public reports with the SEC. Finally, the results and guidance discussed today are based on consolidated non-GAAP financial measures such as non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share. For a complete reconciliation to GAAP and the definition of the non-GAAP reconciling items, please see our Q3 earnings press release, which was issued in advance of this call, can be found on our website at www.indie.inc. I'll now turn the call over to Donald. Donald McClymont: Thanks, Ashish, and welcome, everybody. Firstly, I'm very pleased to announce that Naixi Wu has been appointed Chief Financial Officer for indie effective immediately. Naixi has been with indie for the past 4.5 years and has demonstrated exceptional leadership, integrity and execution skills within our finance organization, especially during the past months in a period where we successfully executed on multiple complex transactions. Beginning her career in PwC's assurance practice, Naixi has built an exemplary track record in finance, holding various senior leadership roles in financial and SEC reporting at CalAmp, Westfield and RealD. Indie's finance team consistently demonstrates seamless collaboration and strong performance, combining expertise and focus to achieve desired business results and goals. Naixi's elevation to Chief Financial Officer is a natural progression in her leadership journey at indie, working alongside our capable and dedicated finance team, indie's financial foundation will continue to strengthen. During the next months, you will have the opportunity to meet Naixi at roadshows and investor events. Let me now review our financial performance within the context of the overall automotive market before discussing indie's key business achievements. Starting with market dynamics, we see an automotive market trending slightly better than feared across almost all regions, with China representing indie's strongest performance during the quarter. Automotive market analysts are also maintaining a positive outlook for growth trends with 2026 production now expected to increase by 0.46% from 2025 levels to approximately 91 million vehicles. This is further underpinned by the continued increase of semiconductor devices and sensor content per vehicle to support the upsurge in ADAS and automated driver safety and feature adoption, which we increasingly see across our customer base. For indie, we achieved third quarter total revenue of $53.7 million, in line with our outlook, but representing solid quarter-over-quarter performance with growth above the market. We have also just completed an annual review of our strategic backlog, which remains a very important and strong indicator for the future potential of our business looking out over the next 10 years. Recall, last year's backlog was $7.1 billion. This year, we have expanded into several adjacent markets, including quantum compute and quantum communications and also into humanoid robotics where several of our products are relevant, particularly and initially our vision processors. We now have content at leading robotics providers, figure.ai and Unitree, who seamlessly use our automotive products for their application. During the last 12 months, due entirely to industry turbulence, we suffered some program cancellations, particularly and although we are still heavily engaged with the customer, we made the decision to remove Ficosa business from the calculation as upheaval at the OEM end customer has made the timing of revenue realization less clear. However, these cancellations were more than offset by new business wins that we achieved in the same period. The strategic backlog is now at $7.4 billion compared to $7.1 billion as of a year ago. However, if we exclude Wuxi, which represented $1.3 billion, the resulting strategic backlog will be $6.1 billion. The composition of our backlog has strengthened materially due to the higher gross margin product mix following the divestment of Wuxi. ADAS and optical products will drive significantly higher gross margin profile going forward. Let me now turn to our recent business progress and key achievements. Beginning with radar, in late October, our Tier 1 radar partner, a leader in the market for whom we developed our 77 gigahertz chipset, publicly launched the next-generation Gen8 radar solution to power the future of ADAS for their global OEM customers. The Gen8 radar is their primary offering on a go-forward basis. This represents a momentous milestone in the program. Our differentiated chipset enables the Tier 1 to deliver industry-leading performance across multiple dimensions, long-range detection beyond 300 meters with ultrafine 4D angular resolution, enhanced capability in close range scenarios for applications such as automated parking, front automatic emergency braking and significantly expanded field of view, enabling new driving scenarios like autopilot in complex urban environments. The solution demonstrates superior object detection and classification across a broad range of parking and driving scenarios, with the Tier 1 noting a 30% performance improvement over their prior generation. Final validation in real-world environments is concluding as we prepare for production shipments. Computer vision capabilities within the automotive market continue to be a differentiator for ADAS and automated safety and a key driver for indie. We are seeing additional penetration of our vision solutions among key customers with our industry-leading iND880 advanced camera processor. During the quarter, we secured a design win for image signal processing for multi-camera operation in a leading self-driving Robotaxi OEM in North America for deployment in 2026. Additionally, we have captured multiple new design wins with leading electric vehicle manufacturers in China, spanning multiple applications. According to S&P Global Mobility, China's automotive market continues to lead the global market in terms of growth contribution and regional dominance. China now represents more than 1/3 of the worldwide motor vehicle production, where indie's advanced ADAS solutions are rapidly gaining adoption. From our power group, our 10-watt G2.0 wireless charging platform continues to gain broader market adoption. Highlights include start of production scheduled at Ford for Q1 2026 on the first platform with multiple subsequent vehicles expected to follow. We secured design wins at India's largest car manufacturer initially for 3 vehicle models with additional awards also expected to be forthcoming. In addition, we saw production start at an Indian joint venture of one of Europe's top OEMs. Looking further out and rounding out the portfolio, we are now actively promoting our G2.0 15- and 25-watt solutions, which are gaining very positive market traction. We have also provided the first custom samples of the connectivity IC to a leading electric vehicle manufacturer in North America, where production is expected to start in the first half of 2026. Our momentum with photonics continues with several highlights, including a design win, which will include an NRE payment for our LiDAR application and a design win in the drone segment for our [ SLG ] product. The operational alignment establishing the new photonic business unit has resulted in meaningful impact on our sales funnel. For applications outside of automotive, while the revenue is not reflected in our short-term results, we are expecting strong growth with minimal additional impact on operating expenses. Last quarter, indie announced 2 additional new distributed feedback or DFB laser products, complementing our LXM-U laser launched earlier this year. The market response has been compelling with exceptional stability for quantum key distribution and quantum computing applications. This technology leadership in photonics generated through automotive LiDAR development is exposing indie to exciting new customers across quantum and industrial sensing markets. I'll now turn the call over to Mark for a review of our Q3 results and Q4 outlook. Mark Tyndall: Thank you, Donald, and good afternoon, everyone. Indie's third quarter revenue was $53.7 million with non-GAAP gross margin of 49.6%, in line with our outlook. Non-GAAP operating expenses totaled $37.9 million, consistent with our outlook. As a result, our third quarter non-GAAP operating loss was $11.3 million compared to $14.5 million last quarter and $16.8 million a year ago, demonstrating our continued progress towards achieving profitability. With net interest expense of $2 million, our net loss was $13.3 million and loss per share was $0.07 on a base of 217.4 million shares. Turning to the balance sheet. We exited the quarter with total cash, including restricted cash of $171.2 million, down $31.7 million from $202.9 million in the second quarter. The reduction in cash includes $17.7 million paid in connection with a recent M&A transaction. Turning to the M&A transaction. On September 26, 2025, ahead of the original schedule, indie closed the acquisition of emotion3D, a company based in Vienna, Austria, specializing in advanced AI perception software algorithms for automotive in-cabin sensing and ADAS. Their expertise in software combines perfectly with our vision processor SoC portfolio, adding a software royalty to the offering. Together, we are already engaging with major Tier 1 and OEM customers where we expect we can secure and announce the first awards in the coming months. Additionally, on October 28, we announced that Indie entered into an asset purchase agreement with United Faith Auto-Engineering, a publicly listed company in China to sell our entire outstanding equity interest in Wuxi indie micro for gross proceeds of approximately $135 million, payable in cash, net of applicable local taxes of roughly 10% upon closing. However, I do want to set realistic expectations regarding the closing time line. The transaction is subject to customary closing conditions for a transaction of this type, including shareholder approval from United Faith and receipt of all required regulatory approvals in China, including both Shenzhen Stock Exchange and CSRC. Based on precedent transactions and discussions with our advisers, we expect closing in late 2026, though the exact timing will be determined by the regulatory approval process. Between now and closing, once it is determined that the transaction meets the requisite criteria under applicable accounting guidance, the Wuxi operation will be reported as discontinued operations within our consolidated financial statements. Further, the sale of Wuxi will improve our margin profile and lower our quarterly breakeven threshold while simultaneously strengthening our balance sheet. While we exit our equity position in Wuxi, China remains an important market for indie, supported by our strong independent and well-established sales channel, including local regional support. Moving to the outlook for the fourth quarter of 2025. With ever-increasing demand in the semiconductor market driven by AI, we are beginning to see some short-term disruptions to the back end of our manufacturing flow. Specifically, there are shortages in the supply of packaged substrates, which will impact our ability to deliver the full demand for Q4. In spite of that, we expect to continue to grow and deliver revenue within the range of $54 million to $60 million or $57 million at the midpoint, with an estimated shortfall of about $5 million due to the substrate shortage. We expect this supply issue to be resolved during Q1 2026. Based on the anticipated product mix, we expect our non-GAAP gross margin to be in the range of 47%, driven by unfavorable product mix and margin pressure on the Wuxi business. We continue the execution of certain targeted initiatives aimed at reducing operating expenses and accelerating our path to profitability. I'm pleased to report that we remain on track. Progress in Q3 has been encouraging and is consistent with our communicated targets. We continue to expect to achieve our stated objectives within the anticipated time frame. This reflects strong execution across the organization and continued commitment to operational discipline and long-term value creation. However, as we now move closer to the production ramp of Radar and some of our large and vision design wins, our customers are demanding an enhanced second sourcing strategy with requirements for production localization. This is requiring additional OpEx investment in the next quarters to qualify these products in fabs and test houses outside of Taiwan and China. Taking these into account, for Q4, we now expect our non-GAAP OpEx to be $36.5 million, down $1.5 million from Q3. Below the line, we expect net interest expense of approximately $2.2 million with no tax expenses. Assuming the midpoint of the revenue ranges and with a base of 220 million shares, we expect a $0.07 net loss per share. From a financial perspective, with our strong focus on operating expenses, further optimization of our capital structure and our solid balance sheet, including anticipated proceeds from the sale of Wuxi, indie is well positioned to continue developing differentiated products for the automotive, ADAS and adjacent industrial markets. This balanced approach will support our return to strong and profitable growth as design wins ramp as we enter 2026. With that, I'll turn the call back to Donald for closing remarks. Donald McClymont: Thanks, Mark. Our core business is solid and growing as evidenced by our third quarter results and positive outlook. Radar and vision programs remain on track as evidenced by our Tier 1 partners' recent release of their advanced Gen8 radar product and the fundamental trend of increasing semiconductor content in vehicles continues unabated. With the addition of new high-growth markets such as Quantum and robotics, indie's technology leadership and expanding product portfolio ensure we are well positioned to drive continued growth. No other semiconductor company has a product portfolio as advanced as indie's to meet the diverse needs of these markets. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] First question we have is from Cody Acree of The Benchmark Company. Cody Grant Acree: Maybe if we can, Donald, dig into your supply shortages a bit. Can you maybe just explain how this happened, when this happened, when you started to see this? And when does this unwind? And do you get this revenue back as supply starts to become available? Donald McClymont: I mean going in reverse order, for sure, we get the revenue back. It's just an inconvenience at the moment because of the short-term shortage. It's something that came fairly suddenly to the market. It wasn't something that we were able to anticipate. It was kind of a shock to the market there. Several other companies out there who have been placed in the same situation. If you look at the reports of some of the other companies, Intel, in particular, they called this out a few weeks ago. So it's something that we expect will resolve in Q1, and it's just basically a short-term thing that we've got to work through. Cody Grant Acree: And can you talk about your gross margin declines into Q4? You mentioned Wuxi. What's happening there sequentially? Donald McClymont: It's just mix really. The products that we sell that use this particular kind of package are very high margin. And so because we have a small shortfall in the market that we can't deliver to, that's the biggest impact on the margin mix. And then because of that, Wuxi is a larger percentage of the roll-up and causes the margin percentage decay. Cody Grant Acree: Excellent. And then lastly, on the Radar side. Can you just talk about what's happened in the last 90 days? And what's your visibility? And what does this ramp look like as we look into next year? Donald McClymont: Yes. I mean it's been a world win for us. We've had so much activity in the last 90 days. It caused us to accelerate our plans to bring up the second sourcing procedures for what we're bringing into play here. It costs us a little bit of short-term OpEx in the short run, but it's a great problem to have. We're having to prepare to deploy into multiple geographical regions with multiple different supply chain requirements, basically China for China, not China for not China. And the sort of level of support and effort that we're having to put into this now is enormous the fact that the customer also announced the product is a ringing endorsement of where we are in the process. These things don't go public unless there's a high degree of certainty that stuff is going to happen. So it's been a crazy 90 days, I would say, Cody, as we've gone through the process of launching now. Cody Grant Acree: Any thoughts on next year's contribution? Donald McClymont: I mean I think we're not really going to make any change to our outlook on life for '26. We still feel that there could be a very aggressive ramp in '26. That together, coupled with our vision processors, we're preparing, again, as I said, because of the supply chain issues that we're having to address. We're having -- we're preparing to prepare for a big ramp. We're already in the manufacturing process. So we feel that we've got a lot of good stuff coming for '26. Operator: The next question we have is from Suji Desilva of ROTH Capital Partners. Sujeeva De Silva: Best of luck in the new role, Naixi. So the products you've been talking about for the quantum laser market, can you talk about if there's any visibility to design wins? Or is that still in the kind of development phase? Any comment there on timing of when that... Donald McClymont: No, I mean we've actually been shipping production already. I mean the year-to-date or the projection for the whole year is probably a little bit less than $1 million worth of business. Given that it didn't start at the beginning of the year, it started late Q2, really, it's accelerating very rapidly. And I think if you look at the reports of the public quantum guys, you're seeing them raising their numbers. So it's a new market for us. We're learning as we go, but it does seem very exciting, very dynamic. It's quite a fragmented market. So we have to cover quite a lot of bases and customers and so forth. But certainly, the deployments can go quite very quickly to ship parts off the shelf basically off the rack. Sujeeva De Silva: Okay. Great. And then the backlog growth you saw year-over-year, can you talk about what programs are driving the increases in backlog? Is it more Radar vision opportunity or expansion of scope of programs? Or any thoughts there? Donald McClymont: I mean, expansion of scope of the Radar program for sure, and then some heavier vision programs, which we added to the portfolio. Sujeeva De Silva: Okay. And lastly, on the Vision programs, can you talk about the timing of when those would start to contribute to revenue? I think there are ones coming on very quickly, but comments on the. Donald McClymont: Yes. I mean Vision is also ramping now, and we have some fairly significant volume in it already. We've added a bunch of new wins in China, which ramped very quickly. And there are certain sort of dynamics in the market that, in many cases, the programs that are new to us should ramp actually pretty quickly through '26. So we've -- again, it's been a one quarter. Operator: The next question we have is from Craig Ellis of B. Riley Securities. Craig Ellis: Donald, congratulations on the growth in the backlog year-on-year. I wanted to start there and just see if you could give us some color on what some of the primary contributors are to backlog Radar versus ADAS? And then I think you mentioned that there's some non-auto stuff in there, maybe photonics and quantum. Help us understand how big that is. Donald McClymont: Yes. So primarily, it is centered around our ADAS products, both Radar and Vision. We had some bigger discrete wins at Vision, which we'll talk about in the fullness of time once we're able to. There is -- we have added a little bit for the quantum-related optics products, still small. But now that we have running revenue, of course, we're kind of compelled to anyway. we're still quite conservative on the market growth and the amount of money that we have in there or assumed in there. It's very small compared to what we're committing to on the ADAS products. But we are excited about the market. It's moving extremely quickly. And that coupled with the fact that we're now seeing a lot of interest from the humanoid robotics market for our product base means that there are some dynamic market growth factors there, which we hadn't anticipated and are unexpected positives, I would say. Craig Ellis: Coming back to Radar and just going a little bit deeper on where Wuxi was. It's nice to hear that your primary customer has identified that the product will ramp. Can you help us understand beyond just color on multi-geography ramp potential, what type of customers they may be engaged with that could give us a sense of the type of volume we would be talking about when this starts going out in volume? Donald McClymont: I mean they are one of the largest vendors on the planet in the space. And so their product portfolio addresses everything from the highest volume passenger cars through commercial vehicles through high-end vehicles and heavy industry. So it's a very, very high-volume market indeed. We expect to get a very significant market share of the entire radar market through this program. And again, that's why we're preparing our supply chain and really had to double down during the last quarter in terms of bringing up second sources earlier than we thought we would. Craig Ellis: Got it. And then if I could squeeze in one more for Mark, the software acquisition, any visibility on the degree to which that could contribute in either fourth quarter or through the year next year and benefit gross margin? Mark Tyndall: Yes. So yes, so the acquisition is off to a very good start, Craig, integration ongoing. We've already engaged with the customers -- with the main Tier 1 customers for camera, OMS, BMS, combining our device with their software. So it's probably too early to have a synergy, revenue in Q4. But certainly, next year, we will see some sales synergy there. It's already running in the order of approximately $1 million a quarter for 2025, and that should increase going through 2026. Operator: The next question we have is from Anthony Stoss of Craig-Hallum. Anthony Stoss: I wanted to focus in on your comments about the North American Robotaxi partner for a 2026 launch. Is that Radar, LiDAR? Anything you can give there? And then I have a couple of follow-ups. Donald McClymont: It's our new vision processor. Anthony Stoss: Got it. And then I think in the last quarterly call, you talked about expanding relationship with BYD, and I think there's a Vision program that was supposed to launch this quarter, Q4. Maybe you can just update us. I know you made some comments about Chinese wins on the call, but love to hear more. Donald McClymont: Yes. I mean we're engaged with all of the name brand Chinese OEMs. We have wins with many of them, and we're making the prescribed progress that we expected through this quarter. So I mean, we're generally pretty happy with the way the market is. And I mean, the sales channel that remains in China, net of Wuxi is doing a phenomenal job of deploying our new products into that space. And so we do expect significant revenue from that geography as time progresses. Anthony Stoss: Got it. And then my last question also related to the Radar ramp. you talked about bringing up a second supplier earlier than anticipated. Is your partner, are the automakers moving more towards intermodal changes out and putting in [ ADAS NAV ] solution? Or why do you need to bring out a second supplier so quickly? Donald McClymont: I mean, heavily, it's been driven by geographical compatibility. So we do need and for certain OEMs to ensure that we have a supply chain that is not including China and Taiwan. And we were well positioned to do that, but we had to accelerate some of our plans and spend some of the manufacturing tooling during this quarter and next quarter in order to make that happen. Operator: The next question we have is from Jonathan Tanwanteng of CJS Securities. Jonathan Tanwanteng: I was wondering what gives you confidence that the substrate and packaging issue will be resolved by Q1, number one? And number two, have you thought about the indirect impacts of shortages across the industry and if that might impact auto numbers overall and not just including substrates, but also like the aluminum plant outage. We've heard third things about Xperia and China. Are those considered in the outlook and if those might flow through you in some way? Donald McClymont: Well, taking the first part. I mean we -- I mean, we're in the process of bringing up several second sources. As I mentioned before, just as a matter of form, we have to accelerate our procedure, particularly for these organic substrates that are used in the flip chip packages that we use. So the discussions and ongoing engagement with the new vendors has been going well. I would say this is, let's say, a corner of the industry specific, where the vendors who are heavily exposed to large language model ICs from NVIDIA and Co are redirecting capacity over there. Even some very large brand names are struggling to get what they want. So it was just a kind of a fallout of that. So you're right, it's an indirect impact. I don't necessarily see that we have a long-term impact from anything that is out there right now, the [ Nia ] thing aside with Volkswagen, particular, of course, that was public. But I do expect that, that will rectify itself in short order. It doesn't feel like a general industry shortage like we saw post pandemic. Jonathan Tanwanteng: Okay. Great. That's helpful. And then just to dig a little deeper there. Is the pricing in ramping more sources for chip substrate going to be an issue, especially if your volumes next year are going to be better than maybe you thought with these -- your customers requiring second sources for your production? Donald McClymont: Yes. I mean the second source helps us give price leverage into our supply chain. So I mean, it was something we would have done in the fullness of time anyway. We were -- our hand was forced really by some unexpected positive news really to do it earlier. And it really should give us leverage as we go forward as we're able to play wafer foundry suppliers off against each other and likewise with packaging and test houses that make up the back end of the product. Jonathan Tanwanteng: Okay. Great. If I could sneak in one more. What is the margin and OpEx without Wuxi look like? And what does the breakeven level look like in revenue? Donald McClymont: I mean we don't really segment it out. I mean we did give directionally indication that the Wuxi business was significantly lower margin than the rest. As we go forward and deploy our ADAS products, we're still committed to getting to the 60% gross margin level of the target model that we set ourselves. Operator: At this time, there are no further questions. And I would like to turn the floor back over to management for closing remarks. Donald McClymont: Well, thanks, everybody. Thanks for attending the call and looking forward to seeing you at the conferences over the coming week, where you'll meet myself and Mark and Naixi. Operator: Ladies and gentlemen, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to OTP Bank's Conference Call regarding the financial results for the first 9 months 2025. Please be advised that the conference will be recorded. [Operator Instructions] At this point, I would like to hand over the floor to Mr. Laszlo Bencsik, Chief Financial and Strategic Officer. Laszlo, the stage is yours. Laszlo Bencsik: Thank you, and thank you, everyone, for joining us today. Good morning or good afternoon, depending where you are. Let me jump into the presentation. As usual, the deck is available for download on the website, but we are also projecting it parallel to the con call. So maybe we go to Page 3, where we have the most important numbers, yes. So first of all, we have this kind of noise in the data due to the fact that many -- most of these extra taxes or all the excess taxes in Hungary were booked in the first quarter for the entire year and some other supervisory fees as well in various other countries. Therefore, if you want to capture the -- properly capture the business performance, and we need to accrue those costs over the year. So you have -- you can see 2 sets of numbers, one at the bottom with gray that's reported and then this kind of the other set of numbers with green where between the quarters, we have accrued allocated evenly the one-off costs. So if we look at the kind of accrued numbers, then the first 9 months was HUF 886 billion. That's like EUR 2.2 billion, EUR 2.3 billion, 5% up last year first 9 months. But I mean, the actual business performance was stronger than that. If you look at the, for instance, the pretax profit, then this growth was already 8%. That's due to the fact that the extra taxes primarily in Hungary increased a lot. And we put these extra taxes, the bank tax and the extra profit tax into the tax line. And on that line, just in Hungary, the extra profit tax increased by HUF 38 billion year-on-year. So that's a major factor actually in the profit after tax number. Now if we were to look at the operating profit year-to-year performance, then it was actually 16% up for the first 9 months. And then obviously, risk cost was somewhat higher, as you can see on this chart on the credit risk cost rate and the total risk cost rate. Having said that, most of this kind of extra risk cost is coming from Russia due to volume effects, the Russian risk cost rate was 7.6%. So that's part of this kind of consolidated number. And if we were to take out Russia, Ukraine, Uzbekistan from the risk cost rate and the credit risk cost rate and the total risk cost rate we would get quite similar numbers to last year actually. So I think it's safe to say that we have had another strong quarter in the third quarter of this year. And there's no reason to believe that the following quarters will be anything worse. So we remain quite optimistic regarding the current trend, the current run rate and also the potential future developments. This profit growth has primarily been driven by especially the operating profit growth by volume growth. We indicated at the beginning of the year that we expected more than last year credit growth. Last year, we had 9%. And the good news is that already at the end of the 9 months this year, the year-to-date performing loan growth was 10%, and it's going strong. So I think it's fair to assume that we will not just have higher number than last year, but materially higher, substantially higher growth rate. And this seems to be the run rate at the moment. Return on equity, again, this kind of accrued ratio, 22.7%. Cost to income, 39%, below 40%, very good and net interest margin stable. And I already a little bit talked about the credit risk cost rates, which are higher than last year, but mostly driven by the contribution from Russia. The following slide is rather technical. It shows this kind of difference between the reported and this kind of accrued or even recognition special items. So I'm not going to dwell into this, but that explains this almost HUF 37 billion difference between the 2 numbers. So let me go to the core performance, OTP Hungary. Again, 5% up year-on-year, but this extra profit, the windfall tax increase is primarily here or substantially here in Hungary. So the pretax number again, with this even recognition of the one-off cost would have been 15% up. So after-tax profit, 5% up, pretax profit, 15% up year-on-year. And this was primarily driven, again, loan growth and some margin improvement. I mean, last year, first 9 months, the NIM was 2.84%. This year, 3.09% and slightly increasing quarter-by-quarter. Here, you can see this kind of detailing of the extra burdens in Hungary. And you can see how much the windfall tax, the extra profit tax increased. Last year, we paid HUF 7 billion altogether. And this year, we expect to pay HUF 54 billion. And there was a strong increase in the transaction tax as well. The tax rates were increased last year and that they became effective late last year, and the impact is actually quite substantial for this year. Having said that, there is plenty of good news regarding our performance in Hungary. So if you look at the recent novelty on Page 6, this is the home start loan program, another subsidized mortgage program, which was -- which started in September this year. And you can see -- I mean, the -- if you just look at the stock numbers, the impact is relatively modest given that it was -- it only started in September. But if you look at the applications, you can see how much the applications increased. So the September level was kind of 3x, more than 3x on average monthly level. So this is a very popular program. It provides opportunity for clients to take mortgage loans at 3% fixed. So this is what they pay, and we receive an interest rate subsidy. And with that subsidy, it is actually a reasonably profitable product. So it is clearly beneficial for clients, and it's also a profitable product for the banking sector. Now this means that the current run rate of, let's say, annualized 12% because the first 9 months, as you can see on this chart, mortgage loan growth was 9% year-to-date. We annualize it just roughly, it's like 12%. So this 12% annualized run rate can increase, and we definitely expect this to increase for the next year, for the next 12 months at least. And that can be up to, I mean, high teens, even closer to 20% till at least till the end of the second quarter next year. If we look at the other product segments in Hungary, consumer loans going strong, almost 39% higher contractual demand in the first 9 months of this year than last year. Our market share is very strong. Now this is a quite attractive profitability product. That's one of the profitability drivers for us in Hungary. So having this strong market share and having this strong growth rate, this is quite