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Operator: Welcome to Morgan Stanley Direct Lending Fund Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to Sanna Johnson. Please go ahead. Sanna Johnson: Good morning, and welcome to Morgan Stanley Direct Lending Fund's Third Quarter 2025 Earnings Call. I am joined this morning by Michael Occi, Chief Executive Officer; Ashwin Krishnan, Chief Investment Officer; Jeff Day, Co-President; David Pessah, Chief Financial Officer; and Rebecca Shaoul, Head of Portfolio Management. Morgan Stanley Direct Lending Fund's third quarter 2025 financial results were released yesterday after market close and can be accessed on the Investor Relations section of our website at www.msdl.com. We have arranged for a replay of today's event that will be accessible from the Morgan Stanley Direct Lending Fund website. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including and without limitation, market conditions, uncertainties surrounding interest rates, changing economic conditions and other factors we have identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof, and we assume no obligation to update the forward-looking statements or subsequent events. To obtain copies of SEC-related filings, please visit our website. With that, I will now turn the call over to Michael Occi. Michael Occi: Thank you, Sanna. Good morning, everyone. Thank you for joining us today for Morgan Stanley Direct Lending Fund Third Quarter 2025 Conference Call. We'll walk through our third quarter results, provide an update on the portfolio and share our outlook for the remainder of the year. I'll start with a few key highlights before turning it over to Jeff Day to discuss the deal environment. We generated solid performance in the third quarter as the deployment environment gathered momentum. We have witnessed a continued pickup in deal activity as the market has gained more visibility on the trajectory of interest rates and government policy. In terms of operating results, we generated net investment income of $0.50 per share, in line with the $0.50 per share that we earned in the second quarter. Our earnings in the third quarter were once again of high quality, characterized by consistently low contributions from payment in kind and other income. During the quarter, MSDL committed $183 million to new investments, representing a 23% increase relative to the second quarter. Fundings were largely offset by repayments with that organic portfolio churn constituting approximately 5% of the portfolio for the third consecutive quarter. The existing book provided a healthy contribution to overall funding activity. And nearly 75% of the non-refinancing volume during the quarter was driven by new platforms, underscoing the strength of our origination engine. Additionally, we continue to lead nearly all of our deal flow, including agency and the LBOs for FMG suite, Holdings, an incumbent borrower and [ BCTO Blue Bill ], a new platform. We believe that the combination of our deep origination team and our ability to leverage the broader Morgan Stanley franchise continues to differentiate our business in the marketplace. Sponsors increasingly look to us as a value-add partner, one that is capable of delivering more than just capital. Our breadth and depth of relationships allows us to see a vast range of deal flow, and we can remain selective given that this opportunity set dwarfs the scale of our capital base. We believe that our selective approach enables us to stay true to our mission of principal preservation as evidenced by our credit results. The Board declared a distribution of $0.50 per share for the fourth quarter, unchanged relative to prior quarters. Our dividend policy framework remains rooted in our pursuit to generate attractive and transparent risk-adjusted returns to shareholders. Even with the prospect of additional Fed cuts, we expect that gross asset yields will remain elevated in a historical context as spreads have shown some evidence of bottoming. Away from interest income drivers, we have made strides in optimizing the right-hand side of the balance sheet, including through the closing of our inaugural CLO and the repricing of our asset-based facility with E&P. We closed both of these in the third quarter, and these steps will see their full earnings benefit in the quarters ahead. We will otherwise continue to evaluate structural opportunities to enhance return on NAV without deviating from our more defensive investment strategy. We believe that our transparent revenue model, efficient and conservative debt profile, relatively low operating expense base and thoughtful fee structure highlight our strong alignment with shareholders. As emphasized last quarter, our platform benefits from Morgan Stanley's global resources and continued focus on MSDL as our platform's most visible pool of capital. The firm has continued to support the build-out of our team as part of the ongoing scaling of MSIM's credit business. We remain focused on generating long-term value for MSDL shareholders through