good news. Our market share recently increased. The other kind of important market share number on this slide, I think it's in the kind of lower right corner, 41.4% is our market share from retail deposits, and it's again, quarter-on-quarter increased a little bit. You may remember that the first half of the year, a large chunk of retail government bonds were repriced and that caused some reallocation of funds by retail clients. And the good news is that we seem to manage -- be able to manage this transition well and our market share again started to grow in deposits. Corporate. Corporate is probably even more exciting it does seem to be that finally, we see a turnaround in corporate loan growth, especially in micro small. So as you can see on this chart, micro small year-to-date growth rate was 12%, large corporate or total corporate 5%. And that's a big improvement compared to '23, '24, where volumes were basically flat. And we read this now as an indicator of a potential turnaround, at least in our client portfolio. Obviously, this trend reversal has been supported by the current subsidized scheme, which is the called Széchenyi Card MAX+ scheme targeting like small corporates in Hungary. Our market share is very strong in this product. And due to all these changes, as you can see on this page, we reached a historic high in terms of our market share to Hungarian corporates, loans to Hungarian corporates above 20% historically highest number, very good news. We are very happy about this. On Page 9, you see some of the -- or well, all of the non-Hungarian bank performances. It's -- I think it's quite solid across the board. Maybe the only kind of pledges in Uzbekistan. We talked about this. As you can see, both the nominal profit declined materially compared to last year and the ROE also went down. I mean, this is something we discussed in detail in previous presentations. We had to limit the volume growth of consumer loans for quite a long period for almost 1 year until we fixed the IT infrastructure and then kind of restarted the growth of consumer lending somewhere in the second half of the second quarter this year. And these results are very strong and very, very promising. I will show you in a few slides, I will show you the details how well new production is building up in Ipoteka, Uzbekistan. So I'm very hopeful that starting from now quarter-by-quarter, we will be able to improve our performance and reach back potentially to previous levels. The NIM development, net interest margin development, again, it's fairly stable quarter-on-quarter, even on a basis point level. And since the beginning of the year, 5 basis point improvement. The improvement is primarily coming from Hungary. Hungarian margin keeps improving, while in some of the other banks in Uzbekistan, where cost of funding increased in Bulgaria, where it's a euro rate environment, and this is due to the euro somewhat lower rate than last year overall and Serbia having some hit. But primarily, the improvement, as I said, was driven by Hungary improvements. Let's have a look at the volume trends, the performing loan volume trends. across the group, 10% year-to-date. And again, we don't have any reason to assume that growth slows down. It's actually quite the opposite. In Hungarian mortgages, we expect definitely acceleration in the first -- in the last quarter, in this quarter. And also in Uzbekistan, as you can see, this 13% increase year-to-date is not evenly distributed between the quarters. First quarter was flat. second quarter, 4% growth and third quarter, 9% growth just in 1 quarter. So this is when we are kind of up to maybe not 4%, but a much higher speed than previously. The other, I think, important development is Ukraine. As you can see, we -- somewhere at the end of last year, we decided to be more active in lending in Ukraine, and that resulted in more than 50% growth in consumer lending. Obviously, this is from a relatively low base, but nevertheless, we started to grow and also corporate and leasing started to grow meaningfully this year, and this is in line with our kind of strategic decision to be active on the lending side in Ukraine, obviously, selectively, but we believe that there's a well defined, actually broad segment of clients who are quite able to take on some leverage and loans. Maybe a few more words about the Uzbekistan development because this is important for us strategically. As you can see, we -- on this one, you see the cash loan volume changes and disbursement numbers by quarters and our market share. And we had this difficult period starting from the first quarter last year, which period pretty much ended a year after. And in this time, we lost market share, our operating results declined. and our profits declined, but now I believe we have reached a turnaround. And as you can see, our market share started to grow in the third quarter. And you can see how much we were able to ramp up production of cash loans. And now this is -- now we believe that we are giving these loans based on sound understanding of clients' creditworthiness and it's well supported by data. So we feel confident that these are going to be quite profitable vintages what we are churning out. In terms of deposits, Again, a strong performance year-to-date, 9%. And just to remind you, the net loan-to-deposit ratio of the group is 74%. So nominally, we have 50% more deposits than loans. So despite the somewhat lower growth rate, the actual nominal increase was substantially more in deposits than in loans. So the group level kind of liquidity situation improved due to this. And the primary drivers here are in Hungary core and Bulgaria and in the retail. These are the 2 countries where we have dominant market share in retail deposits around 40% in both countries. And in both of these countries, retail deposits are very profitable. So this is a kind of growth and profit engine of the whole group, retail deposits in those 2 countries and so far, so good. quite strong performance in both sides. In Bulgaria, there's an additional big event. By the end -- by 1st of January, Bulgaria finally joins the Eurozone after around 25 years in the currency board in a fixed currency -- successfully fixed currency regime, very well deserved, and we expect further positive ramifications from this -- from the accession to the Eurozone. And the only -- I mean, where we had decrease, it was Uzbekistan, But again, funding, especially retail deposits is quite expensive and the growth -- the volume growth in retail loans was not as strong as we originally planned for. So therefore, we scaled back somewhat the deposit volumes in order to optimize for profitability. But again, this recently as the volume growth recovered, we again started to somewhat increase deposit volumes. So this is subject to pricing basically. On Page 14, credit quality. Again, Stage 3 ratio compared to the end of last year improved compared to the second quarter, flat, strong coverage, as you can see, in comparison to some of the other players as well. There's no major development on that front. In terms of capital adequacy, 18.4%, which is still a decline compared to end of last year, but that's mainly due to the Basel IV impact, which kicked in 1st of January, 90 bps negative. And still a 20 basis points transitionary measure is being out phased by the end of this year. So the kind of fully loaded number year-end -- if you fully load with the changes expected till 1st of January, then it would have been 18.2%. Nevertheless, strong and well above regulatory requirement. In terms of liquidity, I mean, quite liquid. The liquidity coverage ratio, 235%. Again, the minimum required is 100%. We -- during this year, we started with a Tier 2 in January, and then we have done 2 covered bonds, very successful, quite -- we're quite happy with the pricing levels and a senior preferred and offshore yuan bond, another one. We are trying to diversify our investor base on the debt capital markets as well. Now -- so this is the kind of internal performance and then some reflections in the mirror, right, how others see us. First of all, rating, there have been many upgrades. Moody's was the very recent one. They improved the counterparty rating of OTP Bank to A3 and the senior preferred bond, the negative outlook disappeared. So it's Ba3 stable and also the Tier 2 rating improved to Ba1, and then prior -- previously during the year, S&P improved our rating. So there, the senior preferred rating is BBB, which is actually a notch higher than the sovereign rating, which is BBB- the Hungary sovereign rating. So again, this is, I think, a rare event that the bank is rated higher than the sovereign, but I believe this is very -- that's a realistic situation. So scope rating even higher. And we have a Fitch rating for Ipoteka Bank, Uzbekistan Bank, which also improved during the year, and they have been through a very successful issuance. They just printed a bond recently, which was very well received by the market. Page 18, that's the -- we like to show this one. This is S&P kind of capital Global Market Intelligence unit. It's just a financial comparison of -- comparison of financial performance of the largest European banks. Last year, we were #1, this year, #2. So next year, we want to get back to #1 as well. And then EBA stress test #13 that was done during the early part of the year. So we are in the first kind of 1/4 of the participants. And just very recently this week, there was an ESG upgrade. MSCI upgraded our ESG rating to A. So I mean, forward-looking, we are I'm sure you will ask questions about that. But as usual, we will share with you our expectations, our guidance for next year when we present the annual numbers, and that's going to be the first week of March, as usual on a Friday. So I won't talk much about next year. But I think it's clear that we have a strong momentum, and there's no reason to believe that this strong momentum should deteriorate. So I mean, especially if we look at the macro environment, on a very high level, we expect basically GDP growth improvements in most of the countries where we operate. And where it's not improving, the kind of slowing down is quite moderate and from quite high levels. So Bulgaria slowing down to 3%, Croatia to 2.9%, but these can be better numbers, to be honest, because the recent data in these countries actually outperformed our previous expectations and maybe Uzbekistan also slowing down. But in the case of Uzbekistan, again, the latest GDP data was much better than what the market expected. So even these countries are doing well. And the biggest kind of improvement in terms of GDP growth is expected in Hungary, where, I mean, next year, our expectation is 3%. It's an election year. Consumption. The order the strong consumption is going to further accelerate and then we don't expect further decline in investments. So this actually seems a quite realistic expectation to go up to 3% after 3 difficult years, '23, '24 and '25. The short-term expectation, we decided not to kind of formally change them compared to what we did in the -- at the end of the second quarter. But I think it's very obvious that loan volume growth, which already 10% compared to 9% last year. So this 9 months year-to-date 10% and obviously, we expect the run rate to continue or even somewhat improve, as I said, in case of Hungarian mortgages and in case of this big consumer loans for sure. So we are not just going to have higher number, but I think it's going to be a materially higher number in the loan growth, and that's going to have obviously positive impact for next year earnings. Margin, again, I mean, the -- it's actually very stable. So again, no reason to believe that it's going to be otherwise. Cost-to-income ratio, this is where we kind of improved the guidance at the end of the second quarter. And now the new guidance is close to 41.3%. We are still below 40%. So I think this is, again, quite likely. And in terms of risk cost, the risk cost rate Actually, first 9 months was higher than last year. But again, this was primarily driven by especially the Russian volume growth and higher rate there. And ROE 22.7%, again, strong number. And it's -- I mean, the denominator is obviously much bigger than last year. We are accumulating capital faster. That's the reason behind the return on equity somewhat lower still this year than last year. In terms of capital actions or capital strategy, I'm sure again, that you will have questions, but we will keep our usual custom and announced how much dividend payment the management will propose to the AGM next year when we present the annual numbers first week of March next year. What we do now, we are executing this buyback program. We did HUF 60 billion at the beginning of the year, and then we started another HUF 150 billion program at the end of April when we got the second package approval from the Central Bank. And we are at HUF 88 billion, and we continue this program. So that's pretty much the kind of short presentation going through the highlights, so to say, of the year or the third quarter. And please, if you have questions, ask them and we try our best to answer. Operator: [Operator Instructions] the first question is from Gabor Kemeny, Autonomous Research. Gabor Kemeny: The first question would be -- I would pick up on your points on loan growth, please, which is indeed pretty strong, I believe, around 12%, 13% annualized in -- as of Q3. And yes, I was kind of blown away by the home start numbers you showed on Page 6 by the applications. It seems like there's a broader strong trend. So how do you think about the loan growth outlook going into '26, accelerating towards the mid-teens, possibly the high teens? Is that conceivable? And related to that, do you think your NII growth will be kind of proportionate to the loan growth? Or would you like to highlight any possible changes in customer spread, securities income, which could shape your NII going forward? And my last question would be on M&A. I believe you were linked to ForteBank in Kazakhstan recently in the press. Can you share any views about your appetite to enter into Kazakhstan, please? Laszlo Bencsik: Okay. Yes. I mean, I share your enthusiasm regarding loan growth. I think this is, as you said, a strong run rate. And if you look at the forces -- the current forces shaping the future trajectory of the loan growth, they seem to be positive, right? Certainly, Hungarian mortgages, very clear. Certainly, Uzbek consumer loans, these are trend kind of new trends, which have already been set, and we expect them to continue. The other positive development is in Hungary, right? The Hungarian corporate has started to grow finally. And now I think it's kind of -- we believe that now it's actually a new trend. And all the other countries are doing well and the GDP numbers that I showed, we expect to get stronger or remain at elevated level. So again, allow me not to give a concrete guidance for next year because just kind of policy-wise, we are not doing it now. But I think your observation is very correct that the run rate is 12%, 13% and the factors which may influence the future growth rate seem to be rather positive. Now I mean -- and that's obviously supportive for NII. Now in NII, I mean, there are 2 factors which are very important here. One is actually deposit growth and more specifically, deposit growth in retail and especially in Hungary and Bulgaria, and these 2 countries have been growing quite strong and Bulgaria joining the Eurozone. So then it's conversion, we might end up having somewhat higher kind of one-off kind of current account volumes as well. In Hungary, we -- I mean, disposable income growth may accelerate given the -- that it's kind of pre-election period, and there are various kind of disposable income increasing factors for various parts of the retail, so that, that's also kind of marginally positive. In Bulgaria, we are going to -- when they join the Eurozone, the current 12% reserve rate is going to go down to the Eurozone 1%. And we don't -- and currently, we don't receive any interest on the 12% reserve rate. So that's going to be a boost. Plus we have the kind of replacement of the kind of old lower-yield Hungarian government bonds with higher-yield ones. So that's also kind of supporting factor. So again, in terms of NIM without net interest margin, without giving a numeric guidance, again, I think the kind of factors which influence the NIM forward-looking seem to be rather supportive. And plus, there's a big plus. So it doesn't seem to be the case that the euro rate is going to plunge substantially further and the reasonably stable euro rate going forward is again, a support for the NIM in the euro-related part of our book. Sorry, I cannot comment anything specific regarding M&A. In terms of geographies, I mean, we have been clear about this before that we consider Central Asia as a region with high growth potential, and we consider the whole region attractive. And we are quite happy with what we did with the investment in Uzbekistan despite the difficulties what we faced, but that's -- I think that's okay, given that it's a new market and we brought a bank through privatization. And so yes, I mean, the region we quite like. And the country you mentioned is part of that region. But no specific comment, sorry. Operator: The next question is from attendee joined via phone. Unknown Attendee: I have a couple of questions on -- related to growth outlook, if I may. First of all, I've seen that in a number of locations, be it Russia, Serbia, Croatia, you had been facing somewhat negative regulatory environment, which affected both fees as well as NII development. And I'm wondering what do you think, what the future holds in those countries and maybe some others where the credit growth is pretty high like Bulgaria. What do you think in general, the regulations, how that's going to affect the growth going forward? And second question also related to growth is on Slovenia. Probably if I'm seeing right, your year-to-date loan book growth after the merger is somewhat falling behind major competitors, I believe. So if you could comment how you're going to, in a way, fix the situation and come back to a more growth-oriented strategy there? Laszlo Bencsik: Well, yes, I mean, there have been some macro prudential measures, Russia, Uzbekistan. But this -- we usually welcome macro prudential measures because make lending kind of more rational business, and it discourages players who have, in some cases, very different risk appetite than we have and can kind of do harm to the market. That can -- that happens, right? So macro prudential measures, we are usually happy with, even if they slow down somewhat the overall growth of the market and so on, but we welcome them. Now Serbia was different. In Serbia, the measure was that we -- it's a forced lowering of the consumer loan APRs, right? We -- all the banks were strongly suggested to voluntarily decrease their APRs, the interest rates of consumer loans to clients who have less than the average wages and income. And that's very harmful. So that's a distortion to risk-based pricing. It's a kind of rude interference into the market conditions. So it's a kind of mixed basket. But in Serbia, this change, it's not going to slow down lending. It's going to boost lending, obviously, right, because it means that we have lower rates potentially higher demand. Now Slovenia, I mean, Slovenia, the problem is pricing. Some of our competitors and unfortunately, not exactly the small competitors follow pricing strategies, which we -- which are very difficult to understand, put it this way, what was the economic rationale behind that. And this is a challenging situation. Well, we try to do our best. I mean the other thing that -- I mean, this is a country where we recently got a new CEO of a very dynamic and very experienced colleague who has very ambitious targets and aspirations. But even with this comment, I think kind of 6% year-to-date growth, I mean, annualized 8%. It's actually a well-developed Eurozone country. I don't think that kind of 8% annualized run rate growth rate is not kind of acceptable in a way in a Eurozone mature market. Having said that, again, this is probably the country where we have the biggest challenge in terms of pricing behavior of some of our competitors. Unknown Attendee: Yes. Understood. May I also maybe revisit the case for subsidized mortgage lending in Hungary. During the conference, I just want to confirm if I got it right. I think a figure of around 20% annual rate was mentioned. And I just wanted to specify, did you allude to the segment or subsegment of Hungarian subsidized mortgage outstanding? Or was it the figure which was related to Hungary for all outstanding loans? I presume you referred to mortgage segment, but I'm not sure whether that was the total mortgage segment or the subsidized mortgage segment only. Laszlo Bencsik: Yes. As I said it, I think, today as well that the current run rate without this home start program was annualized 12%. And our original expectation and early experience regarding demand suggests that this 12% run rate can improve. And I said, yes, that it can be for the next kind of till the end of second quarter next year, at least, can go up to high teens, even close to 20%. We don't know exactly, but it's very clear that acceleration should be expected. And again, as I shared with you, the early data do support that previous assumption. And this number refers to mortgage loans altogether, mortgage volume growth in Hungary, not just the subsidized but total. Operator: The next question is from Simon Nellis, Citigroup. Simon Nellis: Just a few questions from me. I guess the first one would just be on risk cost and how you feel about the outlook going forward. I think risk cost has been a bit more elevated than in earlier quarters, last 2 quarters. So just would be interested in hearing your thoughts about any imminent risks or lack of risks going forward. And then my -- maybe let's start with that one. I have 2 more, if that's okay. Laszlo Bencsik: Yes. I mean, if you look at the third quarter risk cost of HUF 57 million, HUF 29 million came from Russia, and that's just related to the I mean, the nature of the product there. We do consumer lending, it's growing and it's a high kind of normal risk cost level. And I mean profitability is really strong there. So it's not a concern at all. And other than that, we increased provisioning in Bulgaria. It's related to consumer loans as well primarily. But it's, again, within the expected range and quite okay, and we have strong loan growth. And we actually had a corporate -- actually 2 corporates in Uzbekistan, which resulted in another couple of billion more. So these are the kind of focus points of the provisions what we created. We don't see reason to be worried or we don't see a change in the kind of underlying portfolio quality dynamics anywhere. So no. Simon Nellis: Okay. And could you update us on the core banking system upgrade and if there's any implications for cost growth going forward there on that front? Laszlo Bencsik: Cost growth. No. We are actually doing very well. So the first 2 products, we -- I mean, very niche products, and it's kind of small volumes, but they actually started to operate. So far, so good. So we are progressing according to plan. we are happy with the vendor. We are happy with the system. I mean, it's a lot of work in the problem with core system replacements that is the positive business impact is not that obvious, right, because you typically don't have a whole range of new functionalities. It's just a simpler and more efficient and easier to develop environment in a more sustainable environment. So no, we don't expect cost to increase due to this at all. And in a kind of midterm scenario, there might even be over -- I mean, we expect a kind of overall reduction in the total cost of operating this environment. But I mean, usually costs we like to talk about when we manage to reduce them. So this is -- but the expectation here is not that we are going to have a huge peak in the OpEx in Hungary because we introduced the system. No, that's not the case. The extra effort, extra expenditure and cost, which is involved with the core banking system replacement, it's already there in our cost structure this year. So the full team is engaged. No additional cost increase. And hopefully, midterm, when we are done, there might be some improvement in the cost structure even. Simon Nellis: And then just one last one on me on capital return. So I think you have an ongoing buyback. If that buyback completes before the year-end, would you do another one? Or would we expect some new news on capital return only with the full year result? Laszlo Bencsik: There's no -- we haven't decided on this. But I mean, we seem to be strong in capital generation. And if you ask me, the share is still undervalued. So I'm quite supportive personally to continue the program. But we are not close to the end. So we are only -- there's still -- we brought back HUF 88 billion, I think. And so there's still quite some to go. Operator: The next question is from Gabor Bukta, Concord Securities. Gabor Bukta: I have 2 questions. First of all, just a follow-up on capital allocation. So I think you have executed around 60% of the current share buyback program. And if you won't finish it until the year-end, is it possible to extend it? Or what's going to happen with the remaining shares? Because I'm a bit concerned about how you can execute by the year-end because the liquidity of the stock is relatively low versus what you should buy back on the market? And the second question is regarding the provisions, but not on loan provisioning rather than on the Russian bond portfolio because as far as I know as I see the provisions you created for Russian bonds amounted to HUF 97 million by the end of the quarter and stopped setting aside any provisions for these bonds. What is your strategy? And once you think you created any provision for this bond, how would you see when you ref those provisions of the coverage? Laszlo Bencsik: Yes. I mean the extension of the program is possible, but it requires supervisory approval. I mean, given the level of capital adequacy and all the numbers around our performance, I don't see why this would not be given if we were to ask for it. So yes, it is possible, but it requires approval. Indeed, this kind of 79% coverage on these bonds, which majority of these bonds are actually paying regular interest. That's a question. We increased this coverage based on the very firm requirements of our supervisor. So this is conservative. And to be honest, I don't know. I mean this reflects the current view. There will be an event in early December, the first of the bonds, which are kind of performing at the moment, we have a repayment date. And so this is going to be the first principal repayment. And if this happens without any problem, then -- and we don't see any -- we don't foresee any problem sir. So if it does indeed happen, then I think that's going to be a kind of trigger point where we have to discuss with our supervisor if they want to change or don't want to change their view on the required level of provisions or required level of conservativeness on the -- regarding the these bonds. So I mean -- and this is just assuming the status quo. Obviously, if this terrible war ends and the sanction environment potentially changes, then there's, I believe, an even bigger room to release these provisions. But today, I mean, the official answer is that this is the level what we decided conservative enough to reflect the situation and to respond to our supervisors' requirements. Operator: [Operator Instructions] the next question is from Máté Nemes, UBS. Mate Nemes: I have just a few questions left. The first one would be on corporate lending on Slide 8. I heard you clearly that this might be the green shoots we're looking for in terms of the turnaround in corporate lending, the 5% year-to-date. Can you talk a little bit about the nature of the corporate lending here? Are these -- is this essentially pent-up demand for investment type of loans or we are not quite there yet? That's the first one. The second question would be on growth of the various countries. It's clear you're seeing really high loan growth in a number of markets, including Bulgaria, including Russia, including Hungary. Can you talk about perhaps the mix effects you're expecting both in terms of top line and bottom line in the next few years? What sort of weight do you feel comfortable with for one or the other operating countries that are currently showing high growth? And the last question would be on the cost/income ratio guidance. I think you've been quite clear that the FX adjusted organic performing loan volume growth north of 9% is basically not a problem, and that's just a conservative guidance. Is it also the case for the cost/income ratio? Or shall we expect the usual sort of strong seasonality in the cost base in Q4, and we could see that 39% pro rata number deviate materially? Laszlo Bencsik: The corporate -- the large corporate growth is not investment driven. That's mostly working capital, to be honest. And that's -- so we don't see a big new investment cycle coming. There's still a potential upside. And I don't think this is going to happen in the next 6 months. But at least working capital demand is getting there. And where we see actually more fundamental growth is the micro small segment, which is kind of -- and these are the typical kind of small Hungarian mid-caps, put it this way, which are more consumption-driven and more kind of retail oriented. There's actually new investment on their scale, obviously. And there's kind of capacity increase as well in line with the strong growth in consumption. So I think in the micro small segment, there's underlying fundamental, I think, improvement. On the larger corporate, it's not yet a new investment cycle. Now this mix effect, again, I mean, there are 2 clear pockets or segments where we expect acceleration. It's Hungarian mortgages and we expect consumer loans, right? That's clear. Other than that -- and Hungarian corporates started to grow after kind of 2 years of kind of 0 growth. And Ukraine started to grow as well, which was, again, not growing much or actually declining in '22 and then kind of flat '23, '24 and started to grow this year. So this now seems kind of strong across the board. And if you further adjust with Hungarian mortgages for the next year and for Ipoteka consumer loans, if you just kind of -- you increase this year-to-date to the run rate, the quarterly run rate, then I think you got a picture which reflects the current situation. And I don't -- and I don't see why there should be big shifts in the mix, except when the -- if the war ends, if the war ends, then Ukraine can be substantially stronger. I mean there will be a huge opportunity then for -- and that opportunity will only be kind of constrained by our risk appetite. So I think this is the kind of potential further structural changes in the future should the war finally end, which I hope is near. Cost-to-income ratio, I think the usual kind of seasonality can be expected. So the rate will be somewhat more -- the cost-to-income ratio will be somewhat higher than the first 9 months. But we already improved the guidance because we originally expect -- the original guidance was higher than last year. Now it's around last year. I mean, we try to do our best and not to have too much seasonality, but some seasonality is actually quite natural. So yes, somewhat higher than 39.3% is realistic. Mate Nemes: Got it. That's very helpful. Can I just follow up on the second question on the mix effects and very, very helpful color there. Do you see any areas where you feel like this or the other markets may be running too hot or certain product groups and that perhaps might not be sustainable at these levels beyond the next 2, 3 quarters? Laszlo Bencsik: The last 3 years, the kind of fastest growing was Bulgarian mortgages, and that's actually quite a ride, what we have seen there. And there came macro prudential measures, which somewhat calmed down, but not too much the growth. So this is a question, and we expected slowdown this year and the growth rate actually exceeded expectations. So that's -- I think if you look at Page 11 and the kind of across the group growth rates, it's Bulgarian mortgages where I think it would be natural to slow down. Operator: The next question is from attendee joined via phone. Unknown Attendee: Given the credit market running quite hot and spreads level being quite tight, are you considering AT1 issuance? Or is that a possibility only if M&A opportunities come up down the line, as you suggested in the past? Laszlo Bencsik: Issuance of? Unknown Attendee: AT1 additional... Laszlo Bencsik: AT1. No, no. I mean, AT1, again, this is the -- our earmarked reserve for a potential big acquisition, right? So if a potential -- if a big acquisition happens, then we issue. Unknown Attendee: Okay. I thought maybe given where spreads are and different players doing the AT1, it could have been a good timing also for you, but it seems like not. And for next year, maybe in terms of funding, would it be every currency euro? Or I mean, you talked before about diversifying your investor pool, et cetera, et cetera, and you currently have deals with different currency out there. So just wondering. Laszlo Bencsik: We are typically opportunistic between dollar and euro. And we -- as you see, we have started to open up to Chinese yuan and so far offshore. But we always swap back to euro. So whenever we issue FX on a group level, we swap back to euro because that's kind of one of the core balance sheet currencies of the group. Operator: [Operator Instructions] As there are no further questions, I hand back to the speaker. Laszlo Bencsik: Thank you very much. Thank you for participating. Thank you for your very good questions and for your interest. I wish you all the best, and I hope you join us when we present the annual results early March next year. Thank you. Goodbye. Operator: Thank you for your participation. The first 9 months 2025...
Operator: Good day, everyone, and welcome to the Global Partners Third Quarter 2025 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka; Chief Financial Officer, Mr. Gregory Hanson; Chief Operating Officer, Mr. Mark Romaine; and Chief Legal Officer and Secretary, Mr. Sean Geary. At this time, I'd like to turn the floor over to Mr. Geary for opening remarks. Please go ahead, sir. Sean Geary: Good morning, everyone, and thank you for joining us. Today's call will include forward-looking statements within the meanings of federal securities laws, including projections or expectations concerning the future financial and operational performance of Global Partners. No assurances can be given that these projections will be attained or that these expectations will be met. Our assumptions and future performance are subject to a wide range of business risks, uncertainties and factors, which could cause actual results to differ materially as described in our filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or update any forward-looking statements. Now it's my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifka. Eric Slifka: Thank you, Sean. Good morning, everyone, and thank you for joining us. We performed well in the third quarter, consistent with our expectations, reflecting operational strength and disciplined execution across the organization. We experienced a strong performance in our Wholesale segment in Q3, driven by favorable market conditions in gasoline and the continued optimization of our liquid energy terminal network. Over the past 2 years, we have significantly scaled our terminal assets, meaningfully enhancing our product distribution network and positioning Global Partners for long-term growth. This effort reflects our strategy of efficiently connecting liquid energy products with downstream markets, leveraging the integration of terminals acquired from Motiva, Gulf and ExxonMobil. These assets continue to perform well, strengthening our supply chain flexibility, contributing to throughput growth and enhancing our network. We are pleased that fuel margins have remained historically strong even with the year-over-year decline. Our retail network is a critical part of our strategy as we invest in, optimize and upgrade our portfolio. Recently, we expanded our marine fuel supply operations into the port of Houston. As a reminder, today, our bunkering business is centered in the Northeast, and now we have extended this business into the Gulf Coast. On the retail side, we're continuing to redefine the convenience store experience through our all-time Fresh and newly reimagined Honey Farms Market brands. These brands embody our 4 pillars: community, hospitality, local and fresh, while introducing chef-driven menus, clean label offerings and hyperlocal engagement. Through our new loyalty platform, these benefits, we are creating a seamless personalized experience designed to drive repeat business, build long-term loyalty and strengthen the connection between our guests and our brands. Turning to our distribution. In October, the Board declared a quarterly cash distribution of $75.50 per common unit or $3.02 on an annualized basis. This marked our 16th consecutive quarterly distribution increase. The distribution will be paid on November 14 to unitholders of record as of the close of business on November 10. With that overview, I'll turn it over to Greg for the financial review. Greg? Gregory Hanson: Thank you, Eric, and good morning, everyone. As I review the numbers, please note that all comparisons will be with the third quarter of 2024, unless otherwise noted. Net income for the third quarter was $29 million versus $45.9 million last year. I would note that last year's quarter had a $7.8 million onetime gain on asset sales that affected that number. EBITDA was $97.1 million for the third quarter compared with $119.1 million and adjusted EBITDA was $98.8 million versus $114 million. Distributable cash flow was $53 million compared to $71.1 million, while adjusted distributable cash flow was $53.3 million versus $71.6 million. Trailing 12-month distribution coverage remained strong as of September 30, with 1.64x coverage or 1.5x after factoring in distributions to our preferred unitholders. Turning to our segment details. GDSO product margin decreased $18.8 million to $218.9 million. Product margin from gasoline distribution decreased $19.3 million to $144.8 million, primarily due to lower fuel margins compared with the same period in 2024. On a cents per gallon basis, fuel margins of $0.37 were down 7% from the previous year. In the third quarter of 2024, we experienced strong fuel margins, in part due to Wholesale gasoline prices declining by $0.57 during the quarter. In comparison, in this year's third quarter, Wholesale gasoline prices declined only $0.11. Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, increased $0.5 million to $74.1 million, in part due to an increase in sundries. At quarter end, we had a portfolio of 1,540 sites, 49 fewer than the same period last year. The site count does not include the 67 locations we operate or supply under our Spring Partners Retail joint venture. Looking at the Wholesale segment, third quarter product margin increased $6.9 million to $78 million. Product margin from gasoline and gasoline blend stocks increased $18.5 million to $61.5 million, primarily due to more favorable market conditions in gasoline and the expansion of our terminal network. Product margin from distillates and other oils decreased $11.6 million to $16.5 million, primarily due to less favorable market conditions in residual oil. Commercial segment product margin decreased $2.5 million to $7 million, in part due to less favorable market conditions in bunkering. Turning to expenses. Operating expenses decreased $4.6 million to $132.5 million in the third primarily related to lower maintenance and repair expenses at our terminal operations. SG&A expense increased $5.8 million to $76.3 million, reflecting in part increases in wages and benefits and various other SG&A expenses. Interest expense was $33.3 million in the third quarter of '25, down $1.8 million from last year, in part due to lower average balances on our credit facilities. CapEx in the third quarter was $19.7 million, consisting of $11.9 million of maintenance CapEx and $7.8 million of expansion CapEx, primarily related to investments in our gasoline stations and terminals. For the full year, we now anticipate maintenance capital expenditures of approximately $45 million to $55 million, while expansion capital expenditures, excluding acquisitions, are anticipated to be approximately $40 million to $50 relating primarily to investments in our gas station and terminal business. Our current CapEx estimates depend in part on the timing of completion of projects, availability of equipment and workforce, weather and unanticipated events or opportunities requiring additional maintenance or investments. Turning to our balance sheet. As of September 30, leverage as defined in our credit agreement as funded debt to EBITDA was 3.6x. We had $240.6 million outstanding on the working capital revolving credit facility and $124.8 million outstanding on the revolving credit facility. Looking ahead to our Investor Relations calendar, next month, we'll be participating in 2 events, the BofA Securities 2025 Leveraged Finance Conference and the Wells Fargo 24th Annual Energy and Power Symposium. Please contact our Investor Relations team if you'd like to schedule a meeting during the conference. Now let me turn the call back to Eric for closing comments. Eric? Eric Slifka: Thanks, Greg. We remain focused on capital discipline and operational efficiency, continuously seeking opportunities to drive sustainable returns and long-term value creation for our unitholders. Our scale, integrated operations and talented team give us the flexibility to respond to market shifts and pursue growth opportunities that create lasting value for all of our stakeholders. Now Greg, Mark and I would be happy to take your questions. Operator, please open the line for the Q&A. Operator: [Operator Instructions] Our first question comes from the line of Selman Akyol with Stifel. Selman Akyol: Can you talk a little bit more about entering the bunkering market in Houston? Eric Slifka: Yes. I mean we're already obviously in the business. We felt that there was an opportunity, and we feel like the assets that we've entered into there are differentiated versus our competition. And so we're already, like I said, in that business, we already have the customer list. We already have the know-how and the knowledge, and we think it's a good fit for the company. Selman Akyol: Got it. And when you say sort of differentiated offering, can you just explain that a little bit? Eric Slifka: Yes, primarily just the location of the facilities and how we're going to go to market to supply that very busy corridor that is not always so easy to deliver fuel in. Selman Akyol: So you're on the Houston Ship Channel? Eric Slifka: We're outside of it, yes. Selman Akyol: Just outside Okay. Can you talk a little bit about the acquisition environment? And you noted that store counts were lower relative to where you were third quarter last year. And so I'm just curious to more to go there? Or do you think you can add stores from here? How should we be thinking about that? Gregory Hanson: Yes. Stifel, it's Greg Hanson. I can talk a little bit about the sites. I mean, I think we went through a pretty big optimization program on our sites last year. So year-over-year, we've -- in the last 12 months, we've sold 7 sites. We've converted 15 sites, and then we terminated some of our dealer relationships that were low margin. So we continue to optimize. I think that said, there's probably not that big a runway right now on sort of site divestitures for us. I think we're pretty happy with our portfolio in general. It still looks a little obviously down year-over-year because last year was a big optimization period for us. But we'll continue to, I think, move around the edges on that portfolio, but we're pretty happy where it is now. And then on the M&A side, I think overall, it was pretty quiet going into the fourth quarter on the retail M&A. I think we're seeing some signs of life and more deals that are out there on the fourth quarter on the retail side. And then the terminalling side, we continue to look at opportunities as we go through the year. But I think that we have seen a pickup on the retail side. Selman Akyol: Got it. So Parkland, which is north of the border, was recently acquired, but they have stores in the U.S. Do you face much competition from them? Gregory Hanson: We do not. No. We don't -- we're not in -- none of our retail, the GDSO segment operates in their footprint as of today. Selman Akyol: Got it. And then there's been reports of sort of the lower end consumer being under pressure. And I'm wondering if you're seeing that and if you have any thoughts going forward on that? Gregory Hanson: Yes. I mean we've -- I think not unlike a lot of other retailers out there, we've definitely seen it this year. There's definitely pressure on lower income. You see consumers trading down from more premium brands to more sub-generic brands. We continue to try and leverage our loyalty program that Eric mentioned earlier to grow promotions. But I think it's -- yes, they've definitely been under pressure overall. That said, we look at the quarter, we were pretty happy with this summer, how the C-stores did. We were actually up year-over-year, and that's not even adjusting for same site. That's just pure, and we were down 16 company-operated sites year-over-year. So to be above on the GDSO station operations is pretty good in our book. It was a decent strong summer. And where we're located in the Northeast, I think, continues to be trend towards a higher income consumer. So overall, we're pretty happy with how the summer went on the C-store. But yes, I would agree. I mean, I think it's pretty well recognized that the lower-end consumer continues to face pressure, but the higher-end consumer has been continuing to spend, which is good. Selman Akyol: Got it. And then the last one for me. Just how is labor going for you guys? Is it getting any easier? Gregory Hanson: It's the -- I would say the wage inflation has calmed down a little bit. But operating in a retail environment, you continue to face a lot of high turnover. But compared with the '22 and '23 time frame, I think we're still -- we're in a better place. I think what we're working on is trying to optimize around our labor hours and make sure we have the right associates in the right stores to optimize sales, and we'll continue to work on that. Selman Akyol: Got it. I guess what I was thinking about is, is it easier to get people now? Are you seeing more resumes, more people? I mean resume is too strong of a word, but are you seeing more applicants, that kind of thing? Gregory Hanson: Yes. I think we are overall versus the last couple of years, definitely. Operator: We have reached the end of the question-and-answer session. Mr. Slifka, I'd like to turn the floor back over to you for closing comments. Eric Slifka: Thanks for joining us this morning. We look forward to keeping you updated on our progress. Everyone, have a great Thanksgiving. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
John Silas: Good morning. This is John Silas, a member of the Investor Relations team for Goldman Sachs BDC, Inc. I would like to welcome everyone to the Goldman Sachs BDC, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Before we begin today's call, I would like to remind our listeners that today's remarks may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain and outside of the company's control. The company's actual results and financial condition may differ possibly materially from what is indicated in those forward-looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings. This audiocast is copyrighted material of Goldman Sachs BDC, Inc. and may not be duplicated, reproduced or rebroadcasted without our consent. Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.goldmansachsbdc.com, under the Investor Resources section and which includes reconciliations of non-GAAP measures to the most directly comparable GAAP measures. These documents should be reviewed in conjunction with the company's quarterly report on Form 10-Q filed yesterday with the SEC. This conference call is being recorded today, Friday, November 7, 2025 for replay purposes. I will now hand over the call to Vivek Bantwal, Co-CEO of Goldman Sachs BDC, Inc. Vivek Bantwal: Thank you, John. We will begin the call with our perspective on recent performance in light of a gradually improving macro environment. Next, we will discuss our investing activity and outline GSBD's positioning heading into the fourth quarter. Shortly after, David Miller and Tucker Greene will provide a detailed review of portfolio activity and performance before handing it over to Stan Matuszewski to take us through the financial results. We will conclude by opening the line for Q&A. The M&A market has continued to remain resilient despite uncertainty that persisted in the first half of the year as total M&A dollar volumes in Q3 2025 were 40.9% higher year-over-year compared to Q3 2024. This surge is attributed mainly to a renewed risk-on sentiment among investors, lower borrowing costs, greater market clarity and a reset on valuation expectations between buyers and sellers in the market. As David will discuss later in the call, this pickup in activity has directly benefited GSBD as our new investment commitments and repayments during the quarter reached the highest level since the integration of the platform in 2022. Recent base rate cuts with additional expected through year-end into 2026 should accelerate deal activity, albeit spreads remain tight across the middle market and large cap juxtaposed against a tight spread environment in the public markets. Our proactive decision earlier this year to adjust our dividend policy and cut the base dividend positions us well in what will be a lower yield environment, where emphasis on credit selection will be paramount. Additionally, during times of increased competition for deal flow and high-quality deals, our proximity to our investment banking franchise serves as a competitive advantage for our platform to remain highly selective in evaluating opportunities. Broader credit dynamics remain top of mind for investors and made recent headlines concerning what we believe to be idiosyncratic issues versus a broader systematic concern. We remain comfortable with the risk dynamics in the private credit space given the overall health of portfolio fundamentals. We continue to evaluate the impacts of tariffs, ability for companies to service debt, and risks involved with software investing, particularly with the recent growth of AI investing. We recognize the transformative potential of AI, but our primary focus remains on downside risk mitigation. We have developed a proprietary framework to assess both software and AI disruption risk that we had implemented in our underwriting for over 2 years. We remain focused on mission-critical, market-leading companies with core systems of record across all our software deals. Now turning to our third quarter results. Our net income -- our net investment income per share for the quarter was $0.40 and net asset value per share was $12.75 as of quarter end, a decrease of 2.1% relative to the second quarter NAV, which was partially due to the $0.16 per share special dividend with some markdowns to previously underperforming names. This quarter marks the last of 3 special dividends that were announced earlier this year, along with changes to our dividend policy. The Board declared a third quarter 2025 supplemental dividend of $0.04 per share payable on or about December 15, 2025, to shareholders of record as of November 28, 2025. Adjusted for the impact of the supplemental dividend related to the third quarter's earnings, the company's third quarter adjusted NAV per share is $12.71 which I would note is a non-GAAP financial measure introduced as a result of the dividend policy change. The Board also declared a fourth quarter base dividend per share of $0.32 to shareholders of record as of December 31, 2025. We ended the quarter with a net debt-to-equity ratio of 1.17x as of September 30, 2025, as compared to 1.12x as of June 30, 2025. With that, let me turn it over to my co-CEO, David. David Miller: Thanks, Vivek. During the quarter, we made new investment commitments of approximately $470.6 million across 27 portfolio companies, comprised of 13 new and 14 existing portfolio companies. This marks the highest level of new investment commitments since Q4 of 2021, which demonstrates our unique position in a competitive deal environment, where we can be selective on credit quality and exhibit discipline where we want to lean in. 100% of our originations during the quarter were in first lien loans, reflecting our continued bias in maintaining exposure to the top of the capital structure. Of the 13 new portfolio companies, we served as lead on 7 which is a tangible indication of the power of the GS platform. The impact of the GS franchise was on full display through our financing of the acquisition of Shields Health Solutions. This was part of the broader take private of Walgreens, of which 4 silos were financed uniquely with GS Private Credit participating only in the Shields transaction. This is a deal where investment banking colleagues advise the sponsor. Shields Health Solutions is one of the largest specialty pharmacy operators in the U.S. At the time of the investment, the transaction represented one of the largest take privates of all time. Another notable investment this past quarter was to support Newtek Merchant Solutions, a wholly owned subsidiary of the publicly traded bank holding company, Newtek, which offers a range of financial service products to small and medium-sized businesses. Our financing package was used to support the refinancing of existing debt and to fund a payment to increase the bank holding capital base. Due to continued relationship with the CEO, GS Private Credit was able to secure the role of admin agent and sole lender to the company. The integration of our platform in 2022 allowed us to evaluate and invest in more high-quality opportunities that span from the middle market to large cap. And these 2 examples shine a light on our continued ability to do so at attractive pricing. We believe our platform is well positioned by the unique opportunities that channels Goldman Sachs ecosystem to take advantage of an active environment. With that, let me turn it over to our President and Chief Operating Officer, Tucker to discuss portfolio repayments fundamentals and credit quality. Tucker Greene: Thanks, David. For our portfolio companies as of September 30, 2025, total investments at fair value were $3.2 billion, comprising of 98.2% in senior secured loans, 1.5% in a combination of preferred and common stock and a negligible amount in warrants. We continue to see increased repayment activity with $374.4 million for the quarter. 86% of these repayments in the quarter were from pre-2022 investments, leaving less than 50% of our current portfolio at fair value and legacy assets. This rotation remains a key focus for the GSBD portfolio as it recycles into new credits. One notable payoff during the quarter was total vision. GS first invested in the company in 2021 and finance an acquisition in 2022. Total Vision owns and operates optometry practices across California, which provide professional and retail services to patients. We received full repayment of the credit facility and equity co-investment. This illustrates the power of our platform and our team's enhanced management capabilities in the health care space. Throughout this past quarter, we utilized our 10b5-1 stock repurchase plan during the quarter. We repurchased north of 2.1 million shares for $25.1 million, which was NAV accretive. At the end of the quarter, total investments at fair value and unfunded commitments in our portfolio were $3.8 billion in 171 portfolio companies operating across 40 different industries. The weighted average yield of our debt and income-producing investments at amortized cost at the end of the third quarter was 10.3% as compared to 10.7% at the end of the second quarter. Despite a modest tightening in portfolio yield quarter-over-quarter, our portfolio companies have both top line growth and EBITDA growth quarter-over-quarter and year-over-year on a weighted average basis. Our weighted average net debt to EBITDA remained flat quarter-over-quarter at 5.8x, and our interest coverage increased quarter-over-quarter at 1.9x from 1.8x. As of September 30, 2025, we placed one position from an existing portfolio company on nonaccrual status. However, our overall investments on nonaccrual status decreased to 1.5% of fair value from 1.6% as of the end of the second quarter. I will now turn the call over to Stan to walk through our financial results. Stanley Matuszewski: Thank you, Tucker. We ended the third quarter of 2025 with total portfolio investments at fair value and commitments of $3.8 billion, outstanding debt of $1.8 billion and net assets of $1.5 billion. Our ending net debt to equity ratio at the end of the third quarter was 1.17x, which continues to be below our target leverage of 1.25x. At quarter end, approximately 70% of our total principal amount of debt outstanding was in unsecured debt. As of September 30, 2025, the company had approximately $1.143 billion of borrowing capacity remaining under the revolving credit facility. Given the tightening of credit spreads we've observed in the market, we continue to look for ways to optimize the pricing of our financing sources. During the quarter, we issued $400 million of a 5-year investment grade unsecured note with a coupon of 5.65%. We also hedged the issuance by swapping the coupon from fixed to floating to match GSBD's floating rate investments. Over 50 investors participated in the company's day of live marketing, which resulted in the peak order book being 4x oversubscribed. Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we also reference certain non-GAAP or adjusted measures. This is intended to make our financial results easier to compare to results prior to our October 2020 merger with Goldman Sachs Middle Market Lending Corp., or MMLC. These non-GAAP measures remove the purchase discount amortization impact from our financial results. For the third quarter, GAAP and adjusted after-tax net investment income was $45.3 million and $44.8 million, respectively, as compared to $44.5 million and $43.5 million, respectively, in the prior quarter. On a per share basis, GAAP net investment income was $0.40. Adjusted net investment income for the quarter in connection with the merger with MMLC was unchanged at $0.40 per share, equating to an annualized net investment income yield on book value of 12.5%. Total investment income for the 3 months ended September 30, 2025, and June 30, 2025, was $91.6 million and $91 million, respectively. We observed PIK as a percent of total investment income decreased marginally to 8.2% for the third quarter from 8.3% in the second quarter of 2025. With that, I'll turn it back to David for closing remarks. David Miller: Thanks, Stan, and thanks, everyone, for joining our earnings call. Although the perception of risk embedded within the credit market has changed, we continue to apply our staunch underwriting philosophy and remain focused around the maintenance of our dividend that we proactively addressed. In light of a lower-yielding environment, we believe fund managers will be rewarded for their credit selection. With that, let's open the line for Q&A. Operator: [Operator Instructions] We'll go first to Arren Cyganovich with Truist Securities. Arren Cyganovich: In your comments, you had mentioned that the M&A activity to a level that you had not seen for a few years. Maybe you could just talk to us about your thoughts about sustaining into next year and whether or not this is kind of more of a shorter term or maybe start of a longer-term trend here? Vivek Bantwal: Thank you for the question. Yes. Listen, we think this is the start of a longer-term trend. This was, in our minds, really a question of when, not, if. Because when you look at a, the sort of cumulate amount of sort of dry powder in the private equity community, and you juxtapose that with the capital that's invested in existing investments that have now been kind of sort of in portfolio for a period of time. And then you think about the fact that these more recent private equity vintages from a DPI perspective is really behind historical vintages. And so there's kind of a growing kind of need for private equity firms to, a, exit existing portfolios; and then b, given the dry powder sort of investing in new portfolios. So when you sort of look at all of those metrics it speaks to the need for kind of more M&A on the forward. The question then became sort of when. We started to see some signs that early this year, obviously, as you kind of got into April, there was sort of a pullback as you saw kind of broader volatility and focus on tariffs and the like. And what we've seen more recently is really kind of back to that risk-on sentiment where people are looking to kind of do things strategically. And so we're seeing that in the sponsor community, but we're also seeing that in the corporate community in terms of M&A activity. And so we think we're in the early stages of that, and we think that as we get into 2026, we'll see more of that. Arren Cyganovich: Okay. And I guess with -- how much of the increase in activity, would you have to see for spreads maybe to start to widen out a little bit, basically with supply -- enough supply essentially to offset some of the high demand? David Miller: Look, that's a little hard question to say. We're not really anticipating spreads to widen much. We're hopeful that, that might happen with the pick up M&A. But given the dry powder, we're not planning on that in the near term. I think what we like about our platform as we continue to see a bunch of just unique originations that we can get higher spreads because of that unique origination platform that being tied to Goldman Sachs. But your regular way A+ credit, we don't think it's going to have meaningful spread widening anytime soon. Arren Cyganovich: And then on credit, you had one new investment on nonaccrual at Dental Brands. I think that's been kind of a watch list for a bit. Is -- maybe you just talk a little bit about the performance there and nonaccruals were relatively stable, and you had some unrealized and realized losses in the quarter. Were there any impacts from some of your prior nonaccruals in there? David Miller: Look, I mean, as you mentioned, this has been in the portfolio for some time. We have had some more junior securities that were already risk rated 4 as a result of underperformance in a previous restructuring. The company continues to underperform our expectations. So we put a more senior tranche on nonaccrual now. So it's not a new name. It's been risk rated 4 for some time. But the good news is this is a tiny position in this fund. I think it's sub $800,000 of exposure. So it doesn't meaningfully move the needle for us from an overall nonaccruals. And as Tucker mentioned in his prepared comments, it did tick down slightly from 1.6% to 1.5% as a percentage of fair value. So we feel overall portfolio quality has been stable where we've seen continued write-downs is on the more legacy names where we're not seeing a big turnaround. So we took additional markdowns there on those names. But other than outside of those legacy names, we feel pretty good about the portfolio. Operator: [Operator Instructions] The question-and-answer portion has concluded. I would now like to turn the call back over to Vivek for any closing comments. Vivek Bantwal: Thanks, everyone, for their time this morning. And if more questions come up, feel free to contact our team. Thank you, everyone, and have a great weekend.
Operator: Greetings, and welcome to the Conduent's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joshua Overholt, Vice President of Investor Relations. Thank you. You may begin. Joshua Overholt: Thank you, operator, and thank you for everyone joining us today to discuss Conduent's third quarter 2025 earnings. I'm joined today by Cliff Skelton, our President and CEO; and Giles Goodburn, our CFO. We hope you had a chance to review our press release issued earlier this morning. This call is being webcast, and a copy of the slides used during this call as well as the press release were filed with the SEC this morning on a Form 8-K. This information as well as the detailed financial metrics package are available on the Investor Relations section of the Conduent website. During this call, we may make statements that are forward-looking. These forward-looking statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to vary materially from these statements. Information concerning these factors is included in Conduent's annual report on Form 10-K filed with the SEC. We do not intend to update these forward-looking statements as a result of new information or future events or developments, except as required by law. The information presented today includes non-GAAP financial measures. Because these measures are not calculated in accordance with U.S. GAAP, they should be viewed in addition to and not as a substitute for the company's reported results. For more information regarding definitions of our non-GAAP measures and how we use them as well as the limitations to their usefulness for comparative purposes, please see our press release. And now I would like to turn the call over to Cliff. Clifford Skelton: Thank you, Josh, and thank you, everyone, for joining Conduent's Q3 2025 earnings presentation. As you can tell, Josh Overholt is now our new Head of Investor Relations. We've been waiting for Josh to arrive from the other side, if you will, where Josh was part of an investment team we periodically communicated with. It's great to now have Josh's advice as our new Head of FP&A and Investor Relations. Let me start by saying, wow, it's been kind of an uncertain ride in our federal government lately, as you all know, with the shutdown. I've often said that the bulk of our business in the public sector is at the state and local level, even though some of the funds the states distribute come from the federal government, obviously. We're lucky enough that most of these funds are entitlements unaffected by shutdowns, although SNAP, for example, can come with some concern. We were told as recently as yesterday that the emergency fund allotment is now at 65% and includes our administrative fees. So that's good. So far, we haven't seen an impact due to unfunded programs, but we have seen an occasional wait-and-see perspective from time to time on new deals and milestones. Regarding the quarter from a financial perspective, it was a good quarter as it relates to adjusted revenue, EBITDA and margin. We're proud of our performance given the current environment, and we're equally proud to see consistent sales performance and an expanding sales pipeline. Revenue was in line with guidance, slightly up sequentially to $767 million and directly in line with our pursuit of positive year-over-year growth objectives. Giles will talk about the puts and takes in revenue in a few minutes. EBITDA also came in as per guidance with both year-over-year and sequential improvement at $40 million and a margin of 5.2%, up from 4.9% last quarter and 4.1% in Q3 of 2024 and exactly where we said it would land in our Q2 narrative. Regarding sales, performance was consistent and steady year-over-year amidst some reticent buyers who were a bit preoccupied with the government shutdown in the public space specifically. Meanwhile, Commercial sales is a bit behind performance expectations as we focus on changes to our go-to-market approach and look to upgrade business development leadership. Still, there is pent-up demand in the Commercial space, and the pipeline has expanded and will expand further. As mentioned previously, the opportunities and momentum in our Transportation business specifically remains strong, and the Government pipeline indicates some very strong buying signals and go-forward opportunities. Once the shutdown concerns are behind us, cash and milestone achievement hurdles will also open up and manifest. In previous earnings, I stated that our portfolio rationalization efforts were underway, and those efforts continue in a manner that we hope to discuss no later than Q4 earnings as we continue our strategy work. Meanwhile, as you know, we've refinanced our revolving credit facility, allowing us to pay off our Term Loan A balance, further simplifying the balance sheet. Again, the timing of milestone payments in the shutdown influenced environment should soon free up cash payments and improve the free cash flow metrics and cash on the balance sheet. As we look to rightsize our Board and further populate it with folks that have been in our industry, we added a new Board member the last week of October, who is the former Chair of Deloitte U.S., Mike Fucci. We're confident that Mike will add new perspective and new support across both the Commercial and Government businesses based on his background and leadership experience. Now I'll talk in my closing remarks about our AI initiatives and some of our recent wins. This will be important because one of the topics we need to focus on is our technology strength versus our operational peers. We need to showcase our significant capabilities and the resident AI initiatives more forcefully. A recent proof point is that we're now beginning to actually license some of our software with built-in AI to our clients, proving that we aren't strictly a services company, but a service technology integrated business that has proprietary intellectual property far and away more impressive than our BPaaS competition. One example of how we're showcasing our capabilities is our recently developed AI experience center in New Jersey, which we're beginning to socialize with some of our biggest clients in the health care and auto manufacturing businesses. Meanwhile, Giles will take you through the detailed financials. We are still directly on course despite some of that lumpiness that happens, especially in the Government space. Finally, with patience, you'll soon see that our portfolio rationalization plan is clearly underway and working. With that, let me turn it over to Giles. Giles? Giles Goodburn: Thanks, Cliff. As we've done in the past, we are reporting both GAAP and non-GAAP numbers. The reconciliations are in our filings and in the appendix of the presentation. Let's discuss the key sales metrics on Slides 5 and 6. We signed $111 million of new business ACV in the quarter, consistent with prior year. Year-to-date 2025, new business ACV is up 5% versus the same period in 2024. While we have line of sight to achieve stronger sales this year than in 2024, the uncertainty surrounding the speed to execute agreements within the government agencies could push some deals into 2026. Within the quarter, we signed 10 new logos and 25 new capabilities, both sequentially up versus Q2 and on a combined basis, up 7% year-to-date versus the prior year, with the strength coming from supporting our existing client base with new capabilities. New business TCV was up 5% versus the prior year at $246 million. This was another strong quarter of sales execution in our Transportation business, which includes the Richmond Metropolitan Authority new logo win and puts that segment up 320% year-to-date versus 2024. Our qualified ACV pipeline remains strong at $3.4 billion, which is up 9% year-over-year. The strength here is driven by our Government segment as we pursue opportunities in the federal space. Let's turn to Slide 7 and review the Q3 2025 P&L metrics. Adjusted revenue for Q3 2025 was $767 million compared to $781 million in Q3 2024, down 1.8% year-over-year, but within the range that I guided last quarter. Transportation generated another quarter of strong growth. However, the decline was driven by our Commercial and Government segments, which I'll discuss in more detail in a moment. While still down year-over-year, we continue to narrow the gap towards positive revenue growth. Adjusted EBITDA for the quarter was $40 million as compared to $32 million in Q3 2024, and our adjusted EBITDA margin of 5.2% is up 110 basis points year-over-year, again, right in line with where we guided and a sequential step-up versus last quarter. Let's turn to Slide 8 and review the segment results. For Q3 2025, Commercial segment adjusted revenue was $367 million, down 4.7% as compared to Q3 2024. We continue to experience volume declines in our largest Commercial client, which is a significant contributor to the lower revenues. Excluding this largest client, our top 25 Commercial accounts grew year-over-year, most notably from within our health care vertical. We also signed another software license agreement in the quarter to a large public health plan, but these positives only partially offset the lost business. Commercial adjusted EBITDA was $37 million, and the adjusted EBITDA margin of 10.1% was up 100 basis points year-over-year. The drivers here were the software license agreement I just mentioned and cost efficiency programs more than offsetting margin from lost business. Government segment adjusted revenue for the quarter was down 6.7% at $238 million. This decline is attributed to the impacts associated with completing several implementations in the prior periods and extending several implementations in the current period as well as a client canceling an implementation to perform the work in-house. Adjusted EBITDA was $61 million, slightly higher than prior year, with adjusted EBITDA margin of 25.6%, up 210 basis points versus Q3 2024. The drivers here resulted from our AI initiatives and efficiency programs, resulting in lower fraud, labor and telecom expenses, offsetting the negative implementation impacts. Transportation segment adjusted revenue was $162 million for the quarter, an increase of 14.9% year-over-year, while adjusted EBITDA was $4 million and adjusted EBITDA margin was 2.5% for the quarter, up 250 basis points versus Q3 2024. Both revenue and EBITDA improvements were driven by strong equipment sales in our international transit business. Unallocated costs were $62 million for the quarter versus $63 million in Q3 2024. The improvement here is driven by our cost efficiency programs in the corporate functions, which more than offset significantly higher employee health care claims activity we experienced in the quarter. Let's turn to Slide 9 and discuss the balance sheet and cash flow. During the quarter, we completed the refinancing of our revolving credit facilities by amending the credit agreement, allowing us to prepay in full the Term Loan A, reduce the revolving credit facility to $357 million, of which $187 million extends to 2028 and $170 million continues to mature in 2026. We also added a $93 million performance line of credit facility maturing in 2028. We utilized the revolving credit facility to prepay the Term Loan A and at the end of the quarter, had $198 million unused. We ended the quarter with approximately $264 million of total cash on balance sheet and adjusted free cash flow for the quarter was negative $54 million. Free cash flow in the quarter was impacted by a number of timing items. Firstly, we are still awaiting a number of contract amendments being approved by federal government agencies, which given the current environment is taking longer than usual and is a prerequisite for us billing clients for work already performed. Secondly, we are in the post-implementation phase for a couple of contracts in the Government and Transportation segments, which once stabilized, will allow us to routinely bill and collect for steady-state operations and maintenance activity as well as bill the final milestones. The combination of these 2 factors are the reason for the increase in both our contract assets and accounts receivable balances compared to last quarter. Of the $168 million contract asset balance at the end of Q3, we expect to bill over $100 million by the end of Q1 2026, assuming the federal government resumes a more normal level of operations. Our net leverage ratio increased to 3.2x this quarter, which was a result of the cash flow items I just referenced. Capital expenditure for the quarter was 3.8% of revenue, and we repurchased approximately 4.7 million shares in the quarter at an average price of $2.70. Let's turn to Slide 10 and look at the 2025 outlook. At the beginning of 2025, we guided the year under the assumption of broad stable macroeconomic conditions. During the third quarter and entering into Q4, we are starting to feel the impact of a reduced federal government workforce in certain agencies, delaying the progression of RFPs and contract approvals, compounded by the current extensive government shutdown, which in combination creates greater ranges of variability and predictability in where we will finish the year financially. The good news is we still believe we will achieve the adjusted EBITDA margin range of between 5% and 5.5%. However, we now believe adjusted revenue for the year will be between $3.05 billion and $3.1 billion, and adjusted free cash flow will be dependent on the timing items I referenced earlier. As we enter the final stages of 2025 and the 3-year exit rate targets established back in 2023, we feel we are making good progress with the business and we'll lay out 2026 expectations when we deliver Q4 earnings in February next year. Turning to Slide 11. We continue to make progress with Phase 2 of our portfolio rationalization strategy. And as Cliff stated, we will provide further updates no later than our Q4 earnings. We incrementally increased the number of shares repurchased to approximately $70 million and are confident in achieving the $1 billion of capital deployment we committed to in early 2023. That concludes the financial review of third quarter 2025. And if you now turn to Slide 12, I'll hand it back to Cliff for his broader view on the business. Cliff? Clifford Skelton: Thank you, Giles. As always, a couple of closing comments prior to taking questions. Our revenue continues to reflect the puts and takes of our transformational journey, while, as you can see, adjusted EBITDA and margin are meeting expectations on the high end and continue to be predictable. You can now tell that we remain on track for the 2024 to 2025 EBITDA expansion we've been talking about, where we said you should expect a significant increase and then continued year-over-year increases in adjusted EBITDA and margin. Meanwhile, we're focused on revenue and conversion of working capital to cash for the remainder of 2025 as areas somewhat inhibited by a weaker start in Commercial sales and as mentioned, some deal pushes in the Government space associated with the timing of milestone recognition and what was in anticipated government shutdown in late Q3. But again, much demand remains pent up and on the horizon. Some tactics we have underway are as follows: we revised our Commercial go-to-market and leadership model to take out layers and produce increased opportunities to penetrate our current client base. We're enhancing sales and revenue generation talent to open new doors with proven leaders in the BPO and BPaaS technology industries. Not only have we embedded our solutions with more Gen AI, but we've begun to do a better job telling our digitization and AI story, including the as mentioned launch of our AI experience center in New Jersey and the deployment of numerous AI initiatives, not pilots, but real production solutions in areas like agent assist, language smoothing, language translation tools, automated indexing in our digital platforms and automated detection of pharmaceutical reportable events, all of which will drive margin expansion and open new revenue generation opportunities. We've seen significant fraud reduction in our electronic payment card platforms as well due to AI deployment. The bottom line is we will tell these stories more often as our clients continue to ask for innovation and examples of where we can help them do their jobs better. Conduent solutions, unlike many of our competitors, are based on technology platforms infused with AI and automation that enable better outcomes for our clients. And we deploy our CapEx to continue to evolve these solutions with new innovation to solve client challenges. We've also seen some new software license wins with our HSP claims adjudication platform, which now opens up new pathways for not only more software licensing of that product, but potentially simplifying the claims process for even larger health care insurance payers. A couple of other proof points for our quarterly progress. We refinanced our revolving credit facility, as mentioned. The sales pipeline is growing, and there are definitely deals in the waiting. Our transportation business has seen an expected uptick in sales with some recent wins in Richmond Pay-by-Plate processing, as Giles mentioned, additional work in the Bay Area tolling space, additional transit work in Abu Dhabi in Israel as well as a recent transit win in Greece, among others. As mentioned in the past, the journey clearly has twists and turns, evidenced by phenomena like government shutdowns and natural disasters, which we certainly have contingency plans for. But we're continuing that progressive path toward year-over-year growth and have already seen the pitch up, if you will, from the EBITDA trough we described in 2024 to growth. The plan is working. As mentioned, more rationalization is on the horizon as is continued margin expansion from the cost coming out of the center and less capital intensity associated with future expected transactions. Thanks for listening today, and thanks to our 55,000 strong team for their hard work. Finally, I'd be remiss if I didn't send best wishes to our folks in Jamaica, but also in Cebu, Philippines, where hurricane activities have done serious damage to those environments and the necessary ingredients of everyday life. So far, our business continuity efforts have held our operations in good stead, but many have real personal hardship to deal with. As I stated, we're optimistic about our future and see sunny skies ahead. Thanks, and I'll open up to the operator for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Gowshi Sri with Singular Research. Gowshihan Sriharan: Can you hear me? Clifford Skelton: Yes. We got you, Gowshi. Gowshihan Sriharan: Just -- you flagged that you had near closes in Q2 that was -- that was expected to close in Q3. How much of that pipeline actually closed this quarter given that the closings were kind of flattish year-on-year? And would that be -- would we be seeing some acceleration if the government shutdown eases up? And when would that be? Clifford Skelton: It's sort of like the small animal through a snake. It's coming through. I think it's exacerbated, Gowshi, in Q3 because of the government shutdown due to timing in the federal government releasing some deals in places like the CMS where approval is needed in order to get states to be able to approve health care deals, Medicaid deals. I don't see any massive change from Q3 to 2 to 3 to 4 other than in that Government space that we just talked about. Gowshihan Sriharan: Got you. I know you highlighted Gen AI deployment in both Government and Commercial space. How are you measuring productivity or quality gains that will concretely boost the client stickiness or cross-sell opportunity? Any solutions that might be in the public sector win? What is your expectation on the contract size and the margin uplift from the Gen AI pilot? Clifford Skelton: Yes, it's a great question. The primary pilot in the Government space is in our fraud category, specifically in our Direct Express program where address validation is really important. We've used Gen AI to expedite that and create a faster determination from our associates. We see that spreading throughout the Medicaid and the SNAP environments as well, where we can reduce fraud quickly, and that's been a big mission of the federal government as well. In the Commercial space, it's more around customer experience where everybody is deploying fraud, things like language translation, smoothing, agent assist, those kinds of things as well as where we see a real opportunity in scanning and indexing where we can use Gen AI to automate the indexing to create a claims adjudication-ready platform for our clients. So that's a big space. That's going to create both revenue and expense opportunities. The fraud space is more about expense reduction opportunities. What's still outline is how do we pass those capabilities on to the client. In other words, where do we share in both those expense reductions and those revenue increases. Those are contract by contract, to be honest with you, and it's going to depend on exactly what the endeavor is. Giles Goodburn: And just to add to that, Gowshi, we're seeing the expense -- positive expense impact from the fraud initiatives in the Government space turn up in the P&L now and in the last quarter as well. So we're seeing the fruits. Clifford Skelton: And we're seeing in Commercial as well. Yes. Giles Goodburn: Yes. Gowshihan Sriharan: Got you. Given that there's a negative operating cash flow, I know you said 87% of that -- the divestitures done. Are there any specific cost out of stranded cost areas left to tackle? What's the internal time line for fully realizing those benefits? Giles Goodburn: Yes. So I think we're through the initial phase of stranded costs related to the divestitures we did last year. Clearly, we're in the process of Phase 2 of the portfolio rationalization, and there'll be a little bit that we act on in 2026. One thing I will say is we do have a very strong cost discipline in the organization, and we're continually looking to optimize areas, whether it's in spans and layers in the organization or our real estate portfolio. So it's a continual effort, and we'll keep on that journey. Gowshihan Sriharan: Okay. And just my last question. As you -- given the environment as it is, are you changing the contract clauses or structural changes, especially given the recent Government or Commercial deals to reduce churn risk or exposure to budget delays? Clifford Skelton: No, we're not, Gowshi. I mean the thing to remember here, given the government shutdown is it hasn't affected our revenue stream. It's affecting the timing of milestones and the release of sales opportunities that all are going to get through the end of the snake, as I mentioned earlier. But the revenue stream and the revenue deployment is not affected, and we're primarily a state and local government business in the public sector. So we see no reason to change the model as we speak today. Operator: Our next question comes from the line of Marc Riddick with Sidoti & Company, LLC. Marc Riddick: I was wondering if you could talk a little bit about the client mix that you're seeing, particularly on AI endeavors. You made mention of the fraud focus. I was wondering maybe you could talk a little bit about maybe what the industry verticals look like and maybe if there's sort of a first movers, if you will, that are engaging and maybe what you're learning from them? Clifford Skelton: Yes. It's two different questions really depending on whether it's Commercial or in the Government space. In the Commercial space, we're in the neighborhood of 30% to 40% in health care. And a lot of the opportunity from an AI perspective and efficiency perspective and potentially even the fraud reduction perspective, although not yet, is in that health care space. In the Government space, it's a different kind of health care. It's Medicaid processing primarily and Medicaid eligibility, where there's a lot more fraud and a lot more opportunities to reduce expense and drive fraud reduction. So I mean, it's 2 different opportunities, but most of those opportunities from an early mover perspective are centered around health care. Marc Riddick: Great. And then as we sort of think about the opportunities on the Commercial side. I was wondering if you could talk a little bit about as we sort of look into next year, I can understand some delays with activity and the like. But do you get the sense that there's any particular areas that you would like to shore up bandwidth or sort of maybe the level of comfort that you have as far as being able to meet opportunities -- growth opportunities on the Commercial side? Clifford Skelton: On the Commercial side, I mean, if you think about our product sort of penetration, we're less than 2 products per client, which for a company that has as many products and opportunities as we have is too low. We're very focused on that client penetration, especially in our top 60, top 80 clients. And we're putting some new processes in place to deploy against that. Again, health care is a big play there. But the continuum -- for example, the continuum of service and claims adjudication from -- all the way from the beginning of a claim through the servicing of a claim as opportunities end, we're intently focused on that. And we're also focused on some software deployment and software licensing opportunities that we've never really deployed in the Commercial space. We just had our first one with our HSP license to a midsized client in California. We've always done it to a lesser degree in public health medicine in the public sector with our Maven platform, but we're now starting to do the same thing in Commercial. So we see real upside here in technology deployment. We see real upside in further penetration of our current client base. We're putting a new business development team together to feed the top end of that pipeline better, which we think is the Achilles' heel for us in Commercial. It's really not sales execution. It's feeding the top of the pipeline. So we're all over that, and then we're all over the penetration of our current client base. Giles Goodburn: And I think, Marc, we're seeing some of the results in that, right? As I said in my remarks, on a year-to-date basis, we're up year-over-year as far as new capability sales are in the Commercial and overall in the Conduent organization, and that's selling new product into the existing client base. And specifically, as it relates to Commercial, put aside the largest client that we've got, the other '24 of '25 clients are growing year-over-year as well. So we're seeing some of that actually flow through into the financials. Clifford Skelton: I mean that's a great point. While we're not satisfied with our Commercial sales in 2025 just yet, I mean, absent that one client, it's already growing. So there's real opportunity. We're seeing growth already. We just need to outrun that one client. Marc Riddick: Got you. And then so do you potentially see -- I think there was a mention made as far as adding talent, sales talent. Is there sort of a general time frame or sort of runway that you see there? I guess that's kind of a '26 question. I know we're not doing '26 guidance, but I guess maybe I'm sort of thinking about the time frame of how some of that might roll out. Clifford Skelton: Well, it necessarily will affect '26 performance, but it necessarily needs to happen in Q4 2025. Operator: And we have reached the end of the question-and-answer session, and this also does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.