the optimization of our defensive investment strategy and other return levers. With that, I will turn the call over to Jeff Day. Unknown Executive: Thank you, Michael. As Michael noted, activity in the private equity community has continued to ramp, likely encouraged by tariff policy actually taking effect in early August and the Fed's resumption of interest rate cuts in September. Over the course of the third quarter and even more recently, we have observed an acceleration in financing volumes as evidenced by our own pipeline build. We believe that we are now in the nascent stages of a multiyear M&A recovery poised to drive a large volume of opportunities in the direct lending market. While there is significant dry powder sitting on the sidelines today, we estimate that the demand for private financings could ultimately exceed the supply of capital by a factor of more than 2x over a 2-year period. As we have said previously, the trajectory for market volumes will not take the shape of a straight line. However, we are encouraged to see the rebound beginning to take hold. Strong risk appetite in the public markets as well as competitive dynamics in the private market have continued to weigh on pricing for direct lending deals. However, the weighted average spread on new capital deployed by MSDL in the third quarter was flat to modestly wider quarter-over-quarter, and we continue to earn an illiquidity premium of approximately 150 basis points over the leveraged loan market. While we are not expecting spreads to widen in the near term, a prolonged rebound in sponsor activity could ultimately help tip the balance in favor of lenders. Beyond pricing, we are generally still seeing reasonable EBITDA definitions, strong protection on collateral leakage and appropriately sized basket-related documentation provisions. Digging a bit deeper into our portfolio construction, we continue to believe that MSDL's portfolio is relatively insulated from direct tariff impacts and potential cycle volatility. We remain overweight in professional service businesses and underweight in more trade and consumer-oriented verticals relative to other BDCs in the market. Our largest sector exposure continues to be software, which accounted for 19.5% of our portfolio as of the end of the third quarter. This allocation is anchored primarily in ERP-related software businesses that serve as the foundational infrastructure and contains the data for their end customers, which we believe will be more insulated from AI disruption. From a borrower segmentation perspective, we continue to believe that MSDL is positioned in the sweet spot of the middle market with the flexibility to take advantage of attractive credit opportunities across the size spectrum. For the second consecutive quarter, the weighted average borrower EBITDA for new platform deployments exceeded approximately $120 million. Our target remains in that plus or minus $90 million EBITDA range. However, our wide deal funnel has identified what we believe to be attractive risk-adjusted return opportunities slightly more upmarket over the past 6 months. Our portfolio has continued to perform well, particularly considering the unprecedented economic backdrop that we have lived through. where we have seen weakness, it has generally been categorized by idiosyncratic issues rather than indicative of any broader underlying macro trends. Our borrowers have weathered the heightened inflation and initial bouts of tariff with remarkable resilience. Over the last several quarters, we have seen stability in loan-to-value profiles, interest coverage ratios that have ticked modestly higher and EBITDA margins, which have remained relatively healthy. We think that these credit attributes make for a compelling risk-adjusted return proposition for our shareholders. Stepping back, a unique set of conditions is taking shape that could produce sustained tailwinds for the credit environment. The Fed's increased focus on labor market softness suggests that a continued path of monetary easing may be likely, while fiscal policy and a more accommodative regulatory backdrop are working in tandem to support the broader economic activity. Together, these dynamics are helping to drive renewed momentum in sponsor-backed M&A activity and are likely to be constructive for overall credit performance in the quarters ahead. While we remain cautiously optimistic, we are also well positioned to take advantage of potential buy of market volatility should they surface. Our strategy and capital base provide us with the flexibility to lean in when opportunities arise while maintaining discipline through changing market conditions. Looking ahead, we will remain focused on the same investment strategy that has underpinned our success, making first lien senior secured loans to high-quality middle market sponsor-backed companies and less cyclical sensitive industries. With our robust sourcing network and disciplined underwriting, we believe MSDL is well positioned to continue to source compelling investment opportunities that offer strong