Operator: Good day, ladies and gentlemen, and welcome to the Ziff Davis Third Quarter 2025 Earnings Conference Call. My name is Tom, and I will be the operator assisting you today. [Operator Instructions] On this call will be Vivek Shah, CEO of Ziff Davis; and Bret Richter, Chief Financial Officer of Ziff Davis. I will now turn the call over to Bret Richter, Chief Financial Officer of Ziff Davis. Thank you. You may begin. Bret Richter: Thank you. Good morning, everyone, and welcome to the Ziff Davis investor conference call for Q3 2025. As the operator mentioned, I am Bret Richter, Chief Financial Officer of Ziff Davis, and I'm joined by our Chief Executive Officer, Vivek Shah. A presentation is available for today's call. A copy of this presentation as well as our earnings release is available on our website www.ziffdavis.com. In addition, you can access the webcast from this site. When you launch the webcast, there is a button on the viewer on the right-hand side, which will allow you to expand the slides. After completing the formal presentation, we'll be conducting a Q&A. The operator will instruct you at that time regarding the procedures for asking questions. In addition, you can email questions to investor@ziffdavis.com. Before we begin our prepared remarks, allow me to read the safe harbor language. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that could cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements and 8-K filings, as well as additional risks and uncertainties that we have included as part of the slide show for the webcast. We refer you to discussions in those documents regarding safe harbor language as well as forward-looking statements. In addition, following our business outlook slides are our supplemental materials, including reconciliation statements for non-GAAP measures to their nearest GAAP equivalent. Now let me turn the call over to Vivek for his remarks. Vivek Shah: Thank you, Bret, and good morning, everyone. In our third quarter earnings release, we announced that Ziff Davis has engaged outside advisers to help us evaluate potential opportunities to unlock value for our shareholders. I'd like to provide some additional context to this disclosure. At the end of fiscal year 2024, we significantly enhanced our segment-level reporting, going from 2 to 5 reportable segments. One of our goals with this change was to provide investors with a more comprehensive understanding of the financial characteristics of each of our divisions. And we believe that this reporting has resulted in greater insight into the performance and intrinsic value of these businesses. We've been encouraged by the reaction to this reporting change, including the engagement from public market investors and analysts, some of whom have used the enhanced disclosures to adopt a "sum of the parts" approach to the valuation of Ziff Davis. We applaud those efforts because we believe they do reveal a meaningful discount in our current market cap relative to the intrinsic value of the company. At the same time, we have also received interest from both strategic and private equity investors in certain of our businesses, presumably doing their own analyses of our various components. In order to properly evaluate this interest, we have engaged outside advisers to assist us in assessing how certain potential transactions could unlock greater shareholder value. While no final decisions have been made to date, our focus remains on maximizing value for all shareholders. There is no assurance that this evaluation will result in any transaction and we are very willing to continue to operate with the current business structure, which is profitable, growing and generates strong free cash flow. It's worth noting that proactively evaluating and acting on opportunities to create value for shareholders is embedded in our company's culture and history. You'll recall that in 2021, we undertook a similar process that resulted in the spinoff of our Consensus business as an independent public company, demonstrating our willingness to take action when it serves our shareholders' interests and unlocking significant stakeholder value at that time. In that transaction, Consensus' post spinoff enterprise value was close to $2 billion. This was a very positive outcome for shareholders and employees of both companies. If and when there are material developments related to these initiatives, we look forward to providing updates then. And we will, of course, continue to be intently focused on executing against our operating plans. Turning now to our performance in the third quarter. We grew revenues nearly 3%, marking a fifth consecutive quarter of revenue growth. While our adjusted EBITDA fell slightly year-over-year, we grew adjusted diluted EPS by 7% as we increased our share buybacks to capitalize on the current valuation disconnect in the price of Ziff Davis stock. Three of our 5 reportable segments grew revenues in Q3, including a return to growth for our Cybersecurity & Martech segment. So let me share some observations about each of our 5 segments. Tech & Shopping revenue dropped 2% in Q3 with adjusted EBITDA down 12%. This was primarily driven by the continued wind-down of our game publishing activities, which had a negative year-over-year revenue swing of $6.9 million. And as you'll recall, we previously announced that we are no longer investing in new game titles, but we have a slate of preexisting projects which will launch over the next 4 quarters. Excluding game publishing, the Tech & Shopping segment grew in both revenues and adjusted EBITDA, led by CNET, which delivered strong year-over-year growth in licensing driven by new awards, expanded video capabilities and sponsorships and the continued rollout of our Best Buy partnership that began implementation in Q3 of 2024. Gaming & Entertainment revenues were about 4% lower year-over-year, with adjusted EBITDA growth of nearly 3%. Gaming & Entertainment's revenues can be lumpy due to the timing of title releases. Year-to-date revenues are up approximately 2%, and we are on track for revenue growth in the seasonally important fourth quarter. Q3 was Humble Bundle's best quarter of the year and was the second highest revenue quarter for the business in the last 5 years. Humble Bundle subscription revenues were up 5% year-over-year. Events continue to be a large focus for IGN entertainment for audiences and advertisers alike. IGN was back at San Diego Comic-Con in July, and was once again the studio partner for Gamescom, the world's biggest gaming show held in Germany every August. Health & Wellness' growth accelerated in Q3 with 13% year-over-year revenue growth and 18% year-over-year adjusted EBITDA growth, both representing high watermarks for the division in the third quarter. The growth was balanced across subscription and display and performance marketing revenue. We continue to deliver positive results with our pharma commercialization programs while supporting health-seeking consumers with our digital health and wellness solutions like our Lucid app, which saw strong subscription growth this quarter. Since we acquired Everyday Health, the division has evolved into a multifaceted solutions provider to the pharma commercialization, digital health and wellness and provider solutions markets. Participation across these verticals is particularly strategic in a world where the line between traditional health care and consumer-driven self-care continues to blur. Our ability to deliver positive, tangible results for pharma with both patients and providers continues to place us in a strong competitive position. The Connectivity division delivered 2% year-over-year revenue growth as several deals shifted into the fourth quarter. Year-to-date, revenues at Connectivity are up 7%, and we are confident that revenue growth will accelerate in Q4, not just from timing benefits, but underlying strength in the pipeline and the introduction of new products. Continuing our efforts to leverage our platform, brand and distribution to launch new offerings, the first new product is Speedtest Certified, which launched in September and provides a highly localized Wi-Fi certification program to target enterprise verticals under the Speedtest brand. Speedtest Certified is off to a promising start with strong global demand, including the certification of our first customer in October. The second new product, which we are planning to launch in Q4, leverages Ekahau's core capabilities and is designed for rapid network validation, diagnostics, troubleshooting and continuous network connectivity testing. Our initial target customers are Internet service provider technicians and IT organizations, from which we have already received very promising expressions of interest. Cybersecurity & Martech revenue grew 2% in Q3, consistent with our forecast this segment would return to growth in the quarter. Growth was driven by strong performance in Cybersecurity, in particular from consumer VPN and consumer cloud backup. I highlighted the momentum in VPN on our Q2 call and it's great to see the turnaround in this business. In Martech, we completed the small but exciting acquisition of Semantic Labs, a performance-based customer acquisition platform focused on the SaaS vertical. Semantic is a great complement to the customer generation capabilities we have elsewhere in our Martech portfolio as well as in our Tech & Shopping segment. Across the company, we are leveraging AI to enhance our products and improve operational efficiency. As mentioned on the last call, we developed an AI platform to refine how we serve our advertisers. This platform creates precise audience segments, powered by billions of real-time signals from across our portfolio, translating this proprietary data into what we call moment-of-influence solutions. This quarter, we officially launched 2 commercial applications of this proprietary platform. In Health & Wellness, we launched HALO, which activates our deep first-party data to identify and target high-intent audiences, maximizing campaign ROI. It is operational and the early client response has been strong. In Gaming & Entertainment, we introduced IMAGINE, a first-of-its-kind cognitive AI platform that combines cultural intelligence with predictive audience modeling to help brands understand, forecast and reach entertainment consumers in real time. We're currently in private beta with select strategic partners, with a full commercial rollout planned for early 2026, aligning with IGN's 30th anniversary. We are also deploying AI to drive efficiency. In our Shopping business, for example, 80% of all user-submitted coupon codes are now processed automatically with AI, one of many workflow optimizations being implemented company-wide. On capital allocation, we are in a strong position with substantial cash to continue buying back stock at attractive levels and significant leverage capability. Even as we explore potential opportunities to unlock the intrinsic value in our businesses, which we believe is not appropriately reflected in our per share value, we are still committed to an acquisition program that generates attractive cash-on-cash returns for our shareholders. This is a consistent strategy for us. Following the Consensus spinoff in late 2021, we closed 6 M&A transactions in fiscal 2022. And with that, let me hand the call back to Bret. Bret Richter: Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted non-GAAP financial results for Q3 2025. My commentary will primarily relate to our Q3 2025 adjusted financial results and the comparison to prior periods. Please see Slide 4 for the summary of our financial results. Q3 2025 revenues were $363.7 million, as compared with revenues of $353.6 million for the prior year period, reflecting growth of nearly 3%. Q3 2025 adjusted EBITDA was $124.1 million, as compared with $124.7 million for the prior year period, reflecting a decline of less than 1%. Our overall adjusted EBITDA margin was 34.1% in Q3 2025. We reported third quarter adjusted diluted EPS of $1.76, up from $1.64 in Q3 2024, reflecting growth of more than 7%. This increase is due in part to our share repurchases, which reduced third quarter 2025 adjusted weighted average fully diluted shares by nearly 3.3 million shares or 7.5% as compared with the prior period. Importantly, year-to-date, we have delivered growth in revenues, adjusted EBITDA and adjusted diluted EPS as well as a significant amount of free cash flow. Slide 5 reflects performance summaries for our 2 primary sources of revenue: advertising and performance marketing and subscription and licensing. Both of these revenue sources grew year-over-year in the third quarter of 2025. Q3 2025 advertising and performance marketing grew 5.9% as compared with the prior year period, while subscription and licensing revenues grew by 2%. Q3 2025 other revenues declined by $4.3 million year-over-year, reflecting the significant decline in revenues from our games publishing business, which more than offset growth from other products and services. Slide 6 through 10 reflect the Q3 financial results of each of our reportable segments. As Vivek noted, 3 of our 5 segments grew revenue in Q3 2025. With regard to adjusted EBITDA, while there are numerous factors that impact margins in each quarter at each business, I want to highlight a few significant items that impacted Q3 2025 adjusted EBITDA at Tech & Shopping, Connectivity and Cybersecurity & Martech. As we noted, the year-over-year performance of Tech & Shopping was negatively impacted by the performance of our games publishing business, which is in the process of being wound down. We report this revenue net of the amortization of our game publishing investments. And during the last 2 quarters, we reported negative net revenue for this business as this amortization exceeded revenue during the period. This quarter, we reported nearly $7 million less net revenue from publishing than we did during the third quarter of 2024, and this reduction flows through at a very high contribution margin to adjusted EBITDA. In the absence of this impact in Q3, Tech & Shopping would have had positive adjusted EBITDA growth for the quarter. Connectivity's Q3 2025 adjusted EBITDA margin was impacted by the timing of the contracts that Vivek highlighted in his remarks. However, it also reflects the investment we are making in Connectivity to support its anticipated growth. As Vivek mentioned, Connectivity has already launched 1 new exciting product to the market, with another product launch planned for Q4. Q3 2025 reflects our investments in product development, cloud services and sales expenses to support these new products ahead of revenue generation from them. Overall, we are excited about the prospects of these new products as we begin to head into next year. Finally, Cybersecurity & Martech adjusted EBITDA was primarily negatively impacted by the timing of certain expenses. In Q2 2025, Cyber & Martech delivered more than 5% year-over-year adjusted EBITDA growth despite a modest decline in revenues. This quarter, despite an increase in revenues compared with the prior year period, Cyber & Martech's adjusted EBITDA declined by approximately $500,000, primarily as a result of these timing issues. Please refer to Slide 11 to review our balance sheet. As of the end of the third quarter, we had $503.4 million of cash equivalents and $119.6 million of long-term investments. We also have significant leverage capacity on both a gross and net leverage basis. As of September 30, 2025, gross leverage was 1.7x trailing 12 months adjusted EBITDA, and our net leverage was 0.7x and 0.5x, including the value of our financial investments. During the third quarter, we closed 2 small acquisitions to expand the capabilities of our Connectivity and Cybersecurity & Martech businesses. In the first 9 months of 2025, we closed a total of 7 acquisitions across our businesses, and we invested a total of $67.3 million net of cash received to support our M&A program. We anticipate we will continue to be an active and disciplined acquirer as opportunities arise to add capabilities to our businesses in an accretive manner. Since our second quarter earnings call, we've repurchased 1.5 million shares of our common stock, with certain of these repurchases occurring during the month of October. Through the end of the third quarter of 2025, we repurchased 3 million shares, deploying $109 million or close to 85% of our year-to-date free cash flow. Overall, through today's date, we've repurchased more than 3.6 million shares since the start of 2025. We have nearly 2.75 million shares remaining under our stock repurchase authorization, and we continue to believe that the current trading level of our stock does not reflect the intrinsic value of our underlying businesses. Following this earnings call, we plan to utilize a 10b5-1 Plan to continue to repurchase our shares. Turning to Slide 13. We are reaffirming our fiscal year 2025 guidance range. As noted on prior calls, this is a broad range, which we set in February of 2025. And we currently anticipate our key fiscal year 2025 financial performance metrics of revenues, adjusted EBITDA and adjusted diluted EPS to fall within this range. As we have discussed today, the consolidated financial performance momentum that we experienced in the second quarter of 2025 did not broadly carry forward to our third quarter results. And while a number of our businesses continue to show strength, we currently anticipate fiscal year 2025 total revenues and adjusted diluted EPS to be within the lower half of our guidance range, with adjusted EBITDA expected to be closer to the lower end of our guidance range. Please note that the fourth quarter is typically our seasonally largest revenue quarter. Slide 20 includes a reconciliation of free cash flow. Q3 2025 free cash flow was $108.2 million, 35% higher than the prior year period. As of the end of Q3 2025, trailing 12 months free cash flow was $261.2 million. We believe that our ability to generate significant free cash flow is a clear indication of the intrinsic value of our businesses and highlights the disconnect we see in our share price. Overall, through the third quarter of 2025, we have delivered year-to-date growth in revenue, adjusted EBITDA and adjusted diluted EPS, as well as significant free cash flow. Based on our current expectations, we have maintained our expectation of delivering fiscal year 2025 results within our guidance range. And we plan to continue to dedicate our investable resources to our active stock repurchase program while pursuing attractive M&A opportunities. And as Vivek noted earlier, we remain committed to identifying and pursuing all opportunities that we believe offer strong prospects to enhance shareholder value, and we have taken tangible proactive steps to pursue certain of these opportunities. Although there is no assurance that the evaluation will result in any transactions, we are excited about the potential outcomes that may result from these efforts. With that, I will now ask the operator to rejoin us to host our Q&A. Operator: [Operator Instructions] And your first question this morning is coming from Robert Coolbrith from Evercore ISI. Robert Coolbrith: Congratulations on the results. Vivek, I know you have some opinions about where the valuation disconnects versus intrinsic value may be most acute. I wanted to ask if you'd be willing to share any thoughts there. And then secondly, I'd imagine you've had some inbound interest from time to time in the past. Is there something unique about this moment that makes this the right time to entertain that interest in a more significant way? Is the volume of interest where you think you could drive some competitive auction dynamics? Or have you gone some of these businesses to a place where you think an exit now makes more sense? Vivek Shah: So Rob, thanks for the questions. And I should also thank you, I know in your last note after our last call, you did do a "sum of the parts" analysis, which is what we were looking for. And I think to answer your questions, I do think things changed at the beginning of this year when we, for the first time, broke out the company into 5 reportable segments, which gave the entire marketplace a real view into the different businesses and the different drivers, the different growth characteristics, margin profiles, et cetera. And so look, up until then, I think for a lot of people, they were just trying to feel around and estimate. We did that, as I said, with the public market in mind, with our current investors and prospective investors and with analysts in mind. But what it also did was just attract a lot of attention from strategics and sponsors. And so look, from our point of view, that -- I would say that that was different than maybe in the past. And so the decision to engage advisers at this point was really in response to the level of inbound interest. But I would also say that we're at a point where the disconnect between the current value of the company and we believe the intrinsic value of the company, the true value of the company in our own minds, is probably at the widest it's ever been. And so with respect to your question on specific businesses, look, we go into this with an open mind, with a goal of unlocking the maximum amount of value. And what I would say is that we believe every one of our divisions should command a multiple, each of them individually, higher than what is the current Ziff Davis multiple. So in my mind, this value disconnect isn't just in a couple of places, it really is across the board. Operator: Your next question is coming from Cory Carpenter from JPMorgan. Cory Carpenter: I had a follow-up to the strategic review and then one on AI overviews, if I could. Just, Vivek, kind of continuing on that theme, maybe what all is on the table here? It sounds like you think there's a disconnect across all divisions, but are there any properties that maybe you think of as core or off-limits in terms of divesting? And would you consider perhaps the whole company, if that was something that you were seeing interest in? And then on AI overview, some of the other publishers called out an impact this quarter on traffic just as that ramped up a little faster than expected. Curious to hear what you've seen there. Vivek Shah: Thanks for the questions, Cory. So starting with: is anything off the table? No. We're, as I said, we're going in with an open mind. And so we don't have a specific preference. With respect to your question about the whole company, look, the inquiries have been about specific businesses, and we do believe that exploring opportunities for select units is likely to be far more value accretive than considering a transaction for the entire company. That said, look, to the extent we receive credible interest in the broader company, we have an obligation to evaluate any opportunity that could unlock meaningful value for shareholders. I think with respect to just the AI overviews and traffic, might be just worth sort of reiterating what I've said in the past in terms of our view that the company is pretty well positioned and insulated from fluctuations in search traffic. 35% of our total revenue is traffic -- is web traffic dependent, half of that coming from search, so roughly 17.5% revenue exposure. And in AI overviews specifically, AI overviews currently appear in 29% of the queries that drive the lion's share of our traffic, which is actually a tick-down. So the prevalence of AI overviews with respect to the queries that are valuable to us is relatively stable. What I will say, so I don't -- I'm not thinking as much about AI overview prevalence. I'm thinking more about search volatility. There have been a number of algorithm changes, and happening with pretty significant frequency, that's creating a fair amount of sort of rank volatility, which is different than, I think, the AI overviews piece. So that's something we're watching. I think there's a lot of experimentation going on right now in the Google search experience. And so we're feeling some of those chops and some of those bumps. Operator: And your next question this morning is coming from Shyam Patil from SIG. Shyam Patil: I guess you, as you mentioned, you've prepared the market for this kind of announcement just with your segment-level disclosures as well as some of your commentary in the past. I'm just curious, what do you prefer? And then maybe kind of a separate but related, like what do you think is more likely, selling pieces of the business, selling the whole company? And then if it is just selling off certain pieces, what's your value kind of creation and unlocking kind of thesis or philosophy going forward? Would it be we buy businesses, we sell them and then we use that cash to buy back stock or do further M&A? Just how do you just think about kind of those things kind of going forward as you kind of try to figure out what the business could look like over the next 3 to 5 years? Vivek Shah: Shyam, all great questions. Look, I'll start with your question on preference. And my preference is whatever creates the most impactful and positive outcome for the per share price of Ziff Davis. Look, our shareholders have been patient. We feel an overwhelming obligation to really reward that patience. So I would say that the preference is a function of what's going to unlock the most value. And so it's hard to know or say what that's going to be until we get into this process and start to really understand market dynamics. And as you know, many of our businesses are performing really, really well. And so I think we feel optimistic about where that dialogue is going to go. In terms of the larger strategic question you're asking about the company, look, I think what remains unchanged is that we are, I think, very good at identifying opportunities to use our digital transformation skill set to unlock value in businesses across the landscape. We've done it with digital publishing businesses, we've done it with data businesses, we've done it with software businesses. And that remains unchanged, right? And so I think we're going to continue, however this company evolves, to continue to be a programmatic and serial acquirer to unlock value. Obviously, at this point -- and we have done that generally with the view of being long-term holders of those assets. And the market is telling us right now that, hey, look, that may not be the right equation. And so that's where thinking about these options starts to make sense, whether that's the continued model or we revert back to the hold model. I can't say. I think we just have to be flexible. I think we have to be thoughtful about all of this. The other thing I'm going to say is that just we're going to consider all opportunities, so that could be sales, that could be investments, that could be spinoffs. So I think there are various transactional options that we're also going to consider in this process. Bret Richter: And Vivek, I might just add one short thought. I mean widening the lens. Our overall approach is to provide products and services to the communities we serve effectively and generate profits, cash flow and growth. And use that cash flow to ensure, one, we have a healthy balance sheet, and then allocate that capital to go back to that core philosophy of generating growing cash flows. There'll be times, and there have been times, in our journey where we shift that capital allocation to -- from M&A to share buyback. And now we're adding one more leg to the equation, we're considering other opportunities to unlock value. So I don't think overall the approach changed or sets a new course for the company. We're just reacting to where we are in the broad market. Operator: Your next question is coming from Ross Sandler from Barclays. Ross Sandler: Great. Vivek, I guess, a philosophical question. If we're at the peak of system-wide Google referral traffic hit for the broader open web, the broader industry, and revenue impact or revenue headwind for companies like Ziff Davis or any other publisher might be peaking right now and potentially diminishing in a year or 2, why is right now the best time to put the for-sale sign up? Has the outlook for your display growth changed dramatically at all? I'm just curious as to why right now if we're in the peak of that impact. And then, Bret, just a modeling question. I think you said we're going to land in the lower half for revenue, which I think implies like a low single-digit growth rate for advertising in the fourth quarter. Just curious what you're seeing thus far, and yes, the framing of that guide. Vivek Shah: Yes. So Ross, it's an interesting question, and it actually reflects I think the dynamics that are existing in other businesses and not ours, right? So I think what I'm suggesting is this whole AI overview narrative really hasn't been relevant to our businesses. I mean take our Health & Wellness business for a moment. Close to 13% revenue growth in the quarter, year-to-date 12%, adjusted EBITDA up 18%. This business is doing exceedingly well. I mean it's sort of Exhibit A with respect to, I think, the nature of our businesses relative to maybe others in the marketplace. So I would say it maybe a little bit differently, which is we're demonstrating that, notwithstanding what seemed like large industry headwinds, our businesses are doing exceedingly well. So that's one thing, and I think it's possibly why we have had folks reach out on various parts of the company. I will also point out that 2 of the segments have nothing to do with Google, and that is Connectivity and the Cybersecurity & Martech segments. And as you know, within Cybersecurity & Martech businesses, our various businesses. So look, I think that -- and then even within Tech & Shopping, RetailMeNot has a different kind of dynamic. So I think maybe the issues relating to Google and search, while relevant to a few of our brands, may just not be that relevant to the rest. And so with that recognition in the marketplace, which is, "Wow, you know what, these businesses are built differently. They have different dynamics. The market -- the public market doesn't appreciate that, doesn't see that. We do." There's an opportunity here. And I think that's what's going on. Bret Richter: Ross, with regards to your second question. I think it's a fair observation too, and of course, we haven't provided that figure specifically. But looking at what might be implied for advertising in the fourth quarter, I think you said low single digit. I think first, I'd call out probably the most important factor is we'll be lapping the CNET acquisition in the fourth quarter. So we'll be comparing CNET year-over-year, while up to this point for the most part it's been a contributor. And Vivek highlighted a couple of things and I highlighted, that certain of our businesses, the momentum in second quarter didn't quite carry through. And just emphasize what Vivek just said, in other businesses like Health & Wellness, it certainly did. But a little soft product launch in the marketplace as it relates to gaming and advertising, some search volatility, which impacts Tech & Shopping. I think it's a fair observation that we'd be looking for subscription growth to outpace advertising growth in the fourth quarter. Operator: Your next question is coming from Rishi Jaluria from RBC. Rishi Jaluria: Wonderful. Look, I appreciate all the color and increased transparency. Definitely do agree stock seems very undervalued here, and anything that can release shareholder value is great. But I want to turn now to maybe the M&A opportunities. Because, Vivek, I mean, I think it's pretty clear from the way you're talking about the impact of AI search overviews and maybe AI search as a whole, that you seem to be -- your properties seem to be weathering this better than a lot of smaller properties. And maybe I want to think, where is there an opportunity for you to get really aggressive as an acquirer or a consolidator with some of these properties out there that don't have that scale, that don't have the platform, don't have the diversity and, quite candidly, don't have the experience of, as you alluded to, weathering all the different search algorithm changes that have happened over the past decade, and maybe more than that? Because it really feels like given where sentiment is today, and maybe we're at peak negativity on the AI search and media, that there really is just an opportunity for you to deploy a lot of capital right now and find some even smaller dislocated properties and really just kind of bring them in. Maybe walk us through how you're thinking about that, what sort of opportunities you see in the market? Vivek Shah: Yes. No, listen, it's a great question. And I think all the following things can be true. We can be buyers of our shares, we can anticipate transactions to unlock value for our company, and then we can deploy capital in acquisitions. Because I agree with your view, which is 2 pieces, that we have built the platforms and approach that has worked and weathered the storm. Others may not have. And isn't that a buying opportunity? So for sure, we agree with that. And I'll point out that, look, we've deployed close to $70 million for acquisitions thus far this year, and that program is not slowing down at all. But there's also no question that a big share of our capital deployment has been going to buybacks. It continues to stand out as, frankly, the best option for our capital. I mean we could buy this, what we believe is an amazing company, at almost unbelievable multiples. And so we've continued to do that. I think through just to date, it's 3.6 million shares. It's a significant part of our shares outstanding. And that's going to continue. So look, I think that we're always balancing how we deploy our shareholders' capital in the right way against the realities of the per share price experience for our shareholders, and looking to find that balance in this process and going forward. Operator: Your next question is coming from Ygal Arounian from Citi. Ygal Arounian: Maybe the M&A question from a different angle, as you kind of go through this process, if you're more willing to think a little bit more about expanding into new verticals or areas of sort of higher growth? And then on the AI side, maybe on licensing in particular, and I know there's a lot going on there. One of your competitors talked about sort of a marketplace model where, rather than an all-you-can-eat, sort of a pay-as-you-go. And it sounds like there's more interest for the LLMs to come to the table with the Cloudflare blocking. Just wanted to get an update on how things are going there on your approach. Vivek Shah: Yes, 2 great questions, Ygal. So just on the M&A front, look, we've always had a preference for buying leadership brands. CNET, leadership brand in tech; IGN, leadership brand in gaming; RetailMeNot, leadership brand in shopping; Everyday Health, leadership brand in health, et cetera, et cetera. So I think we're always looking for brands that have leadership, because I will say that leadership brands can define their business models by demand and not supply. So much of the conversation is around supply because so much of the media business model has been around programmatic, which is a supply-driven business model, not a demand-driven business model. And so I think we're going to continue if we were to do things that look for businesses that enhance existing leadership or established leadership in new categories. With respect to AI licensing, so we are active, very active with AI licensing discussions and encouraged by sort of this growing market consensus that compensating content owners is just a reality and a necessity. Now we're not going to sign any deal that doesn't provide fair value exchange for our content because this is -- setting the right financial precedent is important for a sustainable model. As you pointed out, the CDN layer with Cloudflare and others, we continue to block AI bots. And I think sources do matter. I think if you have a garbage in, you're going to have a garbage out problem in these models. And so I encourage everyone to always look at the sources when you look at the answers. I think you'll be surprised now to see what some of the sources are, because as trusted sources of information block, like we and others are doing, it does create, I think, a quality problem. I'll also point out, we've joined RSL, which is Real Simple Licensing, which has a standard that has been set which essentially adds machine-readable licensing terms to our robots.txt and also the RSL Collective, which is kind of like ASCAP or BMI, where there's sort of a negotiated collective. All to say that I do have a fair amount of optimism that the future will represent a pretty interesting new business model for content that receives compensation from various AI systems and models. So I am confident in that. I just think that in the early goings of this, you kind of want to set the precedents right. Operator: Your next question is coming from Chris Kuntarich from UBS. Christopher Kuntarich: Vivek, you've called out that the cash that was generated from the Consensus transaction, that was put towards 6 transactions. You were kind of talking in a previous response about going out and acquiring leadership brands. I guess in the event of a spinoff, should we be thinking about kind of the philosophical shift even further kind of on the margin towards targeting a different growth profile of business, maybe kind of expanding from leaders to emerging leaders and looking at something, again, with potentially higher growth profiles? Vivek Shah: Yes. Look, it's a great question and it's one we talk about a lot, which is, in the end, how do we arrive at the returns profile? One of the challenges for us is that, look, I think in the end -- or one of the realities for us is that we really focus on cash-on-cash returns, not necessarily multiple expansion to drive valuation, right? So we've always said, look, we're just going to be an EPS compounder in double digits. We're not at that target right now, I understand that. But that is our goal and expectation. And so look, I think to do that, we really do price/earnings and cash flow. And it's sometimes hard with some things that are smaller and growthy for that to be inside of our portfolio and get any credit. And it may not have the same margin profile and free cash flow characteristics. And so I think we focus a lot on free cash flow, free cash flow yield. And to the degree to which it fits our formula, I think we'll do it. But what we're not signaling here is a change in our formula. I do really think that what we have done an exceedingly good job of is finding investment opportunities where we can unlock a fair amount of cash flow out of those businesses. So I wouldn't want to abandon that in whatever we do. And then whatever this journey -- wherever this journey takes us, I still think we're going to very much be committed to that approach. Operator: There are no further questions in queue at this time. I would now like to hand the call back to Bret Richter for any closing remarks. Bret Richter: Thank you, Tom, and thank you, everybody, for joining us today. We appreciate your time and investment in the company. We look forward to speaking with you over the next couple of months and during our fourth quarter call. Operator: Thank you. This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.