risk-adjusted returns and in turn, create value for our shareholders. I will now hand the call over to David Pessah. David Pessah: Thank you, Jeff. At quarter end, our portfolio totaled $3.8 billion at fair value, maintaining our strong first lien focus comprising of 96% first lien debt, 2% second lien debt and the remainder in equity and other investments. The portfolio remains well diversified with 218 portfolio companies across 33 industries with an average borrower exposure of approximately 50 basis points. Regarding credit metrics as of quarter end, the weighted average loan-to-value for our portfolio companies was approximately 40%. The median EBITDA was approximately $87 million, and our weighted average yield on debt and income-producing investments was 9.7% at cost and 9.9% at fair value, representing a decline of approximately 35 basis points quarter-over-quarter, which was mainly driven by the decline in base rates. Turning to credit quality. We removed one position from nonaccrual and placed 2 new positions on nonaccrual. Those being our debt position in [indiscernible], where our PIK note has already been on nonaccrual and Atlas purchaser, which had undergone a prior restructuring in the first quarter of 2024. Our nonaccrual rate was 120 basis points of the total portfolio at cost, which remains quite low. For our investment activity in the third quarter, we made new investment commitments of approximately $183 million across 9 new portfolio companies and 13 existing portfolio companies. Investment fundings, including fundings of existing commitments totaled approximately $198 million, offset $200 million in repayments. Moving to our financial results for the third quarter. Our total investment income was $99.7 million for the third quarter as compared to $99.5 million in the prior quarter. PIK income continues to remain relatively low representing approximately 4.1% of total income for the third quarter. Total expenses for the third quarter were $56 million compared to $55.9 million in the prior quarter. Net investment income for the third quarter remained unchanged at $43.7 million or $0.50 per share. For the third quarter, the net change in unrealized losses were $16.2 million, which was driven by the underperformance in a handful of portfolio companies. Turning to our balance sheet. As of September 30, total assets were $3.9 billion and total net assets were $1.8 billion. Our ending NAV per share for the third quarter was $20.41 as compared to $20.59 in the prior period. Our debt-to-equity ratio increased to 1.17x as compared to 1.15x in the prior quarter, and our unsecured debt comprised of 54% of total funded debt at the end of the quarter. In September, we closed our inaugural CLO totaling approximately $401 million of aggregate principal at a blended cost of SOFR plus 1.70%. In addition, during the quarter, we repriced our BMP facility, reducing the spread by 30 basis points to SOFR plus 1.95%. We expect the impact of this lower funding cost to be more evident in our fourth quarter results. These transactions, along with our 2030 notes issued last quarter, further strengthened our capital structure by increasing capacity, extending maturities and reducing our overall cost of capital. We also repurchased approximately $3 million worth of our shares during the quarter at share prices below NAV. Note that our buyback program is formulaic through a 10b5-1 program administered by a third party. Focusing now on our distributions. In the current quarter, we paid a $0.50 regular distribution. In addition, our Board of Directors declared a regular distribution for the fourth quarter of $0.50 per share to shareholders of record on December 31, 2025. Our spillover remains consistent at approximately $0.82. With that, operator, please open the line for questions. Operator: [Operator Instructions] We'll take our first question from Melissa Wedel with JPMorgan. Melissa Wedel: I think the quarter was pretty straightforward. I'm curious, though, if you could expand on some of your comments from the prepared remarks about the M&A outlook. I'm curious if you're seeing more strategic deals coming through or if you're actually seeing more sort of PE to IPO or PE to PE turnover. Michael Occi: Yes, Melissa, thanks for the question. It's a mix. I think if we think about the evolution that began in this emerging rebound, call it, 6 months ago, when we look at the pipeline today and the activity in the third quarter, pretty good diversity in terms of use of proceeds, LBOs, take privates, generally a little bit of dividend activity, incrementals. I think we are optimistic to see the continued emergence of regular way LBO activity. We're kind of seeing that emerge if we look at the pipeline. So we're pretty -- we're seeing pretty constructive activity across the board. And our expectation is that it won't be a straight line, but it should continue into '26. Melissa Wedel: I appreciate that. And then following up on just the dividend level. Obviously, that was flat quarter-over-quarter. And realizing that you've been earning NII right at that dividend level now for a couple of quarters. I'm curious how you guys think about the spillover income? And should we see NII pressure from declining base rates, would you think about using spillover income to maintain the dividend level? Or is that something that you'll continue to assess? Michael Occi: Yes. We look at the spillover as one option to help with smoothing over time and the prioritization around consistency, which we do think is important. At the end of the day, though, Melissa, earnings are going to drive the dividend power of the business. The Board is also going to remain focused on prioritizing transparency. If you kind of look at net interest income, and Dave commented on this, there's both headwinds and tailwinds as we talked about in prior quarters. From an asset yield point of view, I would highlight the fact that from an NII impact perspective, you see about a $0.015 impact associated with each 25 basis point cut from the Fed. But importantly, there's about a 1 quarter lag if you think about the impact on earnings. So the 25 bps cut we saw in September, that's a 4Q impact, the one from October, more or less a 1Q impact. And spreads are obviously a variable, too, as we commented on, we're seeing some bottoming. There's maybe diminishing marginal impacts in asset yield compression associated with that until we see spreads widen. In tailwinds category, we do have near term a pretty good offset with some of what we've accomplished on the liability side through the CLO and the ABL repricing, about $0.01 of benefit that we should stand to see in 4Q and beyond. Other levers just on an ongoing basis would include other ways to optimize ROE. And the buyback is included in that mix. Regular way deployment is included in that mix and potentially other things that we would look to enhance ROE over time. If you see significant cuts kind of going out in the future, it may not be a perfect offset, but we're going to continue to be laser-focused on optimizing ROE, creating value for investors, and that includes paying a compelling distribution that the core earnings can support over time. Operator: We'll now take our next question from Robert Dodd with Raymond James. Robert Dodd: I'm interested in the other things that you can do. You've mentioned that a couple of times, Michael, in terms of like portfolio optimization, et cetera, but also other return levers. I mean what are the sorts of things you are contemplating? I mean, are you talking about something like a JV loan fund structure or something like that? Obviously, there's a ramp-up time, right? But some of those other non- just direct lending off the balance sheet structures can enhance ROEs, but do take a while to get set up. I mean just what are the kind of things that you're contemplating there? Michael Occi: Yes, Robert, great question. What I would say is not unlike what we succeeded in doing with the inaugural CLO last quarter, we are in constant evaluation mode around various structural options that could optimize for returns in the normal course. Those options would include, but are not limited to a joint venture, which could enhance the return profile of the company, as you alluded to. Our team has experience with this technology. To your last point, we're diligent in the exploration of all of these different options to ensure that, that solution doesn't involve us actually taking more risk than we would customarily do on the asset or the liability side. Robert Dodd: Got it. Then just on the pipeline, right? And I mean, in the comments particularly about -- I think it was like expect demand for private capital, the need for borrowing could exceed supply by 2x over the next 2 years. I'd just like to -- I mean, so if that's your base case, is it your expectation that if that happens, right, if this pendulum swings the other way and there's much more demand for your capital than -- private credit capital than there is supply. Do you believe that, that is likely to result in spread widening over the next couple of years? I'm not talking about next quarter, but obviously, you gave a kind of 2-year time frame. I mean, is that your kind of base case and how you're thinking about the future for the market and obviously, this BDC? Michael Occi: Yes, Robert, great read of the commentary. I think in short, it is with the convenient caveat that it's tough to peg the point at which that balance will tip. In broad strokes, we measure the opportunity set vis-a-vis stemming from private equity middle market dry powder, maturities it being order of magnitude, something like $500 billion as we measure it over the next couple of years. The offset, to your point, is supply of capital. We think it's plus or minus $200 billion taking into account kind of ongoing fundraising in evergreen products. And so we think that, that supply/demand could ultimately tip the balance in favor of lenders vis-a-vis terms, but it's not going to happen overnight. And so those types of metrics ultimately could support that dynamic, but it's going to take time