Operator: Greetings. At this time, I'd like to welcome everyone to the Barings BDC, Inc. conference call for the quarter ended September 30, 2025. [Operator Instructions] Today's call is being recorded, and a replay will be available approximately 2 hours after the conclusion of the call on the company's website at www.baringsbdc.com under the Investor Relations section. At this time, I will turn the call over to Joe Mazzoli, Head of Investor Relations for Barings BDC. Joseph Mazzoli: Good morning, and thank you for joining today's call. Please note that this call may contain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements. . These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled risk factors and forward-looking statements in the company's quarterly report on Form 10-Q for the quarter ended September 30, 2025, as filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. I will now turn the call over to Eric Lloyd, Chief Executive Officer of Barings BDC. Eric Lloyd: Thanks, Joe, and good morning, everyone. On the call today, I'm joined by Barings BDC's President, Matt Freund; Chief Financial Officer, Elizabeth Murray; Baring's Head of Global Private Finance and BBDC Portfolio Manager, Bryan High, as well as Barings BDC's newly announced incoming Chief Executive Officer, Tom McDonnell. Before I discuss our quarterly results, I'd like to take a moment to speak about the leadership transition that we announced yesterday. As you saw in our press release, effective January 1, 2026, Tom will succeed me as Chief Executive Officer of Barings BDC. While I will continue to serve as Executive Chairman of the Board of BBDC and in my ongoing role as President of Barings LLC. This marks an important and exciting milestone for our company. Over the past decade, Barings has grown into one of the leading middle market lenders anchored by a long-term perspective, disciplined underwriting and strong alignment with our shareholders. Barings BDC is an efficient access point into the Baring's direct lending franchise and reflects the full strength within our business. I'm incredibly proud of what our team accomplished together and confident that the next chapter will build on that foundation. Tom is a proven leader within Barings. During his nearly 2 decades at the firm, he has played a pivotal role across our U.S. high yield and global loan strategies, overseeing complex portfolios through multiple market cycles and helping to shape our credit platform into what it is today. His deep investment experience and commitment to our culture make him exceptionally well suited to lead BBDC going forward. From my vantage point, this transition represents continuity, not change. Tom and I have worked very closely together for many years, and we will continue to do so in the months ahead to ensure a seamless handoff. I wholeheartedly believe he is the right person to step into this role at this time. Importantly, I will remain actively involved as Executive Chairman of the Board of BBDC and as President of Barings LLC, supporting Tom and the overall leadership team as we continue to execute on our long-term strategy. I want to thank our shareholders, partners and the entire Barings team for their continued trust and support. We have built something enduring here, an institution with the scale and discipline to thrive across market environments. And I am confident that under Tom's leadership, BBDC will continue to deliver strong consistent results for our investors in the years ahead. Now turning to our results. In the third quarter, BBDC delivered strong net investment income accompanied by excellent credit performance within the Barings originated portion of the portfolio. Origination activity across the platform during the third quarter reflected continued success in our core strategies. Net deployment was influenced by fund-level leverage and the third quarter reflected a period of net repayments consistent with our prior guidance. A strong portfolio combined with benign credit environment and our focus on the top of the capital structure investments in the middle market issuers has continued to serve our investors well. We focus on the core of the middle market given its lower leverage and stronger risk-adjusted returns, making it the most compelling segment for BBDC and our shareholders. Further, our emphasis on sectors that perform resiliently across economic environments provides an additional level of stability to our portfolio. This combination of senior secured financing solutions, core middle market focus, defensive noncyclical sectors and a global footprint offers our investors strong relative value and meaningful differentiation within the broader BDC landscape. Turning to the specifics of BBDC's financial performance in the quarter. Net asset value per share was $11.10. Net investment income for the quarter was $0.32 per share compared to $0.28 per share in the second quarter. Now digging a bit deeper into the portfolio, we continue to actively maximize the value in the legacy holdings acquired from MVC Capital and Sierra. We are seeking to divest these assets at attractive valuations as we did in the first quarter. As of quarter end, Barings originated positions now make up 95% of the BBDC portfolio at fair value, up from 76% at the beginning of 2022. Turning to the earnings power of the portfolio. The weighted average yield at fair value was 9.9%, reflecting a slight reduction from the prior quarter due to a reduction in base rates. Our Board declared a fourth quarter dividend of $0.26 per share, consistent with the prior quarter. On an annualized basis, the dividend level equates to a 9.4% yield on our net asset value of $11.10. We believe our portfolio is on strong footing, and we're advancing our strategic imperatives. As Matt will cover momentarily, BBDC is well positioned to navigate the current margin volatility and deliver consistent risk-adjusted returns in the quarters ahead. I'll now turn the call over to Matt. Matthew Freund: Thanks, Eric. I would like to spend a minute commenting on recent headlines and how they relate to BBDC. The private credit ecosystem has grown meaningfully in the past decade. As our investors know, we have been investing in core middle market strategies since the mid-'90s and have stayed true to strategy in terms of how we deliver compelling value to our shareholders. While this sound bite will sound familiar to those who have dialed into our prior calls, we feel that Barings repeating this quarter as the news media works to paint a private credit industry with an overly broad brush. BBDC does not have any exposure to First Brands, Tricolor and [ Broadband Telecom ]. As many on this call probably know, First Brands was a broadly syndicated loan issuer and all 3 of these issuers were out of strategy from the opportunities our direct lending business pursues. Article suggesting that these developments are tantamount to a canary in the coal mine are in our view, hyperbolic. Due to alleged in proprieties in these companies' financial statements, the core issues surrounding certain recent bankruptcy filings appears to be related more to factoring facilities than to the loans we would consider to be considered private credit. As part of our underwriting process, we proactively evaluate any factoring facilities within the issuer base. While we do not have a strict prohibition on factoring, the size and utility of factoring lines often combine to make for unattractive investments relative to other opportunities we have in our portfolio. During our prior call, we discussed our private credit managers have expanded rapidly in recent years. We declined to comment on whether recent market activity is reflective of broader trends, but we do believe that remaining consistent with the manager strategy is paramount within private credit platforms. We remain convinced that our unparalleled alignment with shareholders and our ultimate parent, MassMutual is unequaled within the BDC landscape. Now turning to the current state of the M&A environment. As you have seen from our results and those of other credit managers reporting this quarter, market activity continues to show sequential improvement quarter-on-quarter from both the new buyout perspective and add-on financings for the existing portfolio. It can be difficult to assess the broader state of private credit activity as mega deals, those defined as more than $5 billion financing packages, now dominate the reported industry data, which can reflect high degrees of volatility quarter-on-quarter. BBDC typically does not participate in transactions of this nature with a focus on the core of the middle market. For this reason, industry reported data trends will occasionally diverge from our own experience. During the third quarter, it appears that all segments of the market, lower middle market, core and a large corporate market have all shown increased activity. In early 2025, there were rumblings about pent-up M&A demand among middle market private equity firms that would likely support market increases in deployment. No such wave of transactions has materialized. Instead, we have seen steady increases quarter-over-quarter for each of the last 4 quarters in our core strategies. The competition for new assets is aggressive, but we feel the core middle market continues to experience less pressure than other segments of the direct lending ecosystem. Looking forward into the balance of 2025 and into 2026, we anticipate a measured increase in deployment opportunities that will continue to favor scaled franchises such as our own, benefiting from incumbency and deep private equity coverage. We are highly focused on the trends in both base rates and interest rate spreads. Base rates continue to gradually migrate lower from post-COVID highs, while narrowing spreads have begun to shown some level of support. The weighted average spread across assets exited during the quarter was approximately 520 basis points, while the weighted average spread on new investments was above 560 basis points. The benefit of active portfolio rotation we have previously discussed are coming into sharper focus. BBDC shareholders benefit from a largely invested portfolio that can selectively redeploy into the most attractive middle market opportunities across the Barings franchise. Given the size of the portfolio and the illiquid nature of the underlying positions, our ability to rotate the portfolio takes quarters, not months, but we are beginning to see the benefits of this effort in the current quarter. Turning to an overview of our current portfolio. 74% of the portfolio consists of secured investments with approximately 71% constituting first lien securities. Interest coverage within the portfolio remained strong with weighted average interest coverage this quarter of 2.4x, above industry averages and consistent with prior quarter. We believe strong interest coverage demonstrates the merits of our approach, focused on direct lending in defensive sectors and thoroughly underwriting an issuer's ability to weather a range of economic conditions. The portfolio remains highly diversified with the top 2 positions within the portfolio, Eclipse Business Capital and Rocade Holdings being strategic platform investments. These investments provide BBDC shareholders with access to differentiated compelling opportunities to invest in asset-backed loans and litigation funding solutions to specialized areas we believe provide attractive total return and diversification benefits. Turning to portfolio quality. Risk ratings exhibited stability during the quarter as our issuers exhibiting the most stress classified as risk ratings 4 and 5 were 7% on a combined basis and unchanged from the immediately preceding quarter. Non-accruals excluding the assets that are covered by the Sierra CSA accounted for 0.4% of the assets on a fair value basis compared to 0.5% on a fair value basis in the immediately preceding quarter. During the quarter, we removed one asset from non-accrual status that was restructured and moved one asset on to non-accruals that is covered by the Sierra CSA. As our internal marks on Sierra accounts remain below the CSA support amount, any prospective losses at the current marks will offset upon settlement of the CSA. We remain confident in the credit quality of the underlying portfolio. We expect BBDC's differentiated reach and scale, coupled with its core focus on middle market credit and unmatched alignment with shareholders to provide positive outcomes in the quarters and years to come. BBDC's portfolio is a through-cycle portfolio designed to withstand a variety of economic environments and prevailing interest rate levels. With that, I would like to now turn the call over to Elizabeth. Elizabeth Murray: Thanks, Matt. As that Eric and Matt highlighted, BBDC continues to deliver strong, consistent earnings, maintain exceptional credit quality and provide attractive risk-adjusted returns for our fellow shareholders. On Slide 16, we provided a detailed bridge of the NAV per share movement for the third quarter. As of September 30, NAV per share was $11.10, representing a 0.7% decrease quarter-over-quarter. The decrease was driven by net unrealized depreciation on the portfolio credit support agreement and foreign exchange of $0.08 per share and net realized losses on investments and FX of $0.01 per share. This was partially offset by NII per share exceeding both the regular and special dividend by $0.01 per share, reflecting the resilient earnings profile of the portfolio. . We recorded a net realized gain in the portfolio, driven primarily by a gain from the partial sale of our equity position in Accelerant. This is partially offset by the restructuring of our position in synergy which was predominantly reclass from unrealized depreciation. The valuation of the Sierra credit support agreement increased by approximately $1.6 million from $51.2 million in the second quarter to $52.8 million as of September 30. This increase was predominantly due to realized unrealized losses and a reduced discount rate driven by spread compression in credit markets, decreasing base rates and rolling maturity. During the third quarter, the Sierra portfolio had sales and repayments of approximately $3.9 million and had 16 positions remaining in the portfolio at a total value of approximately $79 million, down from 18 positions as of June 30. We reported net investment income of $0.32 per share for the quarter, an increase from $0.28 per share in the prior quarter and $0.29 per share for the third quarter of 2024. Higher earnings were primarily driven by dividends from our preferred equity investment in Flywheel and lower incentive fees quarter-over-quarter due to the incentive fee cap and unrealized depreciation on the underlying portfolio. Our net leverage ratio, which is defined as regulatory leverage net of unrestricted cash and net unsettled transactions was 1.26x at quarter end, down from 1.29x as of June 30, largely in line with our long-term target range of 0.9 to 1.25x. During the third quarter, we sold approximately $90 million of assets to Jocassee. As we at year-end, we anticipate continued sales to Jocassee and additional portfolio repayments. More broadly, our funding profile remains strong and thoughtfully aligned with our disciplined approach to asset liability management. Our liabilities are well diversified by duration, seniority and structure with an industry-leading share of unsecured debt and our capital structure at roughly 78% of our outstanding debt balances. We further increased the share and strengthened our balance sheet during the third quarter by issuing $300 million of senior unsecured notes. We are very pleased with the execution at [ T plus ] 200 basis points over and view this funding as being competitively priced and allowing BBDC to generate attractive shareholder returns. We used the proceeds from this offering to pay down our credit facility and cover the upcoming maturities of our private placement notes, further enhancing our capital structure. Subsequent to quarter end, on November 4, we fully repaid $62.5 million of private placement nets at par, including accrued and unpaid interest. Now on to capital allocation. Our net investment income for the quarter of $0.32 per share covered both our regular dividend of $0.26 per share as well as the final of 3 special dividends of $0.05 per share that was paid during the quarter. As previously mentioned, the Board declared a fourth quarter dividend of $0.26 per share, representing a 9.4% distribution yield on NAV. Looking ahead, we remain comfortable with the stability of our regular dividend. While the current shape of the forward curve does imply lower rates in the near term, our net investment income continues to demonstrate resilience. Our industry-leading hurdle rate of 8.25% provides additional protection as rates decline, reinforcing our focus on shareholder alignment. Our structure is differentiated and allows BBDC to be well positioned amongst BDC peers to deliver attractive returns. This confidence is underpinned by our diversified portfolio of senior secured investments and a well-laddered capital structure, giving us a strong foundation heading into next year. Additionally, we currently have spillover income of $0.65 per share, which equates to more than 2/4 of our regular dividend, reflecting the continued strength of our earnings and portfolio performance, taken together the durability of our earnings and the meaningful spillover provides a solid foundation as we move into 2026. To close, I'll offer a little additional color on the fourth quarter. To date, BBDC has made $73.5 million of new commitments in Q4, of which approximately $41 million are closed and funded. Our overall liquidity remains strong with over $500 million of available capital. We continue to feel that we are well positioned to navigate evolving market conditions, and we'll continue to pursue attractive investment opportunities while being a reliable capital partner to sponsors and borrowers. With that, I would like to open the call up for questions. Operator: [Operator Instructions] And the first question is from the line of Heli Sheth with Raymond James. Heli Sheth: So with repayment activity elevated this quarter as base rates come down and with the second Fed cut in October, do you expect to see repayments remain at 3Q levels? Or are you seeing any sort of moderation there? Eric Lloyd: Yes. Heli, good question. And so as we think about the activity in Q3 and how you perceive kind of the repayments, a meaningful percentage of the repayment line that you're seeing is actually sales to our joint venture within BBDC. And so I would say that we continue to utilize our joint venture really to actively manage our leverage profile as well as provide capacity for the broader BBDC ecosystem. That said, as we kind of look across the broader landscape, we do anticipate a moderate uptick in terms of repayment velocity as we move to the end of the year. That's based on kind of payoffs that were made -- that we've been made aware of through today to be candid, but do not anticipate that it's going to have a meaningful needle mover in the context of the deployed capital within BBDC as a fund. . Heli Sheth: Okay. Got it. And historically, you've had $86 million in share buybacks, so they've slowed in recent quarters. With the recent contraction in industry multiples across the board? Are there any plans to ramp up buybacks while your stock is trading at such a discount? . Eric Lloyd: It's something that we consistently evaluate. Over the course of the past quarter, we were a little bit more restricted in the context of when we could be actively in market. And so as a consequence of that, we were not able to take full utility of the share buyback program as it's been approved by the Board. It is, however, something that we consistently evaluate and you could -- it's very likely that you will see some degree of activity on that in the quarters to come. . Operator: [Operator Instructions] At this time, I'll turn the floor back to Eric for closing comments. . Eric Lloyd: Well, thank you, everyone, for joining the call, and we look forward to supporting you in the quarters ahead. Operator: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at your time, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the NerdWallet, Inc. Q3 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would like to hand over the conference call to our first speaker, Mr. Robb Ferris, Vice President for Finance. Please go ahead. Robb Ferris: Thank you, operator. Welcome to the NerdWallet Q3 2025 Earnings Call. Joining us today are Co-Founder and Chief Executive Officer, Tim Chen; and Chief Financial Officer, Jun Lee. Our press release and shareholder letter are available on our Investor Relations website and a replay of this update will also be available following the conclusion of today's call. We intend to use our Investor Relations website as a means of disclosing certain material information and complying with disclosure obligations under SEC Regulation FD from time to time. As a reminder, today's call is being webcast live and recorded. Before we begin today's remarks and question-and-answer session, I would like to remind you that certain statements made during this call may relate to future events and expectations and as such, constitute forward-looking statements. Actual results and performance may differ from those expressed or implied by these forward-looking statements as a result of various risks and uncertainties, including the risk factors discussed in reports filed or to be filed with the SEC. We urge you to consider these risk factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances. You should be aware that these statements should not be considered a guarantee of future performance. Furthermore, during this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, except where we are unable without reasonable efforts to calculate certain reconciling items with confidence. With that, I will now turn it over to Tim Chen, our Co-Founder and CEO. Tim? Tim Chen: Thanks, Robb. This quarter, we exceeded our guidance for revenue and non-GAAP operating income. In a moment, Jun will talk through our results in more detail and you can also find more information in the earnings release and shareholder letter posted on our Investor Relations website. In the meantime, I want to highlight that these results are a testament to 2 longer-term initiatives, extending our reach with consumers and improving operational efficiency. The first longer-term initiative is our effort to build on our key competitive advantage, our trusted brand and distribution. While our mission has always been to provide financial guidance to all consumers, our product offering has historically been geared toward the prime market. Over the past 12 months, we've undertaken efforts to expand our shopping experiences by offering more products to below prime consumers, broadening our appeal. This has allowed us to scale our performance marketing capabilities, which have in turn offset headwinds in organic search. Beyond performance marketing, we are seeing momentum with referrals from large language models or LLMs, where our trusted brand has made us the most cited source in our competitive set. Although our traffic from LLMs is currently small, these consumers appear to convert at a much higher rate than traditional organic traffic. So we will continue to invest in growing this channel. The second longer-term initiative shaping our results this quarter is our focus on operational efficiency, which has allowed us to get more miles per gallon and deliver margin expansion. We're still at an early stage in our journey and have only scratched the surface of our addressable market. The big opportunity we're pursuing is to use our trust and distribution advantages to convert our traffic into a loyal owned audience that we can reengage directly with personalized nudges when there's an opportunity to make a smart money move. We will do this by making it a no-brainer to come to NerdWallet for all your money needs, enhancing our guidance through our land and expand, vertical integration and registration and data-driven engagement strategies. And now I will pass it over to Jun to cover our financial results in more detail. Jun Lee: Thanks, Tim. As Tim mentioned, our third quarter results exceeded our guidance on all metrics. As we have discussed over the past couple of quarters, I believe the key drivers of long-term shareholder value creation are sustainable growth, strong free cash flow generation and disciplined capital allocation. With growth ahead of expectations, trailing 12-month adjusted free cash flow increasing and sizable share repurchases in the quarter, our focus is beginning to pay off. Total revenue in the third quarter was $215 million, up 12% year-over-year, exceeding our guidance range of $189 million to $197 million. Revenue outperformance was primarily driven by banking, up 96% year-over-year and personal loans up 91% year-over-year. Our insurance business was up 3% year-over-year, a bit better than expected. However, our SMB product and credit cards verticals declined year-over-year, driven by organic search headwinds. We delivered third quarter non-GAAP operating income of $41 million, above our $23 million to $27 million guidance range. Notably, we underspent on brand marketing versus our target by $8 million as we reevaluated our brand strategy during the quarter. In Q4, we expect to return to more typical levels of brand spend. Excluding this onetime brand spend benefit, our NGOI performance was driven by revenue outperformance, improved efficiency in performance marketing and conservative expense management. GAAP operating income for the third quarter was $34 million. Over the last 4 quarters, we generated over $85 million of adjusted free cash flow and ended Q3 with a cash balance of $121 million. Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures. In terms of capital allocation, during the quarter, we completed $19 million of share repurchases, reflecting our confidence in NerdWallet's long-term prospects on our belief that these repurchases were an attractive use of our capital, especially at prevailing share prices. Looking ahead, we'll continue to focus on creating long-term shareholder value through disciplined capital allocation, including both opportunistic share repurchases and bolt-on acquisitions to accelerate our vertical integration strategy. Going forward, we expect less margin expansion year-over-year due to organic search headwinds, a lower prior expense base as we fully lap our Q3 2024 reduction in force and planned investments in the business. In Q4, we expect to deliver revenue in the range of $207 million to $215 million, which at the midpoint will be up 15% versus prior year. We expect continued strength in banking and personal loans, offset by continued degradation in credit cards and SMB. In terms of profitability, we expect Q4 non-GAAP operating income results in the range of $20 million to $24 million. This assumes continued benefits from the improvements we've made to our shopping funnels and operational efficiency and that we continue to deploy performance marketing spend to take advantage of verticals with opportunities for profitable growth. We expect to generate full year 2025 non-GAAP operating income of $91 million to $95 million, an increase of $18 million at the midpoint compared to our previous guidance. With that, we'll open up for questions. Operator? Operator: [Operator Instructions] our first question comes from the line of Justin Patterson from KeyBanc. Just want to check if you're able to listen in. Justin Patterson: Sorry, can you hear me now? Operator: Yes. We hear you very well. Please go ahead. Justin Patterson: Perfect. Sorry about that. I wanted to dive into LLM traffic a little bit more. I realize it's pretty small today, but very interesting that's converting at stronger rates. So I would love to hear about just some of the investments you're making to really grow that channel more and continue conversion. Tim Chen: Yes. Thanks for the question, Justin. I think there are a lot of similar characteristics with organic search that drive LLMs, some slight differences in terms of how they pick up certain context but it all comes down to the trust around the content that we provide. So I think a lot of those investments are actually quite similar to what we've been very strong in historically. Operator: Our next question comes from the line of Ross Sandler from Barclays. Ross Sandler: Tim, just following up on that last one. Has the growth in LLM traffic been a function of like the overall usage that you see out there for like ChatGPT and Gemini, which is kind of like adding hundreds of millions of users every few months? Or is there like something new that's going on whereby those products might be surfacing links or citations? Just any additional color on like what's happening today versus maybe a year ago? And then the second question is, so it looks like banking was the strong category this quarter. Can you just unpack that a little bit? Is that deposit? Is that other products? And what's kind of driving that uptick in demand from banking? Tim Chen: Yes. Thanks, Ross. On the first question, I'd say the primary driver to think about is actually AI overviews within Google Search. So because search is becoming more useful, people are searching a lot more. And so we are seeing traffic come through from AI overviews. ChatGPT and Gemini are also driving an increase there. So those are kind of the 2 major drivers in terms of the LLM traffic. When people come through that way, they're really high intent typically, they're really held in on finding something in a marketplace, for example. So I think that's what's driving some of the higher transaction rates there. And then on the banking one, we continue to see a lot of strength there, both in terms of consumer demand as well as partner demand even as rates have come in a little bit. So that and we continue to work on improving our product funnels to better match users with the right intent. So nothing beyond that. Operator: Our next question comes from the line of Ralph Schackart from William Blair. Ralph Schackart: You talked briefly about reevaluating the process or looking at brand spend. I think you maybe underspent by $8 million or so in the quarter. It sounds like you're going to probably pick that back up next quarter. But the question is, I guess, why did you go through the reevaluation process? And what did you learn after going through that process? Tim Chen: Yes, I'll take that one. Brand is our biggest asset, right? And you'll note that the brand spend was down significantly because, as you mentioned, we underspent by $8 million in Q3. We were really just reevaluating our brand creative strategy during the quarter. Really excited about some things to come in Q4. I won't spoil it for you, but we're always trying to figure out how to make things more impactful. So in Q4, we do expect to return to more typical levels of brand spend. Last year's Q4 '24 spend is a pretty good proxy. Ralph Schackart: Great. And just on the content side of the business, obviously, it's been more focused on sort of the higher-end consumer. Now that you're looking at below prime consumers, maybe talk about sort of there have to be a major shift in content strategy? Is it pretty easy to do? And will you have sort of the products available as well in the marketplace to sort of meet those needs of the below prime consumers? Tim Chen: Yes. So the way I describe it is we've always had content and products for all consumers, including low prime. It's really just historically, our monetization has skewed very heavily towards Prime because of the products that appeared in our marketplace. So it's really not a new strategy. It's really about filling out our panel with lenders and service providers to round out that marketplace. And what we're seeing is the second order impact there is it's making more competitive, making us more competitive in channels like performance marketing. And from a consumer perspective, honestly, we're just better serving unmet needs that we weren't serving before. So we feel good about that, too. Operator: Thank you. I am not showing any further questions at this time. This concludes our Q&A. I would like to turn it back to Tim Chen, CEO and Co-Founder for NerdWallet. Tim Chen: All right. Thanks all for your questions today. As always, I'd like to thank the Nerds for their continued hard work over Q3, and I'm looking forward to sharing our Q4 results with you in a few months. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you.