for us to see the evidence of that. Robert Dodd: Got it. And then one more, if I can. Obviously, on the pipeline, as you said, is picking up. Activity is picking up. Are you seeing -- is the quality of deals in the marketplace, obviously, you're going to focus on the higher quality but is the quality of deals keeping up with the rebound? Or is the median deal in terms of our quality of the underlying buyer, is the median deal, so to speak, starting to deteriorate? Obviously, if you're a AAA company, so to speak, you could refinance at any point in the last few years. it's the weaker end of the spectrum that hasn't been doing so. So any thoughts there? Michael Occi: Yes, it's a great question. We see a pretty good variety. The quality is there, probably at the very upper end of the EBITDA spectrum, what falls out into private credit land is limited to a certain extent by very high-quality borrowers that could just as well pursue a financing in the public market. If you take a step back and just consider the breadth of our funnel, and we've belabored this before, but it's core to our DNA and our differentiated offering. We've got a very high-quality and growing team that is serving north of 400 private equity firms, but compounding that is other areas within this institution, including a vibrant investment bank that's serving many of the same private equity firms feeding that funnel. And so I'm merely trying to underscore the point that we have a pretty good vantage point vis-a-vis the flow that we have access to. We benefit from having a little bit of a supply-demand imbalance relative to our capital base. It allows us to be selective. And so we're certainly seeing high-quality deals. We're seeing low-quality deals that we have the luxury generally of passing on, which we think is a unique testament to our business. And so I think it's a little bit of a mix in terms of quality, not inconsistent with what we've seen in the last couple of years, just the kind of volume is picking up. Operator: [Operator Instructions] Our next question will come from Kenneth Lee with RBC Capital Markets. Kenneth Lee: Just one on the prepared remarks. I think you briefly mentioned about building out the team, expansion of the MSIM platform there. Wonder if you could just further expand upon that. Wondering if there's any kind of potential additions down the line for the originations funnel there. Michael Occi: Yes, it's a great question, Ken. What I'd say is that the team has continued to grow. We alluded to that. It's a high-quality team. We couldn't be prouder of what we've assembled and continue to curate in this business, headcount approaching about 80 individuals. The redundancy in the sponsor coverage effort and just the build-out in terms of sheer headcount has supported what is this -- supported this increasing kind of volume dynamic on the deal side. We continue to leverage Morgan Stanley more broadly in the brand and the relationships, as I just alluded to. And specifically, the firm has continued to support the team expansion. So net headcount has grown by over 10% since the start of the third quarter. And that pickup is about 1/3 since the IPO at the beginning of last year. The firm remains committed in terms of the talent build, also committed to supporting this business in terms of ongoing investment in product and distribution capabilities, too. Kenneth Lee: Got you. Very helpful there. And one follow-up, if I may, on the nonaccrual side, I think you mentioned for them that there was a further restructuring after a prior restructuring. Wondering if you could provide a little bit more details around that, what drove the latest restructuring and how you see the potential recovery path there? Michael Occi: Yes, Ken, you probably point out that they were both kind of known issues. I don't know, Rebecca, if you want to address that more specifically. Rebecca Shaoul: Yes. I think specific to your -- to the deal you're alluding to, there was a restructuring that took place Q1 of 2024. The business has continued to underperform. And so there's likely to be another event that will take place. So we've moved that to nonaccrual as a result and expect that to be resolved in the near term. Operator: We'll now take a question from Ethan Kaye with Lucid Capital Markets. Ethan Kaye: Curious what drove the deceleration in share buybacks? I know you mentioned it's formulaic, but the stock multiples seem to contract this quarter. So just hoping to kind of get a better understanding of what are the other inputs into that formula and specifically, what may have caused the decline this quarter? Michael Occi: Yes, Ethan, it's a good question. As you alluded to, the plan is formula-based, administered by a third party. It takes into account various inputs such as share price, but also capital structure considerations. We're committed to the program. We acknowledge the accretion benefits associated with it. At the same time, though, we have multiple capital allocation options at our disposal. And so that includes regular way deal deployment, among