Michael Judd: Hey, everyone. I'd like to welcome you all to Opendoor's inaugural open house earnings live stream. I'm Michael Judd, Opendoor's Head of Investor Relations. A few housekeeping items before we get started. Details of our results and additional management commentary are available in our earnings release, which can be found at investor.opendoor.com. The following discussion contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking, including, but not limited to, statements regarding Opendoor's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion and management objectives for future operations. These statements are neither promises nor guarantees, and undue reliance should not be placed on them. Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor's most recent annual report on Form 10-K for the year ended December 31, 2024, as updated by our quarterly report on Form 10-Q for the quarters ended June 30, 2025, and September 30, 2025, and other filings with the SEC. Any forward-looking statements made on this webcast, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. With that, let's get into the open house with Kaz and Christy. Kasra Nejatian: Good afternoon. My name is Kaz Nejatian. I'm a computer nerd turned lawyer turned founder, but I think of myself primarily as a product manager. That's what I spent most of my career doing, building products and leading teams to build better products faster. I'm not the guy you invite your place if you want someone to bring to party. I'm the guy you invite your party if you want someone to fix your Sonos. On my first day at work, I told our team at Opendoor that we're going to make a bunch of changes and that the new Opendoor would look nothing like the old one. And that's because, well, the old Opendoor had kind of lost its way. Before I tell you why I think Opendoor was broken, let me share you one example of the thing that has changed just in the last few weeks, so you can get a sense of the scale of the change. Look, on my first day at work on September 15, Opendoor had entered into contracts to buy 120 homes in the prior 7 days. By last week of October, that number had risen to 230 homes. In 7 weeks, we nearly doubled our speed of acquisition. I think it's reasonable to ask how can we move so fast right now when we used to move so God damn slowly. If you give me a couple of minutes, I'd like to tell you what caused the old Opendoor to be so broken. I think this diagnosis will kind of matter in how we rebuild Opendoor. Having been inside the company for just over a month, it's kind of obvious to me that the old Opendoor had just lost faith in the power of software to make selling, buying and owning a home easier. It just kind of thought of itself as an asset manager trying to predict the economy. And the previous Opendoor also didn't really believe in the power of AI to do anything, much less to make our work less toilsome. When I joined the team, I'm not kidding, there were a dozen people whose only job it was to copy and paste information from PDFs into glorified spreadsheets. The previous Opendoor also didn't really believe in itself. I was genuinely shocked when I found out that one of Opendoor's biggest expenses in the first half of this year was millions of dollars paid to a well-known consulting firm to tell Opendoor how to do its job. Everywhere I looked in my first 30 days, I found consultants making decisions that should have been made by executives. Finally, the previous Opendoor had become so risk-averse that it no longer really believed in buying and selling homes. If you ignore COVID, we bought fewer homes in Q3 than we have since 2017 when Opendoor was just a tiny start-up. Look, in the last few weeks, we've reversed course on all of these decisions. We are ditching manager mode. We're now firmly in founder mode. We are refounding this company. This is Opendoor 2.0, and we believe different things. So what do we believe at Opendoor today? We believe that we have to use all of our energy and every modern tool at our disposal to build products that make homeownership easier and less frictionful. We believe we're a software company, and our leverage comes from engineers writing code. We believe machines are better at pricing assets than humans. We believe AI will empower us to avoid toilful work, and we can have a leaner and more aggressive company. We believe we are here to make hard decisions, and we will never ever abdicate that responsibility to management consultants. We believe in being operationally excellent, especially in marketing and corporate functions. When I was at Shopify, I insisted that we manage our marketing dollars like a hedge fund would manage its IRR. We're going to do the same thing here. We're going to spend money only on channels that give us great payback, and we're going to stop spray and pray marketing. We believe slowing down buying homes just to buy them at a significant spread is a bad strategy. Look, the only folks who are going to sell their house at a large spread are people who know things that you don't know. They want to get rid of their house as fast as possible. This is the definition of adverse selection. It's not a buying opportunity. It's a massive red flag. To use Wall Street terms, Opendoor is going to be kind of like a market maker in the future, not a prop desk. We're going to profit from flow, speed and tight spreads, not on bets on the direction of the economy. Our business plan is simple: buy and sell lots and lots of homes quickly, be operationally excellent and increase our value to each homeowner by launching services like mortgage, insurance and warranty. Starting last month, we reduced our spreads while simultaneously stepping up operational rigor and tightening our selection discipline. The goal is simple. We're going to make stronger first offers, buy more good homes and get more good sellers through our funnel. To avoid adverse selection, we're building our inspection process from ground up, structured in-app video and audio, feed goes directly into AI that creates condition profiles that are validated through a standardized inspection process that give us great data. The result is going to be a consistent high-fidelity view of every single home. This trust but verify approach is going to improve the speed and the quality of homes while giving us amazing data to adjust our process, allowing us to grow our portfolio without sacrificing pricing discipline, without giving up on asset quality and without slowing down transaction velocity. But buying a great home isn't the end of our job, right? It's also important that when Opendoor buys a house, we provide value and services to both buyers and sellers. That's why earlier this week, we launched Opendoor Checkout. It's available in select markets now, and it's going to expand to our entire inventory soon. A buyer can walk into an Opendoor home, tour it and place an offer to buy it on opendoor.com without ever talking to a human being. We're shipping the buy now button for homes on the Internet. We're going to improve on this. We're going to add more products and more features for homeowners to simplify the home buying experience, starting with mortgages and warranties. Look, in the future, buying a home will be as seamless as buying a car from Tesla. You'll choose your home, your financing, your warranty, your insurance, all in one place, all in one flow. Right now, homeowners have to deal with a bunch of different companies, brokers, agents, a lot of different stuff to get what they need for a house. That doesn't make sense. We have the Internet. We're going to fix this. And over time, we'll add everything a homeowner needs when they need it, all bundled into one simple experience. Opendoor's goal is really simple. We're going to tilt the world in favor of homeowners and those working hard to become homeowners. That's our goal. And we're going to pursue it with an incredible amount of aggression. Since my first day as the CEO of our company and our first day in this new Opendoor, we've launched over a dozen new products and features. They include things like an end-to-end AI home scoping, where machines instead of human beings decide what repairs are needed and what renovations need to be done. We've automated title and escrow, where AI has started doing some of the work that goes into closing a transaction. We've launched Opendoor's trade-in widget, where we help builders to offer a home trading program like they do in car dealerships. The new Opendoor Key app allows agents, Opendoor experts and soon any homeowner to assess their homes just like an expert. Now we're going to fully power this with AI rather than someone showing up with a pen and paper. We launched Buyer Peace of Mind, giving people certainty when they buy their home with benefits like home warranty and early move-in. We launched AI-powered multilingual agents, explaining home valuation to homeowners and helping them move forward with Opendoor. And we're launching a new partnership with Roam, connecting sellers with Roam's Assumable Mortgage platform to help them move when they want to. We've also made significant improvements in our SEO products, significantly increasing organic traffic. But closest to my heart has been our push to default to AI everywhere. And this has allowed our frontline operators to iterate without writing code. One of our nontechnical teammates built a no-code tool that cut our quarterly inventory management process from 10 hours to about 7 minutes. And this list of launches should show you that we have this renewed aggression at Opendoor. We're going to focus on building great products. But aggression by itself is not a strategy. It's better than hope, but it's not enough. So here's our 4-step plan to channel that energy. First, by the end of next year, we will drive Opendoor to breakeven. We think about this in terms of adjusted net income on a 12-month go-forward basis. That means Opendoor will start generating cash and will never be forced to raise equity ever again. Second, we will drive significant positive unit economics while increasing the velocity at which we transact in homes. This includes launching financial services like mortgage. Third, as we increase our unit economics, we will change the company's focus from primarily building channels to transacting directly with buyers and sellers. We're also going to focus on reducing our days in possession rather than arbitrarily increasing spread, which has had genuine significant negative consequences for us. Fourth, once we've accomplished the first 3 steps, we're going to focus on allowing buyers and sellers to transact on Opendoor without having to buy or sell from Opendoor. This is going to significantly lower our capital risk, but more importantly, it's going to give folks options they want. Over time, as we succeed in these initiatives, Opendoor will change the homeownership experience in the same way Amazon changed the shopping experience, both directly and through its third-party marketplace. Let me be clear, adjusted net income breakeven is a milestone, not a goalpost. We have a huge runway ahead of us. Yes, there's going to be some headwinds, we're going to get some things wrong, but we're committed to consistently delivering improved unit economics and you're going to begin seeing progress towards adjusted net income breakeven milestones as we clear old inventory and increase our acquisition speed. In my first month, we've already made significant progress on the first 3 steps. As we move towards breakeven adjusted net income, we're prioritizing durable cost reductions. Chris is going to talk about some of these, but I want to give you some examples. We reduced spend on external software and have terminated or are in process to terminate over 20 software vendors to date. We've reduced spend on external consultants. Opendoor spent millions on management and PR consultants in the first half of 2025. The go-forward plan is 0. And to drive positive unit economics and increase the velocity at which we transact in home, we've significantly changed our buying behavior. For example, up until mid-October, when someone came to opendoor.com and typed in their address to sell us their house, we would have up to 11 Opendoor employees in the hot path of that sales contract closing. Today, that number in many of our flows is down to one person, and that one person is there to audit the machine to make sure we don't make unnecessary mistakes in underwriting. In fact, we're now doing almost 750 home assessments per week using AI. It used to take us close to a day from the time we collected artifacts to time we complete assessments. In our new flows, this takes about 10 minutes. In the last week of September, we entered into contracts to buy 128 homes. In the last week of October, we entered into contracts to buy 230 homes. To accelerate transaction speeds and customer choice, we can now accept a USDC as a payment method for home purchases. And to make the company primarily D2C, we've turned on Opendoor's D2C flow once again. The company had completely shut down almost all of these flows. Look, while we want customers who want experts to be able to work with one, we are once again accepting customers who want to sell us their home directly. Last week, these customers made up over 20% of our total home assessed. And in a test we ran in mid-October on over 2,000 accounts created, we saw that our new D2C totally unoptimized funnel was able to convert 6x better than the non-D2C funnel. We're far, far from optimizing this, but we believe we have significant opportunity to improve our overall conversion. Okay, that's a lot. Before I hand off to Christy, I want to spend a minute to talk to you about previous decisions Opendoor made about its capital structure. Because look, I think it's important that you hear from me directly about this. When I took this job, I knew Opendoor needed a balance sheet that was fit for our ambitions. Every home needs a solid foundation. And for us, that's capital. There are aspects of our balance sheet that are just genuinely phenomenal. We have 10 different lending facilities with long-standing partners, some of them as long as 9 years, who've demonstrated their ability to scale with us as we grow. Today, we can finance roughly 5,000 homes all at once and close at almost 100% advance rate at great prices. At our peak, that number was about 20,000, and we're going to get back there. And I'm genuinely confident that we can get there with our lending partners. But they're also part of our capital structure that were not focused on the long term. They seem to have been designed and driven by fear rather than setting us up to win. To be blunt, when I joined, the balance sheet had a [ pink lock ]. The company had issued convertible notes with an early repayment that could have forced us to repay them in full before the end of this year. That would have been disastrous for the company. And my first priority was to remove this pressure and give us runway to execute on our vision. Let me be clear, I despise dilution. If we issue a share, it has only one job, to make every other share worth more for our existing shareholders. But to give us some breathing room, I made a decision in my first week to use our existing ATM program to raise nearly $200 million. This bought us the time we needed to deal with the notes without a gun to our head. Earlier today, we reached an agreement to retire the majority of these notes. We took the steps we needed to clean up our capital structure, and we now have the balance sheet we need to stop playing defense and start playing offense. But there's a second part to this, and it's about you. We wouldn't be here without you, our shareholders. You believed in the long-term value of this business, even when our capital structure didn't really reflect it. And I don't believe in asking you to stay on this journey without sharing directly in the upside we're creating together. Look, public markets have a long history of taking shareholders for granted. We're not going to do that. In fact, we're going to reverse that. This is why we're issuing a dividend warrant. Each of you will receive 3 series of warrants, Series K, Series A and Series Z with exercise prices at $9, $13 and $17. One warrant for each series of 30 shares you hold. These warrants are going to cost you nothing and their value goes up as we make Opendoor into what it can be. We want to be on the same side of the table as our shareholder. We're returning some value to you today. You can sell the warrants as soon as you get them, but I'm hoping that you'll stay along for this ride, that you'll participate in what we are building together. We're going to move forward together. And when Opendoor succeeds, our shareholders are going to share in that success. And yes, I'll admit it, it gives me just a bit of joy that this will totally ruin the night of a few short sellers. Look, we're building a new company, right the open. Opendoor 2.0 is committed to its community because we're building and because who we're building for matters. We're going to talk to you the way we talk in the office in plain English, sometimes with a few cuss words, but always with transparency. Please consider this our clean break from corpo jargon. We're just going to talk to you and tell you when we make mistakes. And we know that this transparency is not a burden. It's a feature of your trust in us. We want to hear from our shareholders, your ideas, your questions and even product bugs because we want to fix things fast and build better. If you haven't already seen this, my [indiscernible]. I am more bullish today about Opendoor's ability to change homeownership than I was when I took this job. I'm more bullish because I see a lot more of what is happening inside the company than folks see from the outside. And I think one of the ways in which we can bring you all along for this journey is to just communicate more frequently, more directly and tell you what we are doing, what's working, what's not. Christy is going to tell you a bit more about how we intend to do this after she shares our third quarter results. Christy? Christy Schwartz: Thank you, Kaz. Our third quarter results reflect the deliberate choices made earlier in the year to prioritize risk management over volume growth, defined by wide spreads and a risk-averse posture that treated buying homes as something to avoid rather than our core business. The numbers tell the story. In the third quarter, we purchased 1,169 homes, roughly in line with the expectations shared at Q2 earnings, but well below our recent historical acquisition volumes. We delivered revenue of $915 million, above the high end of our guidance as we deliberately cleared old inventory before the slower winter selling season. When you stop buying homes, you don't just lose volume, you lose the ability to manage your inventory mix. We were left selling through older homes that were selected under the old strategy, and that showed up in our margins. GAAP gross profit was $66 million in Q3 compared to $105 million in Q3 of the prior year. GAAP gross margin was 7.2%, down 40 basis points year-over-year. Contribution profit was $20 million and contribution margin was 2.2% compared to contribution profit of $52 million and contribution margin of 3.8% in Q3 2024. On costs, prior leadership did meaningful work to restructure our cost base, and we will continue that effort. Third quarter GAAP operating expenses totaled $134 million. Adjusted operating expenses were $53 million, a 41% improvement from $90 million in the third quarter of 2024. This improvement was driven by disciplined cost management across all components, marketing, operations and fixed operating expense. As we rescale acquisitions, we're doing it from the structurally lower cost base. Net loss for the third quarter was $90 million compared to a loss of $78 million in Q3 '24. The prior year number included a $14 million gain from the Mainstay deconsolidation. Adjusted net loss totaled $61 million, an improvement from an adjusted net loss of $70 million in the prior year period. These are the results of the old Opendoor. What matters now is what comes next. Earlier, you heard the plan for Opendoor 2.0. I'd like to take a moment to walk through the foundation it runs on, our capital. We ended the quarter with $962 million in unrestricted cash and $187 million of equity invested in homes. We held 3,139 homes, representing $1.1 billion in net inventory. We had $7.6 billion in nonrecourse asset-backed borrowing capacity, of which total committed borrowing capacity was $1.8 billion. As Kaz mentioned, we have executed three substantial capital transactions to set our balance sheet up for the scale ahead. First, the rapid increase in our stock price triggered a condition in our 2030 convertible notes that could have required us to repay the full principal balance in cash during the fourth quarter of 2025. Using our at-the-market or ATM equity program, we proactively raised equity in September 2025, selling 21.6 million shares at a weighted average price per share of $9.26 for nearly $200 million of gross proceeds. Second, today, we refinanced a substantial portion of the 2030 notes with equity. As a reminder, these notes bear interest at a 7% annual rate. The combination of these two transactions add meaningful liquidity to our balance sheet, reduce our cash interest costs and provide enhanced financial flexibility. Third, to align Opendoor's upside with all shareholders, our Board declared a pro rata warrant dividend. Every shareholder will receive 3 series of freely tradable warrants for every 30 common shares held as of the November 18 record date with exercise prices of $9, $13 and $17. Zooming out, we believe we have the right capital setup for the Opendoor 2.0 operating model, higher volumes, faster turns, tighter spreads and more products to serve homeowners. Now let me tell you how we're executing against that model and how you can hold us accountable. We are targeting to reach adjusted net income profitability by the end of 2026 measured on a forward 12-month basis. To get there, we're focused on three key management objectives that we monitor internally. For each objective, I want to frame for you why this matters, what we're doing and how you can hold us accountable. First, scale high-quality acquisitions. More volume means more revenue from transactions and ancillary services plus better leverage of our cost base. Further, market concentration creates a flywheel. When we own meaningful share in a market, we attract more inventory, which attracts more buyers, which attracts more sellers. We have multiple initiatives underway to drive this growth. Most importantly, as Kaz described earlier, we started reducing our average spread while increasing our operational rigor and selection, stronger offers for high velocity, high-quality homes, discipline on higher-risk homes. We're pairing that with AI-driven scoping and standardized pre-offer inspections to raise conversion and cut time and costs from offer to acquisition. You can track our progress against our acquisition goals through the end of 2026 on our new dashboard at accountable.opendoor.com. Individual weeks will fluctuate, holidays, weather, local market events will be focused on the trajectory over time. Second, improve unit economics and resale velocity. Speed and profitability per transaction enable us to build a sustainable business while enduring macroeconomic changes. Higher profitability per transaction gives us the ability to decrease the spreads embedded in our offers, leading to more acquisitions. This objective is supported by our tailored spread framework. By pricing more aggressively for high-quality, faster-selling homes and maintaining discipline on higher-risk assets, we expect our acquisition mix to skew toward more marketable homes that need less repair and renovation. We expect this to shorten the time from acquisition to listing and days on market, thereby reducing our holding costs. Second, we are innovating at an incredible pace with a renewed focus on execution and a culture of challenging everything to be better. Much of our product innovation is designed to automate workflows and increase resale velocity, supporting a business model focused on turns, not spread. You can hold us accountable to improving resale velocity by tracking the percentage of Opendoor homes on the market for greater than 120 days, which we report quarterly in our 10-Q. You can also follow our product, feature and partnership launches on accountable.opendoor.com to see how we're building the velocity into the business. Third, build operating leverage. We will scale transactions faster than fixed costs. So each additional home adds accretive profit. We're cutting aggressively in the right places, eliminating consultants, removing redundant tools and software, reducing marketing waste and streamlining operations while simultaneously reinvesting a portion of those savings into engineering and AI automation. Importantly, we expect to shift our overall operating expense profile toward variable components that flex with volumes rather than remain fixed through cycles. You can hold us accountable by tracking two specific metrics we report quarterly in our 10-Q. Fixed operating expenses should hold relatively steady as we rescale volumes and trailing 12-month operations expense as a percentage of trailing 12-month revenue should hold relatively steady or decrease over time. These three objectives are the foundation of our path to profitability, and we're building in the open so you can track our progress along the way. Turning to our outlook. Our guidance is going to look different than what you've seen in previous quarters. Our business is changing rapidly. Just in the past few weeks, our acquisition contract speed increased by nearly 2x. We're focused on execution and outcomes, not on benchmarking every turn during the transformation of this scale. Our results in the upcoming quarter are largely the outcome of us managing decisions that were made several months ago. We're focused now on making the right long-term decisions for the business, not managing the short-term guidance. What matters and what we want to be held accountable for are the actions we take from here and the results they drive over time. Our destination is clear, adjusted net income profitability by the end of next year, measured on a 12-month go-forward basis. We've already seen the levers in this business work. You can't build a breakeven business in a spreadsheet. You build it by shipping product, operating with discipline and learning from the market. For the near term, I will provide you with these guideposts. Acquisition rescaling. We're committed to rescaling acquisition volumes. We expect fourth quarter 2025 acquisitions to increase by at least 35% from Q3 as our product launches and pricing strategy changes take hold. You can track our weekly acquisition progress at accountable.opendoor.com. Revenue. We expect Q4 revenue to be higher from the outlook we provided at Q2 earnings, but decrease approximately 35% quarter-over-quarter due to low inventory levels from Q3's reduced acquisition volumes. Contribution margin. Our priority since mid-September has been to clear old inventory homes selected under the previous strategy that prioritize spread over quality. That's pressured our contribution margin sequentially since April through October. And we believe we bottomed out in October. Margins will improve through the end of the year as we replace legacy inventory with better homes, but Q4 contribution margin will be below Q3 as we reverse the downward trend. Cost discipline. We are focused on continuing to manage and improve our cost structure. Adjusted operating expenses for the 12 months ended June 30, 2025, were $307 million. For the 12 months ending June 30, 2026, we expect to spend $255 million to $265 million. Excluding the $15 million cash make-whole award for our CEO, this is a year-over-year decrease of approximately $62 million or 20% at the midpoint. We expect to achieve these savings while concurrently investing in engineering and AI automation to drive further operating leverage. We're cutting the waste and reinvesting in what matters. Finally, adjusted EBITDA. Given the near-term margin pressure as we clear old inventory, we expect Q4 2025 adjusted EBITDA loss in the high $40 million to mid-$50 million. We're building Opendoor 2.0 in the open, holding ourselves accountable to measurable objectives and giving you the transparency to track our progress. The journey won't be perfectly linear, but our conviction in the destination and in the levers that get us there is unwavering. With that, Michael, I'll turn it over to you for questions. Michael Judd: Great. Thanks, Christy. Our first question comes to us from video submission from Vlad Tenev. Vladimir Tenev: What's up, Kaz? By the way, we're super pumped that you guys are streaming live to retail on Robinhood. I think the question on everyone's mind is what's going on with tokenization? How real is it? And how do you think it could revolutionize the homeownership experience? Kasra Nejatian: Thanks, Vlad. Thanks for hosting us. Look, I'm such a big fan of Robinhood, and I hope that we can continue to do things together. Our mission at Opendoor is to tilt the world towards homeowners and those working hard to become homeowners. And I love that Robinhood does some of the same things, this whole thing of taking power away from fancy people and giving to average person. Now to answer your question, look, I have a habit of not announcing products before they're launched. That's because I build products, not spreadsheets. And I think it's important that we ship things before we talk about them. And I don't want to say we're going to do this next week, but I generally can't imagine a future where real estate is not tokenized. And I also can't imagine a future where Opendoor isn't leading innovation in real estate. Look, asset tokenization is not a side quest for us. Tokenization allows us to increase the speed of transactions, decrease the cost of transaction and broaden base of homeownership. That's our job. Today, we talked about how we can now accept USDC. This week, I bought Bitcoin on my own laptop so we can start developing. And we've begun talking with partners about how we can work across stablecoins and tokenization. The work is active. We're very serious about it, and we'll tell you more when we launch something. Michael Judd: Great. Our next question comes to us also via video submission from Eric Jackson. Eric Jackson: Eric Jackson, welcome. On behalf of the entire $OPEN Army, we are thrilled to have you here leading the charge. I have two questions. Can you say specifically what the headcount is now at the company? I believe it was 1,407 over the summer. And second, can you say more about the revenue opportunities that you see around iBuying? Do you expect to add mortgage and title and other ancillary services? Zillow experimented with doing this a few years ago by acquiring a legacy company, and that didn't really take. So what is the Kaz approach to revenue? And how do you expect to grow this in the coming quarters? Thank you, again. Kasra Nejatian: Thanks, Eric. Look, to start with, I think Opendoor has had far too complicated structure for a company of this size. To give you a sense, we've had 11 different HR software products. We're going to go down to one. As of this morning, there were 1,100 people working at Opendoor. And the most important thing isn't the number of people, but how aggressive and efficient those people are. I believe every single Opendoor employee needs to be 2 to 3x more aggressive and more efficient than the average employee in tech. We will have the most aggressive software company in the public market because our mission is incredibly important. And like I said in the prepared remarks, our job is to be incredibly mindful of OpEx and to reduce our fixed OpEx over time so that it becomes a smaller and smaller part of our income statement. On the second question, look, I'm incredibly bullish on what I call services. When I joined Shopify, Shopify was 50-50 in its revenue between SaaS and services. Today, services are 75% of Shopify's revenue. And while I didn't have everything to do with it, I had something to do with it and was the services guy at Shopify. The reason why these embedded fintech things typically don't work is because they're usually designed by some dude in a Boardroom trying to figure out how can I make more money from my users. That's what it typically work. And that's just not how users interact with products. We will build excellent products. They will feel whole, and you will buy a home from Opendoor the same way you buy a car from Tesla or something from Amazon. They will feel like one product, and there won't be a different -- bunch of different cross-sell motions that you have to keep feeling that you're talking to different companies. I hope that answers your question. Michael Judd: Great. Our next question comes from Zach H, who asks, when will we see a dramatic change in profitability? Kasra Nejatian: Next year. The answer is next year, we're going to see a dramatic change in profitability. Christy Schwartz: Zach, let me walk you through some of the details. So as we shared in the prepared remarks, we are driving the company to adjusted net income profitability exiting 2026 on a 12-month go-forward basis. The framework to achieve that goal requires us to rescale acquisitions. We guided to rescaling acquisitions, growing them by 35% quarter-over-quarter for Q4 2025, and we are driving to exit Q4 2026 by buying somewhere around 6,000 homes. You can track that -- our progress against that goal and hold us accountable to that goal at accountable.opendoor.com, which will be updated weekly. On the margin side, we expect to get contribution margin of 5% to 7% as we approach the acquisitions with renewed rigor, decreasing tail homes, improving days in possession and therefore, holding costs. In addition, as we get more shots on goal and buy more homes, we get the opportunity to attach more products and drive margin from ancillary services. We expect financing costs of 2% to 3% of revenue. These costs are highly sensitive to our turns and will benefit from our faster resale velocity. We're targeting adjusted OpEx of 3% to 4% of revenue. We expect to leverage our existing fixed OpEx structure, as Kaz mentioned, to invest slightly more in marketing, but with the discipline that Kaz discussed earlier, and we expect to scale operations marginally as we rescale volumes. That's a framework. It's not new guidance. But it's -- yes, go ahead. Kasra Nejatian: I'm going to add a little to this, if you don't mind. Look, I spent the last few years of my career at Shopify, and I think folks would say that I had something, though obviously not everything to do with Shopify's profitability and growth. In late 2022, when I became Shopify's Chief Operating Officer, I'm going to read this because it was a quote. There was an analyst that said, "Shopify will lose money every year through 2025. Profitability is nowhere to be seen." Well, Shopify became profitable 2 quarters after I became COO, and it has been profitable ever since and have hit the Rule of 40 every quarter. Companies don't become profitable in Excel sheets. The way this works pragmatically is what [indiscernible] and I did at Shopify. You create a list of projects, you put odds -- adjusted odds of success against each of them and you execute every single day. At Shopify, we had a few dozen of these, 3 or 4 of them ended up really mattering. And we have the same list here. We have a list of projects. And the reason I say we're going to drive to profitability is because this is not a passive thing. It's not just going to happen to us. We know what we are going to do. We're going to take those actions, and we're going to exit 2026 profitable on a go-forward basis. Sorry, I cut you off. Michael Judd: Our next question comes to us from Victoria B. Short sellers keep attacking Opendoor, spreading negativity and driving the stock down despite strong progress. What’'s your strategy as CEO to fight these daily short-selling pressures, protect shareholders, and make sure the market sees Opendoor's true strength? Kasra Nejatian: Look, I care a great deal about our average shareholder. And you've seen us do some things today to help align us to our average shareholder. Having said that, I don't spend that much of my time thinking about short sellers. I never worked on Wall Street, and I generally don't understand why these people do what they do. It just seems deeply boring and like just bad for the soul. I mostly just pity them. They don't really build anything. Look, we run the company for long-term owners, not for people that bet against us every week. And what matters to us is execution week in, week out, how fast we buy and sell homes, how operationally excellent we are, how we turn over inventory. And I think the best way to deal with short sellers is just prove them wrong through numbers. Every quarter, we're going to improve unit economics. Every quarter, we're going to get better. Every week, we're going to show you the numbers. We're going to do all the right things. And I think when you do that, the score takes care of itself. Michael Judd: Great. Our next question comes from Dae Lee from JPMorgan. How do you define Open's identity? What do you see as its biggest strength? And how will you leverage that to achieve sustainable growth and profitability as Open navigates the currently depressed housing market and longer term? Kasra Nejatian: That's a great question. I'll take it first, if you don't mind. Look, Opendoor is a software company. We're not a hedge fund waiting for macro to turn around. That's our job. Our job is to help people sell, buy and own homes. And our leverage comes from building excellent products. And you do that by writing excellent code. So that's the largest source of our leverage, right? Codes written by our engineers, data on our databases and the models we have and we're improving the value not just the valuation of home, but dispersion on them and days in possession. And I firmly believe that the best software companies are built in hard times because the times forces you to be disciplined, right? You end up having to care about your user more. You end up building deeper integrations that solve more of the problem. So when times get good, you end up having abnormally large profits. I'm very bullish on the company. Just in the last couple of weeks, we've shown that we can grow acquisitions relatively quickly. I think we grew 60% on acquisitions just this past week. We'll see how much we grow next week. And we've shown that we have relatively good levers in this company. And when you decide that you're going to do that, you have the good levers, you have great software and you have the balance sheet that we do, you get the chance to go on offense. And I really like our odds, and I think things are starting to work for us. Michael Judd: Great. Our next question comes to us from Ryan Tomasello from KBW. Does management intend to continue to emphasize the Cash offer as Opendoor's primary product? Or do you envision moving the business more capital light? Will the Key Agent program be the primary distribution channel for the cash offer? And if so, how should we think about potential bottlenecks on growth given this high-touch approach tied to agents? Kasra Nejatian: That's just not how I think of the business, to be honest. Let me answer your question first. Look, I think companies fail when they think of themselves first and their users second. Like our job is to serve our users and people come to us to sell or buy a home. That's why they come to us. And our job is to meet them where they are. Some of them want to use an expert, some of them don't. And the question is, how do we answer? I think Cash is a great product. I think Cash Plus is a great product. We're going to have different products along both the risk and the ownership axis because I think that's just not the final two products we're going to have. And I like our D2C model. I think we talked about how in our tests early on, it has been converting 6x better. So I think the question isn't really one of which channel are you going to pick. We're going to pick the channels that allow us to have the maximum impact on behalf of our users. And I firmly believe in our DTC channels are going to be the future of the company. And if there are users that want to use experts, we want to serve them where they are. Michael Judd: Great. We have a few questions on sustainable acquisition growth, so I'll read for you those out. One from Ygal at Citi. How are you expecting to manage guardrails and acquisitions as you pick up pace? Another from Andrew at Citizens. Can you talk about controlling the long tail and how those purchases have outsized losses? And Nick McAndrew at Zelman. How do you balance near-term transaction growth with your stated goal of evolving into a platform business? Kasra Nejatian: Okay. I'll try to take these one at a time. I think the tail question is actually the best question. Let me take that one first. So what you actually want to have is a lot of dispersion in your model, right? Opendoor historically have not had that, where it has kind of like just had a peanut butter spread across its space. We now have significant dispersion, and this is basically all we talk about is how we can have excellent offer on good homes where we know days in possession is going to be low and be more careful on longer days in possession homes. And we have a new process for inspecting every home to make sure that we don't get caught by surprise. This is a trust but verify approach that I talked about, which will be great because it will both, a, variable cost and b, more importantly, allows us to have lots of data on our servers. Last question second. I don't think these two things are at conflict. Look, at Shopify, we had high growth and high free cash flow. I think these two things actually go together because when you buy lots of homes, you get opportunities to sell lots of homes. And when you sell lots of homes, you get opportunity to attach additional services to them. And I think these two things go hand-in-hand. And to answer your first question last. Look, I think we have shown that we have really good levers at our disposal. Morgan and the growth team have been working only for a couple of weeks now. But every single day, we're seeing improvement on buying the types of home we want to buy, and we really like our top of funnel. We have cut marketing and have seen acquisition go up, which is always a good sign. Am I missing something? Michael Judd: That's great. We have another question from Ben Black with DB. There's a few in there, but his last question was, in what ways can AI be an accelerant to growth? Kasra Nejatian: I mean, look, in all the ways, and basically all the ways. Look, I don't spend that much of my time worrying about like the problems Opendoor has traditionally had on this area because there have been different types of problems. I spend a lot of time about what the problems are today. Let me give you one example. I talked about this a bit. We would have up to 11 people touch a home before we had a sales contract go out for it. Today, in many of our flows, that's down to 1. And the job of that one person is to watch the machine, right? This significantly reduces OpEx per home that we acquire, far, far, far fewer human beings, far more machines. This is better speed, better user experience, lower OpEx, win, win and win. And then secondly, on the -- just the top of funnel part, you've seen us cut marketing and we cut marketing when I came in and increase acquisition. We're able to do this because we can optimize our funnels and put more of the experience in the hand of the user. And by the way, AI is also able to help us explain to our users the valuation of each home. So across top of funnel, middle of funnel, bottom of funnel, already, we are seeing the impact of AI. And we're also seeing the impact on closing, which is the last step, where we've had machines do much of their work for closing these days, and that's just going to continue. Michael Judd: Great. We had one more question from Margarita M, who asks, how can you guys make homeownership easier for younger generations? Kasra Nejatian: I mean this is like the fundamental goal of the company. Look, home prices have increased by something like 50% since 2020. Mortgage rates are much higher than they used to be. Housing inventory is far too low. Typical sale is taking like 60-plus days and like 1 in 7 deals are falling through. And the average time for a person to buy a home is almost 40 now. This is just terrible because it's harming our communities, harming our families and people who want to own are facing real barriers. People feel trapped in their homes because of mortgage rates. This is why we announced our partnership with Roam today. But the enemy really isn't any one group of people or any one company. That's just not how it works. The enemy is the process. There are so many people involved in the process of you buying and selling a home that the costs are just out of hand. And one of the things I'm super excited about is the fact that we can underwrite a home gives us excellent power to underwrite mortgages and the fact that we can do things that allow you to buy a home earlier, buy a better home earlier and know that you have the peace of mind to buy it, is going to be a key part of the company's future. But that's the mission, right, tilt the world towards homeowners and people who are working hard to become homeowners. Michael Judd: Great. We're getting close to the top of the hour. So that was our last question. So Kaz, if you have any closing remarks? Kasra Nejatian: Yes. Let me -- thanks. I appreciate it. Thanks for your question, folks. Look, I spend most of my day in Cursor and GitHub. I don't spend much of my time in spreadsheets. I started writing code on my Commodore 64 when I was 6. And I'm opinionated about what Opendoor's product should look like. We are a product company building software to enable homeownership. And you've seen us launch many products, like dozens of products just in the past few weeks, and you should expect us to do the same. And you should expect us to be operationally excellent and incredibly mindful of your dollars as our shareholders. You're going to see us be accountable. We're going to make mistakes along the way, but at every single step, you're going to see us care deeply about our mission and be transparent as we build. I'm incredibly bullish. I am more bullish today than I was when I took this job. And I think we're going to actually make a change and make a real difference in the future of homeownership in this country. Michael Judd: Great. With that, we'll conclude our third quarter open house.
Operator: Good day, ladies and gentlemen, and welcome to Amadeus Third Quarter 2025 Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Luis Maroto, President and CEO of Amadeus. Please go ahead. Luis Camino: Good afternoon. Welcome to our Q3 results presentation, and thank you for attending today. I'm joined by Caroline Borg, our CFO. So let's begin. We'll start on Slide 4. Amadeus had a strong third quarter full of momentum, which drove revenue growth acceleration and margin expansion. Year-to-date, group revenue has grown by 8% and adjusted EBIT increased by 9%, both at constant currency. Our prospects remain strong, and we entered the last quarter of the year with confidence to deliver on our outlook for the year. Amadeus is a B2B technology partner of reference in travel, and it is deeply integrated into the travel ecosystem. Many of the world's most important travel players leverage on us for their core technology. In the quarter, we continued to span our relevance. We grew our customer relationships with airlines, hotels, travel sellers and airports. We won new customers across our portfolios and broaden our offering. We are pleased to announce we have won the Ascott Limited as a new customer for Amadeus Central Reservation System in hospitality. Ascott is Singapore based and its portfolio expands more than 230 cities in over 40 countries through Asia, EMEA and North America. ACRS market leading attribute-based selling capabilities will empower Ascott to deliver uniquely personalized merchandising, enhance guest experiences and drive growth across its portfolio. The current scope of our ACRS agreement covers Ascott's global portfolio, excluding Quest-branded properties and those located in China. Further expansion is expected as Ascott continues to execute its global growth strategy. Investing for the future has been key to our success. In the year, we have deployed over EUR 1 billion in R&D into our solutions, technologies and capabilities to extend our reach in travel and to further connect the travel ecosystem. Today, we want to take the opportunity to serve some further insights into how we are leveraging AI to generate further opportunities. As you know, as a leader in the travel and technology space, we have been evolving and applying AI into our products and solutions for almost 20 years. Our journey began with operations research, machine learning continued with deep learning and introduction of generative AI, revolutionizing essential functions like flight scheduling and search, airport resource management, passenger disruption handling and revenue management systems. We use AI to optimize airplane usage to reduce the impact of disruption on passengers, to improve hotel occupancy forecasting and to improve the creation of shopping recommendations among others. We use AI at an enormous scale. We have been investing for an AI-driven future, and we are building the technological foundations to excel at Agentic AI in travel. As we complete our cloud transformation, we are also creating the first data mesh in travel, a trusted industry data source with several insights across domains and solid governance. For the potential of Agentic AI to be realized across travel, this is key. We are embedding Agentic AI as a capability of our platform for the benefit of our portfolio and we are uniquely placed to infuse Agentic AI across the travel ecosystem in the years to come. At Amadeus, we are also leveraging on strategic partnerships with world-leading technology players to boost our strengths. We are focused on our strategic partnership with Microsoft and Google to propel our AI innovation, deploy effective multi-public cloud operations and develop unique business collaborations. Garv is a recent example of AI co-innovation. Garv is an AI agent built on top of our airport data platform. Airport employees with Microsoft teams can ask questions using natural language and Garv reasons through problems, make decisions and learns from experience. Please turn to Slide 5 now for a strategic update. Amadeus is leading the airline retailing transformation with Nevio, our AI powered next-generation airline IT platform. Nevio's leading capabilities are being recognized by existing and prospective customers, increasing our competitive advantage and further deepening our customer proximity. Nevio has a distinct value proposition. It allows us to offer our customers the possibility of doing much more, and it also allows Amadeus to better attract new customers, thanks to its modularity. We are active in numerous RFPs. We continue to advance negotiations and we aim to expand our group of Nevio customers. In the quarter, we continued to deliver new Nevio capabilities. Finnair has introduced a significant step in airline retailing becoming the first airline to launch native ancillary combos, powered by Amadeus Nevio product catalog. This is part of our offer management offering and consolidates our products and services into one catalog. It is a single repository for all content that an airline can offer to travelers. These products and services can then be provided by the airline directly or by third parties, and they can be offered individually or bundled into an offer tailor to the traveler, and they can also be self-service purchases by the traveler. In hospitality, we have become a leading IT provider to the hospitality industry. We believe the Amadeus platform offers the most comprehensive portfolio of core capabilities to the hotel industry and is the most probably connected ecosystem of partners. We are uniquely placed to address industry needs and expand in this large and growing market. We are progressing well with the implementation of Marriott International and Accor to the Amadeus hospitality platform. The first Marriott International properties are now live in -- on ACRS and progressing well with more to be rolled out around the world over the next few months. Feedback on capabilities has been positive. InterContinental Hotel Groups, MGM, Marriott International, Accor and now the Ascott Limited, we are creating a global community platform of world-leading hotels and a mission to transport relationships with guests. Amadeus' travel platform is a platform that enables travel providers around the world to retail through third parties everywhere on the globe. This quarter, we expanded its reach by adding new travel sellers and increasing our share of wallet with existing travel seller customers, for example, with Trip.com. We also expanded the content bookable on our platform, for example, with low-cost carrier flyadeal, enhancing the platform's attractiveness. We also continue to sign new NDC agreements. Our goal is to become the undisputed aggregator of NDC content and we believe Amadeus has the most advanced and compressive NDC technology in the industry, and we aim to do NDC at scale. Finally, regarding our technological capabilities, including AI, Agentic AI promises to transport travel in positive ways, bringing increased personalization to travelers as well as productivity and efficiency gains across the value chain. We are uniquely placed to deliver Agentic AI functionality into our installed customer base and into new customers. Amadeus can build solutions for the travel industry that others cannot easily replicate. Our technology is natively integrated into travel players covering critical end-to-end flows and managing vast amounts of extensive data in travel. We have identified over 500 potential use cases whereby applying generative AI, we can bring value to our vast customer base through the announcements of our products or the creation of new ones as well as for internal efficiencies. We are enhancing our solutions together with our customers with very positive feedback. Some that had been launched already are Cytric Easy AI assistant for employees to plan and book personalized corporate travel with the Microsoft teams, Amadeus Advisor for leveraging business intelligence in hospitality. We have trained and deployed several productivity boosting AI agents for travel sellers on top of our selling platform, Connect. We are additionally investing in call center automation for airlines. We have received huge interest for this and it is a clear opportunity for all travel providers and travel sellers to gain efficiency and productivity at call centers. We are expanding our hospitality platform as well with Ascott for an AI automated call center powered by Amadeus and Salesforce. And we are also actively engaging with AI platforms to assess how we can best serve them within the travel industry. Please turn to Slide 6 for our most recent developments in Air IT Solutions. We continue to see great success in revenue management through the quarter. Amadeus innovative modular AI power and data-driven revenue management technology enables customers to optimize pricing, enhance operational efficiency and respond dynamically to market changes. Qatar Airways, Vietnam Airlines and Jazeera Airways have contracted for Amadeus Revenue Management solutions. Also as part of its acceleration towards modern retailing, Singapore Airlines has implemented Amadeus Dynamic pricing. We expanded our Altéa customer base in Asia with both Sun PhuQuoc Airways and Air Borneo contracted for our Altéa PSS. Several customers expanded the scope of solutions adopted from our portfolio, including Wizz Air, Aeroitalia, Malaysia Airlines, FireFly and Air Sial. In Airport IT, we continue to deliver innovative solutions. As I previously mentioned, we introduced Garv, an AI agent that enables better decision-making. Also together with Lufthansa, we successfully tested the biometrics enabled EU Digital Identity Wallet. This is an initiative led by the EU Commission that aims to have a digital version of EU ID, passport and driving license in an EU Digital Identity Wallet by the end of '26. We also have commercial wins with customers such as Manchester Airport, Changi Airport, Aeropuertos Mexicanos and Alyzia Handling who added solutions from our portfolio. Moving on to our volume performance in the first 9 months of the year, Amadeus PB grew by 3.7% or 4.3%, we exclude the leap year effect in the base driven by the global traffic evolution in the period, supported also by the Vietnam Airlines implementation, which slapped in [ April '25 ]. All of our regions, excluding North America reported solid growth. Asia Pac was our fastest-growing region, reporting 8% PB growth. In North America, Amadeus PB evolution was impacted by soft performance of some of our customers in the region. Western Europe and Asia Pac were our largest regions. In the third quarter, Amadeus PB grew 2.2%, moderating slightly relative to quarter 2, mirroring global traffic growth but with an improving trend within the quarter. You will see PB volume growth moderation in the quarter was more than offset by revenue growth by an accelerating revenue per PB. In the first few weeks of October, we have seen our PB volume growth trending ahead of quarter 3. Slide 7 for our developments in hospitality and other solutions. In the first 9 months of the year, the segment's revenue grew 8% at constant currency, supported by positive trends and evolutions by new customer implementation and increased volumes at both hospitality and payments, particularly in quarter 3, which supported revenue growth acceleration in the quarter. We have commercial wins in the third quarter across our business domains. I was saying before, we are pleased that the Ascott Limited has contracted for Amadeus Central Reservation System, represents a step forward in Amadeus' journey to transform the hospitality industry through its ACRS community and it demonstrates the value of our open and scalable technology for hoteliers of different sizes and needs. We'll also span our hospitality platform with Ascott with our AI power automated call centers for hoteliers. Our Business intelligence solutions continue to attract new customers, such as EOS Hospitality and Scandic Hotels. Our Business Intelligence solutions include Amadeus Advisor and AI agent designed to simplify that access and empower hoteliers with smarter insights to drive more informed decisions. Further on the AI front in hospitality, we have built an AI power solution within meeting broker to automate and accelerate hotelier's responses to group and events RFPs. Trip.Biz part of Trip.com Group expanded its hotel distribution agreement with Amadeus to support its continued growth outside of China, and Abu Dhabi's Department of Cultural and Tourism, and Adeera Hotel Group based in Saudi Arabia are adopting Amadeus Digital Media Technology. In the quarter, we expanded our partnerships. We have partnered with Shiji, a global provider of hospitality technology solutions to offer hotels a combined offering, including industry-leading reservation, property management, guest experience solutions through a single provider. We have also partnered with Sensible Weather, the leading weather warranty provider for travel and hospitality to integrate automatic reimbursement capabilities for unexpected adverse weather conditions into the Amadeus iHotelier Central Reservation System. In payment, Outpayce has made progress in scaling our payments offering. We have initiated the issuing of prepaid virtual cards and implemented various new customers such as HBX Group, who are now in production. Also Sweden-based tour operator Sembo and Hong Kong-based Junting Travel has expanded their B2B wallet agreements with Amadeus. Please turn to Slide 8 for our distribution highlights. During the third quarter, we signed 14 new contracts or renewals of distribution agreements with airlines, including low-cost carrier flyadeal, taking the total to 43 for the first 9 months of the year. To date, we have signed 75 NDC agreements with airlines, including Riyadh Air in the third quarter and 35 airline services in content accessible to the Amadeus travel platform. We had great commercial developments with major travel agencies. We expanded our travel seller customer base with travel management companies such as Corporate Information Travel in Malaysia an UOB Travel in Singapore as well as with leading French tour operator Voyageurs du Monde. All of these travel sellers will benefit from access to the broadest range of travel content, including NDC. We strengthened our relationship with online travel agencies such as Trip.com, which expanded its agreement with us and Fareportal, which continues to scale its NDC option through the Amadeus travel platform. Retail travel agency, Internova Travel Group and tour operator Cercle de Vacances expanded their partnership with Amadeus to also include NDC content. To review our volume performance in the first 9 months of '25, Amadeus bookings grew by 2.7% or 3.1%, excluding the leap year effect supported by continued commercial gains across regions most notably in Asia Pac, which was our fastest-growing region, growing 12% over prior year. In third quarter, Amadeus booking growth accelerated to 4% from a softer Q2 growth backed by a more stable overall global environment compared to first half. Growth accelerated across most regions, particularly the Middle East and Africa, Asia Pac and Western Europe. The volume growth acceleration in the quarter offset the expected moderation we saw in revenue per booking growth in quarter 3, which can sometimes be lumpy. And to the first weeks of October, we have seen a moderation in our booking growth relative to quarter 3. With this, I will now pass on to Caroline to review our financial performance. Caroline Borg: Thank you, Luis. I'm delighted to be presenting our strong Q3 results today. So please turn to Slide 10 to review our solid financial performance to date with high single-digit revenue and adjusted EBIT growth at constant currency coupled with steady free cash flow generation, reinforcing our expanding relevance in travel. Given that the first 9 months of the year, the U.S. dollar has depreciated significantly in relation to the euro, we are displaying our performance of revenue, EBITDA, adjusted EBIT and free cash flow versus prior year also at constant currency to facilitate understanding of Amadeus' underlying financial performance. More details on our exposure to FX on our constant currency calculations as well as complete information on our IFRS figures and their evolution are available in the appendix of this presentation and in the Amadeus' January to September 2025 management review. In the first 9 months of the year, we've delivered strong growth across many of our key financial metrics. Revenue of EUR 4,895 million, 8% growth at constant currency, 6% reported growth. Operating income of EUR 1,420 million, 8% reported growth. Adjusted EBIT of EUR 1,471 million, 9% growth at constant currency, 8% growth reported. Profit of EUR 1,088 million, 10% growth and diluted EPS at 11% growth. Adjusted profit of EUR 1,109 million, 8% growth and diluted adjusted EPS of 9% growth. Free cash flow of EUR 955 million and expected 2% below prior year. Leverage at 0.9x net debt to the last 12 months EBITDA as at the end of the period. And as you know, we've been ongoing -- we have an ongoing share repurchase program for a maximum investment amount of EUR 1.3 billion, which I can announce just completed yesterday. Our 2025 outlook at constant currency remains unchanged. So now let's go to Slide 11 for our revenue evolution at constant currency. Our group revenue grew by 8% as a result of revenue expansion across all of our segments. Air IT Solutions revenue growth of 7.9% was driven by the PB volumes that Luis has just described previously and a 4% higher revenue per PB, which is fundamentally resulted from positive pricing impacts from new agreements and renegotiations, upselling of our incremental solutions, including those from Nevio and inflation. And in addition to that, we delivered strong growth of our airline expert services and our airport IT businesses. These effects were partially offset by a negative platform mix as Navitaire New Skies outperformed Altéa. We expect that revenue per PB growth to moderate in Q4 relative to Q3. Hospitality and Other Solutions revenues grew 8.1%, which was largely driven by the hotel IT, hotel distribution and business intelligence domains, supported by customer implementations and increased volumes. As we communicated in H1, Digital Media revenue growth showed an improvement in Q3. Revenue growth was also driven by payments where both our merchant services and payout services businesses expanded notably. As we have communicated previously, we expected revenue growth for this segment to accelerate into the second half of the year. In Q3, we have delivered faster revenue growth relative to the prior quarter, and we expect this growth to continue to accelerate again in Q4. Air Distribution revenue growth of 8% was driven by the booking evolution that Luis has just described previously, coupled with a strong revenue per booking growth of 5.2%, primarily resulting from positive pricing effects, including contract renewals, new agreements and inflation. As Luis mentioned, these effects can be lumpy in nature. And as we communicated in our half 1 results, revenue per booking growth in Q2 was exceptionally high with revenue per booking growth in Q3 moderating as expected and we expect that moderation to continue into Q4. So now let's go to Slide 12 for a review of our adjusted EBIT evolution. At constant currency, our adjusted EBIT grew 8.7% resulting from the 8% revenue evolution discussed on the previous slide. And in addition, our cost of revenue growth of 3.1% is fundamentally driven by an increase in transactions such as in air distribution and hotel distribution bookings and in payments due to the B2B wallet expansion. Reported fixed cost growth of 8% mostly resulted from, firstly, an increase in resources, particularly in our R&D activity, coupled with a high unitary cost. Secondly, higher cloud costs due to a combination of our own volume growth and also to our progressive migration of solutions to the public cloud as we continue to mature. And thirdly, to the Vision-Box consolidation impact in Q1. Fixed cost growth is expected to moderate in Q4 relative to Q3. Ordinary D&A expense increased by 4.2% as a result of higher amortization of internally developed software, partially offset by a lower depreciation expense at our data center given the migration of our systems to the public cloud. At constant currency, EBITDA margin was 39.1%, slightly below prior year, and adjusted EBIT margin was 29.8%, a small expansion versus last year. So now on to Slide 13 for a review of our adjusted profit evolution. Adjusted profit grew by 8.2% as a result of our adjusted EBIT growth, lower net financial expenses and higher taxes than last year. Diluted adjusted EPS grew by 8.9% in the period. Net financial expenses declined driven by lower average gross debt and cost of debt and taxes increased as a result of higher taxable income and a higher effective tax rate at 22%, which was impacted by the changes in local tax regulations and lower tax credits expected for the year. Adjusted profit evolution in Q4 2025 will be impacted by the unusually low effective tax rate that we had in the same period last year, Q4 2024, resulting from positive effects coming from previous years compared to the 22.1% tax rate expected for Q4 2025. Now on to Slide 14 to review our R&D and capital expenditure. As Luis was saying before, reinvesting into our business is the #1 priority for us. To evolve our technology capabilities and solutions for the benefit of our customers is something we are proud of, and it is hugely important to continue to enrich the competitive advantages we have built through the years of leadership in travel. At September, our year-to-date R&D investment grew by 10.6%. Half of our investment was dedicated to the expansion of our portfolio and the evolution of our solutions and AI capabilities, including Amadeus Nevio, Navitaire Stratos for airlines, our hospitality platform, NDC technology for airlines, travel sellers and corporations and solutions for our airports and payment services. 1/4 to 1/3 was dedicated to customer implementations across our business such as Marriott International and Accor for ACRS, our new Nevio customers, as Luis was previously saying and airline portfolio upselling, and customers implementing NDC technology as well as efforts related to bespoke consulting services provided to our customers. The remainder was dedicated to our migration to the cloud and our partnerships with Microsoft and Google as well as the development of our internal technology systems. In the 9-month period, our capital expenditure increased by EUR 80.5 million or 15.3%, mainly driven by higher capitalizations from software development. Capital expenditure represented 12.4% of revenue in the first 9 months of the year. And now on to Slide 15 for a review of our free cash flow generation and net debt evolution. In the first 9 months, we generated EUR 955.2 million of free cash flow. Free cash flow was slightly below our prior year by 2.1% as we expected and as a result of increase in our capital expenditure, as I just previously discussed, deployed to elevate our portfolio of solutions and to strengthen our value proposition. We also had an increased change in working capital outflow and taxes, partially offset by our EBITDA expansion and a reduction in interest payments backed by lower gross debt and cost of debt versus prior year. In Q4 and the full year free cash flow growth will be impacted by nonrecurring tax collections that increased free cash flow in 2024 by EUR 107 million in Q4 and EUR 116.2 million in the full year, as we described in the full year 2024 management review. Net debt amounted to EUR 2,219.9 million at the end of September, EUR 108.6 million higher than at the end of December due to the acquisition of treasury shares under the share buyback programs, including our ongoing EUR 1.3 billion program, which, as I said previously, has just completed as well as the dividend payment and a small acquisition in the Travel Intelligence space, partially offset by our free cash flow generation and the conversion of bonds into shares. Our leverage is 0.9x net debt to EBITDA as at the end of September. And finally, please turn to Slide 16 for our current views on 2025. In the first 9 months of the year, we've delivered steady and profitable growth, demonstrating the resilience and diversity of our business. We entered the last year of the year with confidence to deliver our group results within our 2025 outlook guidance range at constant currency, with revenues growing at the lower end of the range and EBITDA and adjusted EBIT growing faster than revenues. With that, we have finished the presentation, but before we open to questions, I'd like to share that this year we'll be presenting our full year 2025 results in person in London at the London Stock Exchange. We will be publishing a save the date on our website and circulating the information soon. We look forward to seeing you there. With that, we can now open the call to take any questions. Operator: [Operator Instructions]. We'll take our first question comes from Alex Irving with Bernstein. Alexander Irving: Two from me, please. First, on our distribution. Do you see the LLM, ChatGPT and so on, becoming a major distribution channel for airlines? And what steps are you taking to position for this? Second, if you do see this becoming an important channel, then does this create the ability for airlines to reduce their dependence on GDSs given the LLMs should have both the scale and the technological competence to plug directly into airline APIs. And would you expect airlines to offer content parity with GDS channels or to advance their own channels when selling through LLMs? Luis Camino: Okay. Look, let me see how I see things. Of course, we will need to see how things evolve. But you know the travel space is complex. There is a lot of content fragmentation that in my view, needs to be aggregated and standardized and if we also think about the transition to offer an order and dynamic pricing capabilities, this will even add more complexity in the future in the way to really connect to travel providers and to really get the content. So whoever wants to consume travel, we'll need to work in my view, with people that can provide this content in a perfect way. I mean we are not just talking ourselves. We are talking about the need to be service and we also need to see that the look-to-book ratio is reasonable. You know that with NDC is already a challenge in terms of the number of transactions per booking. And with AI, this could be even more costly. So based on all that, we don't believe the goal of the AI platforms will want to become merchants, to be content aggregators and deal with all this complexity, we feel that these platforms will need real-time pricing, not static content. And you have seen many of them reaching today agreements with online TAs to get this content. So yes, there will be changes. This is a constant in our industry. We will target that as an opportunity. I mean, as you probably know, we are the largest provider of airline.com engines. We are the largest processor of online travel agency, and we work a lot with metasearchers. So this is -- the metasearch was also something that appear and we work with the majority of them. So our goal really is to keep our role. Of course, as an IT provider. And as I mentioned during my presentation, we have a lot of cases. This is going to be normal for any technology company, and we also feel in distribution we can play a role to orchestrate what is coming. And yes, the AI platforms will be a new channel of getting into the final booking, and we are engaging with them as we do with the metasearches to see how we can play a role. So we feel quite confident about that, but also we need to see how things evolve in the future and what is the final intent of the AI platforms. Operator: The next question comes from the line of Adam Wood with Morgan Stanley. Adam Wood: Maybe first of all, you made an interesting comment about the opportunity in call center automation. Maybe first of all, could you just talk a little bit about how far along you are from a technology point of view on that? And then maybe more importantly, from a strategy point of view, I guess that's a very labor-intensive industry today. It's not going to be a technology replacement cycle immediately. There's going to be a need to move from one to the other. I guess you don't want to hire a lot of labor to help manage that transition. So can you just talk a little bit about what the strategy is to help people move from your labor incentive call center operation to one that could be powered by your technology. And then secondly, we're obviously seeing flight restrictions in the U.S. Would that be included in the guidance range that you've given? Or would that potentially create downside if that was to persist through the end of the year? Luis Camino: Okay. Again, we don't know what will be the impact in the U.S. But with our current figures year-to-date, I mean, we feel confident we can manage I mean again, it depends how things evolve, but it's already assuming that in the U.S., there may be some impact. As you know, we have more or less 20% of our volumes in the U.S., less in PBs. Hopefully, this will be short. But again, I think an impact may happen. Of course, this may impact us in that part of the world, but we expect to be within the range that we have provided to you. With regards to the call center automation, we are working in pilots and working very closely with customers. We believe this is an opportunity. Again, I mean, is not new to us because we have been delivering technology on this front, and there will be a transition to things that we are delivering, both for our customers, but also internally in the way we operate. So we are quite advanced in working with airlines. And of course, in many cases, we are in pilot mode. In other cases, we have launched the technology, but all that is moving well. That's what I can say. Operator: The next question comes from the line of Sven Merkt with Barclays. Sven Merkt: Maybe one on hospitality. Obviously saw a very good improvement in growth in the third quarter, and there are reasons to believe that we should see a further improvement in Q4. That said, you still need a substantial acceleration in the fourth quarter to hit the low end of the full year guidance. And therefore, it would be great if you could comment on your confidence on getting there? And then secondly, could you please give us an update on the cloud migration. Is there anything you can say more precisely when this will be completed? And what impact we need to take into account in our cost and cash flow modeling for the upcoming quarters? Caroline Borg: Yes. Great. I can take both of those. So let's start with the hospitality acceleration. We've seen well, firstly, we mentioned that half 2 would accelerate beyond half 1. We also mentioned that we would be starting to see some recovery in our media slowdown from half 1. So elements of our hospitality business that have really benefited in the Q is our Hospitality Distribution business. As I said, recovery of Media, our Business Intelligence operations and our operations in payments around our merchant services and our B2B Wallet. So we've been very pleased with the improvement and the growth in hospitality. And we do expect that to continue to accelerate into the future -- into Q4, particularly. We also mentioned, Luis mentioned our implementation of Marriott, and we're starting to see that ramp up come through within Q3 and Q4. So we do feel confident in our Q4 projection for hospitality to continue to accelerate its growth. With respect to your cloud migration cost, we are in the high 90s percent complete, I think about 96% complete. We expect to complete early in 2026 and we're starting to see the evolution of our cost base as we transition through our cloud migration. It is true that there'll be some costs that we will not recur once we move to the cloud migration. Those costs are costs that are purely related to the migration activities. But given our ethos of reinvesting ourselves into our solutions and product offerings, we expect to redeploy a lot of those people into other activities. So the impact, we will see fixed costs growth moderating, continue into Q4, but the impact will not be that big from the cloud migration per se in terms of cost evolution. Operator: And the next question comes from the line of Toby Ogg with JPMorgan. Toby Ogg: Perhaps just on the growth side. So you've been running at 8% year-to-date ex FX revenue growth so far, and you're continuing to steer towards the lower end of the 2025 growth guidance. Just thinking about the midterm growth guidance of 9% to 12.5% growth CAGR that, I think, implies that growth next year should accelerate. Could you just give us a sense for how confident you are around that acceleration? And then what gives you that confidence? And then just secondly, just on the comments around the first week of October. You mentioned an improvement in the PB growth versus Q3, but a moderation in the air bookings growth versus Q3. We're now a week into November. Is there any color that you can share just on how those metrics have been trending through the remainder of October? Luis Camino: Okay. Look, it's -- again, there are seasonality matters. What we have seen overall is that October was a bit weaker. But again, there are some seasonality effects, mainly in Asia Pac as we had in India, some holidays and in Korea, some specific volumes. So you always have these kind of cases. So this was the main reason, which is not happening in November. It is true that in November, and in the last part of October, we have seen some impact in the U.S., as I mentioned before, not much, but yes, some weakness there. So I will say bookings underlying are healthy. We don't see in the rest of the regions, any change compared to what we have seen in the previous months. But again, in October, there were some specific matters just in Asia. And in November, this was not there, but we have seen some weakness in the U.S. So if we exclude these effects, the volumes will be quite positive. Caroline Borg: Yes. And if I take the question on our FY '26 growth trajectory. Look, firstly, we're not going to give '26 guidance today. We will come back in February with our 2026 guidance. However, to your question, we did communicate our midterm guidance, which covered 2026 at our Investor Day a number of years ago. We've delivered a strong 2024. We are on track to deliver a good 2025. So we are quite confident in our midterm guidance at a group level to maintain those CAGRs of 9% to 12.5%. But as I said, we will come back with more details on segments in February and tell you more about our evolution on how we see things once we've closed FY '25. Operator: And the next question comes from the line of Victor Cheng with Bank of America. Hin Fung Cheng: Maybe, first of all, do you see potentially more risk maybe from Direct Connect given NDC is now maturing at version 24.1 and AI is helping build these pipelines. I think in Q3 earlier, there is one large tech savvy TMC that switched from using GDS to direct connect for NDC content. So is that -- do you see that as a risk of more of that happening? Or is it more of a one-off scenario? Luis Camino: We don't see an increase in direct connect to be honest. And I think I have mentioned myself that I don't believe on direct connect in general, it is expensive for both parties, requires adaptation. And if we think about NDC, there are new versions, that, of course, both parties will need to really support airlines and the travel agencies and adapt to that. There are not so many travel agencies that have global systems. And that means that, yes, when you deal with one system different in each country, you need to connect and try to really do this direct connect per country. Of course, you need to aggregate all these direct connects and then the rest of the content. So -- and then yes, I mentioned already the look-to-book ratios and the fact that the GDS has optimized that, and we are working really in trying to see with NDC and also with AI, how this is going to be handled in the sense of having intelligent search that is not hitting the inventory of the airlines every time there is a request because otherwise, this will be difficult to manage. So I don't think direct connects will be the norm. Again, we have said there are some specific reasons for some specific parts of the inventories that can work. But in our conversations, we don't think there is any push today in general, of course, there could be exceptional or specific cases in general from the travel agencies to really move into that direction and deal with the airlines. So we feel the contrary. There are more conversations about how we can bring back part of this content with the right technology and in the right way. Hin Fung Cheng: Very clear. And if I can have one more follow-up. I think you have detail of interesting AI developments from Amadeus. But maybe can you help me understand on a high level, how you view Agentic AI can disrupt the distribution market either from a workflow perspective or from a structure or an economics perspective, any potential channel shifts or how Amadeus can participate and position itself in the new workflow? Luis Camino: I mean, again, I tried to explain before, probably without much success. But I mean, again, we feel -- it depends how things move, of course, but we are extremely well positioned to really deal with whatever technology, including that. There will be a new channel. Yes, there will be a new channel of search and shopping. This has happened. Again, if you think about the way the metasearch works, including Google, of course, we will need to see how the AI platforms move and what is their intention. We don't think they will become a merchant, as the metasearchers are not doing so. And therefore, we are in a position to really provide them with the content that is required. I mean, moving -- because they don't need a static content, they need real pricing if they really want to move ahead and we don't think it's in the interest to really integrate vertically and try to really deal with all the complexity of the servicing and all the complexity of the pricing that is required, which is not an easy task. Therefore, our goal is to really be content aggregation to really orchestrate the needs of the AI platforms. But of course, yes, there will be a new channel of sales and inspiration and they will need to really go through the process with providers. Some of them are already working with some travel agencies, some of them, we can provide IT services as we do. I mean, we also announced in the last quarter our partnership with Google to deal with our Meta Connect, and this is a proof that both as they deal with metasearch and now the Agentic AI, we'll need to work with partners, and we feel we have this capability. And again, I was mentioning, of course, the huge amount of transactions that this may generate if -- I mean, this is not for free. As you know they need to use a lot of data, a lot of hits to the system and therefore, we aim to be orchestrating all that as the key technology provider. And that's our goal. And again, we engage with AI platforms. We engage with airlines about all that and as we have done at the times of other technology changes, we aim to be playing that role in the middle. Operator: The next question comes from the line of Charles Brennan with Jefferies. Charles Brennan: Great. Maybe I'll just start with a clarification on the hospitality side, actually. You seem to attribute the revenue increase more to the media side and maybe payment side. In the prepared remarks, I didn't hear you reference Marriott. Can you just confirm that Marriott did start as planned in Q3? Or were there any delays in that contract? And then with Ascott, we've seen these hotel chains take years to come on board and contribute to revenue. Should we assume that's the same for Ascott. Is it more of a '27 revenue event than '26? And then separately, can I just ask about pricing and the pricing algorithm that we should expect more broadly across the group. I think you're flagging in both Air IT and Distribution, we're going to see pricing per booking and PB declining in Q4 relative to Q3. I know you said you weren't going to give us guidance for 2026, but can you just talk through the broad algorithm that gets us to the pricing dynamics for '26 between underlying inflation and perhaps the non-volume-related revenues that feed into that pricing equation? Luis Camino: Let me deal with hospitality. I mean we didn't mention as a key impact because the impact is already happening, but it's small. We started to really work with properties, but it's completely according to plan. And in the coming months, well, as we speak, we keep rolling into more properties. But the main impact, as we said for months will happen in '26, so there is no delay. Everything is moving according to the plan, but we started slower than we will have in the coming months when we see everything is working properly, which is the case. With regards to Ascott, yes, we will start the migration in '26. So it will not take so much time because the platform is much more mature, but we should expect the impact in '27. Caroline Borg: Yes. And then in relation to the revenue growth, maybe I'll bring it a little bit more into the FY '25 because we wanted -- we want to deliver FY '25 first as a jump-off point for '26. And as I said, we'll give some FY '26 information in February. I think Luis adequately said that there is still some volatility in the macroeconomic environment, so we could see a moderation in group revenue growth in the Q4. And that's driven by what we're already seeing in terms of booking volume moderation that we've started to see in October. We've also seen some softening of our revenue per booking due to the timing of our customer, negotiations and renewals. We are seeing some softening revenue per PB due to pricing dynamics and we will -- we do expect to have a lower growth in service -- in our service revenue in Q4, but all of that is offset, as Luis was mentioning, by the acceleration that we are delivering in hospitality. We are seeing some really good implementation on our customer implementations and ramp up. And I apologize if I missed that off the script, but that's definitely a key part, recovery of our media business and the activities and commercial momentum that we gain across our payments businesses. Operator: And the next question comes from the line of Michael Briest with UBS. Michael Briest: Great. It's good to see distribution back at, I guess, nearly 90% of 2019 levels. But looking at the regional color, it's very diverse. So I mean, Europe is still maybe 30% below Latin America, nearly 40% below, while Asia is over nearly 25% above 2019. Can you talk to the dynamics in that market? Is that your win rates and competitive dynamics? Is it the way the airlines and the agents have adopted NDC and direct connects? That would be the first question. And then on the buyback, you're almost 80% done, leverage is the same as it was at the start of the year. Presumably you're completed in Q4, conceptually, do you feel comfortable if there's no M&A that we could maybe see further buybacks in 2026? Luis Camino: Okay. In terms of volumes, again, it's difficult to really come back to 2019. But as we have mentioned, there can be in the distribution business as in the past, the fact that low-cost carriers were growing faster during many, many years, including in '25, in many parts of the world, okay? I don't remember exactly where all the details of the comparison with '29. We also move out of Russia at one point. So there are a number of effects where we have been impacted. And yes, there has been a move that has happened in the previous years of full service carriers selling more direct and less to the travel agency. So some of the most easier in the disintermediated volumes have moved to alternatives, mainly the direct sales more than really direct connects, okay? Some direct connects, but the majority of that has been the normal way of airlines pushing more direct sales. So that has been mainly what has happened when you talk about 6 years not very, very different when you compare 2019 with 2012, to be honest, we have always seen this disintermediation effects. We are seeing less in '25, as you see from the volumes that we are reporting and when you see the growth of passengers. But still, yes, I mean there are some of these dynamics that are still there. And that's clearly a reality despite that fact. I mean we have been able to really offset part of that with share, with bringing back some volumes and we feel optimistic about this business moving forward. Caroline Borg: Yes. And maybe I'll take the question on buybacks, which effectively talks to our capital allocation policy, which, as you know, and you will expect me to say, we do have a disciplined capital allocation policy, prioritizing the investments that we're making to drive organic revenue growth. I think we mentioned that a lot. In addition to the dividend policy, we also completed the buyback this year and M&A still remains and has been a really key relevant part of our growth strategy. So we continually review all of those pillars and what other potential uses of our funds moving forward. And we will come back in February when we're in the process of setting our budget expectations at the moment and we'll come back in February with any changes to that dynamic. Operator: The next question comes from the line of James Goodall with Rothschild. James Goodall: So firstly, just sort of coming back to Investor Day, where you outlined your medium-term targets. You also gave us a TAM for all of your various business segments of EUR 41 billion. I guess, since then, we've seen a fairly material evolution in terms of the products that you're offering and where you're sort of headed. Does that mean that you'd see a larger TAM today than you did back at Investor Day? And then secondly, on Nevio and Stratos, we haven't seen a new customer for a while and Nevio was still waiting for one on Stratos. Are you comfortable with the current pace of agreements there? Is there any color you can give us in terms of how conversations are going with network airlines and LTCs and what we should sort of expect over the next sort of 12 to 18 months? Luis Camino: Let me start with the last one. Yes, I mean, we have a lot of engagements as we speak. So the probability of having something close is high. I will say. But more than that, it's difficult to say because nothing is done until it's really done, okay? So hopefully, this will happen. But what I can say is that engagement is high. We feel and we believe the potential of that is very good for airlines. And therefore, there will be a natural move into offer an order in the medium term. The question is when but we have the feeling things are accelerated in terms of engagement with carriers. But of course, from that, we need to get the agreement with them and sign a contract, but the prospects are positive. And with regards to the TAM, I mean, in theory, you are right. I mean we are expanding our solutions in many parts of our business. We have not revisited that number, so I cannot give you what will be the number today. We don't have that -- but in theory, yes, I mean we are addressing more parts of the travel industry. So in theory, this should extend the EUR 41 billion. Operator: The next question comes from the line of Laurent Daure with Kepler Cheuvreux. Laurent Daure: I also have 2 questions. The first is on the Air Distribution business. You commented on the higher pricing and in particular, renegotiation and new agreements. I was wondering how in this kind of environment, what are the pillars to convince your customer to pay higher prices. And my second question is on Nevio. I understand it's tough to estimate the closing of some deals, but I was wondering whether the long sales cycle in your view, mostly comes from a tough environment. Or do you believe some of your potential customers are looking to see how the first implementation will be going in the near future? Luis Camino: I mean, look, I think it's a matter of priority. This is not just about our sales providing the technology. It's also about the way the airline is aiming to really deal with our retailing capabilities. Again, I mean if you see and you listen some of the presentation of the airlines, what they talk about that, I mean they are objectives that they have. So it's a matter of when they are ready to really jump into the pool. It is also true we are developing and implementing some of the solutions. Some others are ready. So I really feel that will be traction. And then as we implement some of these carriers to really get the full benefits, of course, there will be some need for -- especially with the ones that they are working in the same alliance or with the partners that they have to really in the same logic. Otherwise, we need to be reaching between the new times and the old times. And therefore, there will be an additional pressure between them to really move into this logic. So that's why I said, look, I'm optimistic. We have seen already in our P&L already in the third quarter some revenues coming from the Nevio implementations. So progressively, we will see revenue upside in the years to come. But of course, it will depend on the timing of the signatures and the timing of the implementation. Caroline Borg: And I can take the distribution question. So you asked a question about what's the commercial kind of foundations around distribution. Well, clearly, things like commercial success, market share gains, contract renewals, agreement, inflations all affect the pricing dynamic. We also have said that traditionally, quarters can be lumpy because of the combination of those things happen. But another criteria that can also affect the pricing dynamic is really the content that is being provided. So as we transition -- as the industry has transitioned from full content agreements into relevant content agreements, we offer more discount to -- for our providers with the more content that gets provided. So there's a mix also in terms of the dynamic of content that's being shared and what the pricing drives that as well. Operator: And the next question comes from the line of Thomas Poutrieux with BNP Paribas. Thomas Poutrieux: I just have one, please. And I was wondering if you could elaborate on the nature of the expansion of your relationship with Trip.com in particular. I think this one is interesting given their own relationship with Travel Fusion. So are you basically adding NDC concerns or LCC concerns? Or is it just that geographical expansion of your historical relationship? Any color here would be helpful. Luis Camino: Yes, it is both. I mean, we are expanding with them. We have a very close relationship with them. We are increasing our set of wallet, expanding in different countries. So it's increasing the volumes we are having with them. They have been extremely -- yes, they have the ownership with Travel Fusion, but we have been independently of that, working very closely with them and getting very healthy volumes from Trip.com, and we have a very close relationship with them, definitely. So it's an expansion of a relationship, but we have had that should translate into incremental volumes for us. Operator: And that concludes our question-and-answer session. I would like to turn it back to Luis Maroto for closing remarks. Luis Camino: Thank you very much for attending the call and your questions, and we're looking forward to meet in London at the end of February. Thank you very much. Operator: And the conference has now ended. Thank you for participating. You may all disconnect your lines.
Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Direct Digital Holdings Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Walter Frank, Investor Relations. You may begin. Walter Frank: Thank you. Good afternoon, everyone, and welcome to Direct Digital Holdings Third Quarter 2025 Earnings Conference Call. On today's call are Direct Digital Holdings Chairman and Chief Executive Officer, Mark Walker; and Chief Financial Officer, Diana Diaz. Information discussed today is qualified in its entirety with the Form 8-K and accompanying earnings release which has been filed today by Direct Digital Holdings, which may be accessed at the SEC's website and the company's website. Today's call is also being webcast, and a replay will be posted to Direct Digital's Investor Relations website. Immediately following the speaker's presentation, there will be a question-and-answer session. Please note that the statements made during the call, including financial projections or other statements that are not historical in nature, may constitute forward-looking statements. These statements are made on the basis of Direct Digital's views and assumptions regarding future events and business performance at the time they are made. We do not undertake any obligation to update these statements. Forward-looking statements are subject to risks, which could cause Direct Digital's actual results to differ from its historical results and forecasts, including those risks set forth in Direct Digital's filings at the SEC, and you should refer to those for more information. This cautionary statement applies to all forward-looking statements made during this call. During this call, Direct Digital will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release that Direct Digital filed in its Form 8-K today. I will now hand the call over to Mark Walker, Chief Executive Officer. Please go ahead, Mark. Mark Walker: Thanks, Walter, and thank you to everyone joining our call this evening. I'll start by reviewing some of the highlights of our operations and financial results during the third quarter before turning the call over to our CFO, Diana Diaz, for a more detailed look at our financial results. We'll conclude by opening the call for a brief Q&A. We saw another period of encouraging growth in our buy-side segment during the quarter, with buy-side revenue increasing 7% to $7.3 million, which represented the majority of our consolidated revenue. Subsequent to the close of the quarter, we announced the first of its kind partnership between Orange 142, our buy-side subsidiary and ReachTV, an award-winning streaming network for live sports and lifestyle content reaching over 50 million travelers per month. This partnership combines the data-driven scale of ReachTV's travel media networks with Orange 142's media planning, buying and performance marketing expertise. Providing our buy-side business with new inventory and valuable data targeting segments. Together, we're simplifying how brands reach the connected traveler through a scalable model that unites data, content and context to drive measurable results for travel and tourism marketers. During the third quarter, our sell-side revenue was negatively impacted by lower-than-anticipated impression inventory and engagement levels as we continue working to rebuild publisher relationships and onboard new customers. However, we're taking a differentiated approach to this rebuild, one that leverages our unique position as one of the few companies operating at scale on both sides of the programmatic ecosystem. We're developing integrated solutions that combine our supply-side platform technology capabilities with Orange 142's demand-side marketing expertise, creating a full stack offering for clients. This dual approach can deliver tangible cost savings to customers by streamlining the programmatic supply chain while also allowing us to capture incremental margin that wouldn't be possible with the single-sided model. We're currently in alpha testing with select clients generating revenue, which fueled our quarter-over-quarter increase in buy-side revenue and early feedback has been positive. We believe this strategy positions us to grow company revenue in a more sustainable and profitable way. As many of you already know, over the last year, we faced considerable external challenges related to our sell-side business, Colossus SSP that resulted in the restructuring of teams and rethinking how we operate. A silver lining of this is that it accelerated our adoption of AI for the sell side of our business. Today, we're leveraging AI to drive innovation and agility to better position ourselves to win new opportunities. And though we're still in the very early stages, we're already seeing some encouraging results. Our overall feature set grew by nearly 40% this year, driven by the creation of 10-plus new AI modules that support both internal operations and clients. What once took months can now happen in days, projects that previously required 8 to 9 engineers and nearly a year to build now take a few weeks or less to reach testing. We've achieved hundreds of thousands in annual savings through automation and streamlined infrastructure. These efficiencies allow us to reinvest more into innovation and client value. These results are driven by our phased approach to building smarter technology. Using AI and real-time analytics, we've optimized how ad requests flow through Colossus. Now we're taking that optimization a step further, moving it to the edge of our infrastructure where requests first enter the system. This shift allows us to eliminate nonperforming traffic before it even reaches our servers, dramatically improving efficiency and reducing costs. Building on these breakthroughs, we're preparing a new suite of AI tools that will empower our existing clients in ways that weren't possible before while supporting new customers. These are just the first steps in our AI journey, and they've already shaped -- reshaped what's possible for our company. AI now touches every part of how we operate from development and analytics to decision-making and optimization. Finally, we continue to drive improved operational efficiencies and cost savings. Year-to-date in 2025, we've delivered total reduced operating expenses by $5.4 million or an approximately 20% decrease in expenses compared to the first 9 months of 2024. So we're seeing meaningful progress [Technical Difficulty] we recognize that this has been a challenging period for our business and our shareholders, and we remain steadfast in our stated goals and strategy to rebuild and grow our business back to the strong year-over-year revenue growth that we drove consistently from 2018 through 2023 prior to the short attack. I will now hand the call over to Diana Diaz, our CFO, who will walk through some of the financial highlights in further detail. Diana Diaz: Thank you, Mark, and good evening, everyone. I'll now provide a review of our third quarter results. Consolidated revenue in the third quarter of 2025 was $8 million compared to revenue of $9.1 million in the third quarter of 2024. Sell-side revenue was $600,000 in the third quarter compared with $2.2 million in the third quarter of 2024. The decrease in sell-side advertising revenue was primarily related to a decrease in impression inventory when compared to the third quarter of 2024. Buy-side revenue increased approximately 7% to $7.3 million compared to buy-side revenue of $6.8 million in the third quarter of 2024. Gross margin for the third quarter of 2025 was 28% compared with 39% in the third quarter of 2024. Operating expenses in the third quarter of 2025 were $6.1 million, a decrease of 25% or just over $1 million compared with $7.2 million in the same period of last year. The reduction is primarily related to a decrease in general and administrative costs. Expense reduction is a key strategic initiative for Direct Digital, and we're pleased with the progress that we've made so far. Our long-term goal is to efficiently minimize our cost structure while simultaneously driving growth across our business. Total operating loss for the third quarter was $3.9 million compared to a loss of $3.7 million in the same period of last year. Net loss in the third quarter improved to $5 million or $0.24 per share compared to a net loss of $6.4 million or a loss of $0.71 per share in the third quarter of 2024. Adjusted EBITDA for the third quarter was a loss of $3 million, essentially consistent with the adjusted EBITDA loss of $2.9 million in the prior year period. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $900,000 compared to $1.4 million as of December 31, 2024. Total cash plus accounts receivable balances as of September 30, 2025, was $4.5 million compared to $6.4 million at the end of 2024. We remain focused on strengthening our capital structure through multiple financing pathways. During the third quarter, we successfully converted $25 million of existing debt into Series A convertible preferred stock, substantially improving our shareholders' equity position and enhancing our financial flexibility. This momentum continued after quarter end with an additional $10 million debt-to-equity conversion completed on October 14, 2025. We've also enhanced our capital access by expanding our equity line of credit facility to $100 million, a $50 million share increase in late October. Since the program's November 2024 inception, we've raised $8.9 million through this facility and the expansion provides meaningful additional financing capacity to support our strategic objectives. Now I'd like to turn it back over to Mark for some closing comments. Mark Walker: Thank you, Diana, and thank you to everyone for joining. We appreciate your interest in Direct Digital Holdings, and we would like to now open the call for questions. Operator, please open the line. Operator: [Operator Instructions] Our first question comes from the line of Dan Kurnos with Benchmark Company. Daniel Kurnos: Mark, obviously, not the sell-side result you were looking for. We had talked about direct integration. There's a lot of noise in DSP [ land ] right now with Trade Desk basically prioritizing OpenPath, and they're obviously a big DSP partner could be. Do you think Amazon is making a bunch of noise? How do we think about your willingness to kind of pursue the historical business model in direct connect and drive volume from the DSP universe through Colossus. And then subsequently, you talked about this platform approach. Obviously, Orange 142 linking up and keeping everything sort of in the ecosystem makes a lot of sense, but you have to be able to drive both advertiser demand and publisher access and inventory to make the ecosystem grow. So just help us get a little bit more clarity on the thought process there. Mark Walker: Yes. No, good question, Dan. So we see it as a combination of both. So we think the traditional business model of working directly with DSPs, we still see that as a viable path. We think that some of the Tier 2 DSP partners that are out there are still interested in partnering. And then some of the Tier 1s are still interested in partnering and see that as a viable option. However, for the company and the way that we're viewing our go-forward strategy, more of the ecosystem platform play, we're making more investments going down that path. And that's where we have already started testing and starting to see favorable results and favorable feedback from our clients and doing some level of cost savings that we're able to provide to them. So we think that, that it's going to be for us, multiple revenue streams into the SSP for the go forward, and we're looking for more opportunities and exploring different ways to continue to drive revenue through the SSP that we actually have autonomy to control. Daniel Kurnos: And do you have the -- on the -- from the buy-side perspective, we've talked about category expansion, vertical expansion. As you kind of go through this platform approach evolution, it change your go-to-market? Does it change your ability to reach out to the buy side and suggest, hey, you can get better SPO, you can get better yields, you can get better return, ROAS effectively for the buy side anyway by running this platform approach? And how receptive have advertisers been to the new go-to-market? Mark Walker: Yes. So far, the advertisers have been -- the ones that we're in alpha testing with have been pretty favorable with that approach. And then the test that we've run, they've seen the benefit from a performance perspective and also from a ROAS perspective. So the way that we're viewing it, we've -- it's one side of our business that we've been very strong on, and that is really the revenue generation side for our buy-side business. And so we're going to continue to push towards that where we see the top of the funnel to run more dollars in revenue to the bottom of the funnel. And then for us, maintaining the publisher relationships is important. So we're continuing to focus on that as well. Daniel Kurnos: And just any color -- additional color you can give us on the Orange 142 and ReachTV partnership. You flagged it. I think it's interesting. It's kind of an adjacent into travel, which you guys already have some tourism there. So I don't know if you would consider that sort of an add-on to where you already are or if we should be looking for more of these kinds of partnerships in the future where you guys get creative with your platform? Mark Walker: Yes. The ReachTV partnership, we view that as being strategic in nature. We have roughly about [ 70 ] partners that are in the DMO advertising space. And so having a ReachTV with the data platform that they have and also, I would say, the RTM component that they actually have in many of the different airports across the United States and specifically concert that they have, we saw that as being strategic in nature and a real complement to the advertisers that are already buying with us already. So yes, we are planning on continuing to find opportunistic opportunities like ReachTV, but we felt like this one was definitely important for our platform. Operator: And your next question comes from the line of Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Just a couple of questions. You indicated that there was $2.1 million in revenue from new verticals in the buy-side in the latest quarter. And if I just extract that revenue out in the quarter, it seems like there's quite a bit of attrition. And I was just wondering if you can maybe provide a little color on where we saw the weakness. Was it particular customers, verticals? Maybe just add some color there. Mark Walker: Yes. So for us, the way that we viewed it, we definitely are going after new verticals. We're taking a strategy of going after larger customers and purposely avoiding customers that might be a little bit smaller in nature just due to the churn and internal resources that's required to manage. So strategically, we saw it as being valuable to go after different industries and different verticals and go after larger customers in those industries. Michael Kupinski: And did those larger customers then have higher margin, I would assume? Or maybe can you give us a flavor on what those larger customers brought to the table? Mark Walker: Yes. They bring more stability as they are performance-based customers. And so therefore, it's tied directly to results and then we like holding ourselves accountable to deliver on performance. So be a performance-based marketing and be a performance-based clients, we view those as being stickier in the long run. Michael Kupinski: Got you. And then in terms of -- obviously, you guys have been aggressively rightsizing the business and focusing on your higher-margin buy-side business. I was just wondering if you can kind of give us your thoughts of when you might see the inflection point towards positive cash flow? Mark Walker: Yes. Yes. We believe 2026 is going to be a positive cash flow year for us. We continue to find optimization opportunities to reduce costs, specifically around the sell-side. We want to rightsize that business to be able to baseline it and then return to growth, if you will for that business -- I mean, I'm sorry, for the sell-side. Buy-side business is quite profitable for us and continues to be -- maintain that profitability. And so we believe really, we could keep streamlining the sell-side business as well as work on top line performance and more of this ecosystem approach, which we saw favorable results in Q3, we believe that 2026 will be a cash flow positive year for us. Michael Kupinski: I was curious, given the fact that your buy-side business carries much improved margins that -- and that with the results that you saw in this quarter, particularly the number of customers you say increased 5%, but yet revenues declined 70%. Why wouldn't you just concentrate most of your effort on the buy-side instead of trying to rebuild and put so much effort into the sell-side? Mark Walker: Yes. I think what you're pointing to is just the revenue issue with the sell-side of our business. The reason we like the sell-side of the business is because once you get past the breakeven point, the operating leverage is actually quite favorable, where every incremental 20% actually falls to the bottom line. So for us, being able to figure out how to get back to profitability on the sell-side business helps the overall profitability of the entire entity, and that's really what we're going for. Michael Kupinski: And then final question. I'm sorry. Diana Diaz: Michael, a lot of the things that we've been doing with AI are allowing us to grow on the sell side without significantly increasing our fixed cost to meet that capacity. So that's the positive part of being able to generate higher revenue on the sell-side. Michael Kupinski: Fair enough. And then obviously, you made -- mention and did a lot of financings and a lot of opportunities to raise equity and so forth. Can you just kind of give us some thought about with the recent financings and so forth, where does the company stand? Are you at positive shareholder equity at this point? Or can you kind of just give us your thoughts on where you stand at this point? Diana Diaz: Yes. So we completed another conversion of debt to preferred after the end of the quarter of $10 million. So we believe we're definitely positive after the end of the quarter. Operator: And there are no further questions at this time. Mark Walker, I turn the call back over to you. Mark Walker: Thank you. And if there's no further questions, that concludes our conference for today. Thank you for participating. You may now disconnect.