other things, and those can be value generative, too. And so we think of these different options together as we measure kind of usage of capital over time, we will continue to optimize that with the goal of generating value for shareholders. Ethan Kaye: Understood. And then I guess one other quick one. So there was some migration kind of downward in the internal risk ratings you published, nothing dramatic really, but just kind of wondering whether this reflects the name or names that were added to nonaccrual or if there are maybe some other positions that experienced some negative trends there? Michael Occi: Yes, Ethan, I'll start by just reiterating that the portfolio, we think, continues to perform really well. borrower health has remained resilient in the wake of the peak inflation early days here on tariffs. We continue to see pretty good growth, top line in the double digits, mid- to high single digits EBITDA. We've seen what that interest coverage ratio grind a little bit higher over the last series of quarters. Where we've seen issues, including those that you're alluding to, it has been isolated to certain companies with kind of ongoing specific problems, which we don't think are indicative of anything systemic. But maybe I'll turn it over to Jeff to kind of comment on the nonaccruals and the migration that you asked about. Unknown Executive: Yes. Ethan, great to catch up. So we did have, as we alluded to, 2 investments that were added to nonaccrual status during the quarter as well as obviously one that had been removed. For context, that was out of a portfolio of 218 borrowers. So quite low from that perspective. These are names that were -- as Michael mentioned, these were idiosyncratic underperformance. They were names that businesses that operated in different industries, different end markets. And so the portfolio -- or the issues that they encountered were not signs of weakness in any specific industry, but really just underperformance that was unique to those individual businesses. Ethan Kaye: Great. Yes. Obviously, aggregate credit quality continues to look great. So I appreciate that color. Operator: That does conclude our question-and-answer session for today. At this time, I'd like to turn the call back to Mr. Michael Occi for closing remarks. Michael Occi: [indiscernible] executing our defensive investment strategy to drive shareholder value, and I couldn't be more pleased with our continued execution. We're confident with how MSDL is positioned in this environment due to the sourcing advantages of our unique credit platform. We look forward to providing an update on our fourth quarter 2025 earnings call in February of next year. Operator: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.
Operator: Hello, and welcome to the TDS and Array Third Quarter 2025 Operating Results Conference Call. [Operator Instructions] I would now like to turn the call over to John Toomey. Please go ahead. John Toomey: Good morning, and thank you for joining us today. I'm pleased to be here in my new role as Treasurer and Vice President of Corporate Relations. I've been with TDS for 25 years, serving as Treasurer since 2018, and I look forward to meeting and talking with you as part of my expanded role. We want to make you aware of the presentation that has been prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and Array websites. With me today and offering prepared comments are from TDS, Walter Carlson, President and CEO; Vicki Villacrez, Executive Vice President and Chief Financial Officer; from TDS Telecom, Ken Dixon, President and CEO; Kris Bothfeld, Vice President of Finance; and from Array Digital Infrastructure, Doug Chambers, Interim President and CEO. This call is being simultaneously webcast on the TDS and Array Investor Relations websites. Please see the websites for the slides referred to on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases and our 10-Qs earlier this morning. Finally, as shown on Slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings. I will now turn over the call to Walter Carlson. Walter C.D. Carlson: Thanks, John, and good morning, everyone. We are pleased to report to you on our third quarter performance and the progress we have made on our priorities for 2025. Our priorities for 2025 are set forth on Slide 3. As we reported to you in August, the T-Mobile transaction closed on August 1. The close of that transaction and the subsequent transition activities have gone well. And the successful close has enabled us to continue our progress on all our other priorities. Array Digital Infrastructure has seamlessly transitioned into an independent tower company and has hit the ground running, already showing nice growth, as Doug Chambers will highlight shortly. Doug has done an excellent job leading Array during this transition. With Array established as a stand-alone tower company, we are pleased to name Anthony Carlson as the President and CEO to lead the Array team into the future. Anthony has an outstanding business background and has led significant teams at both UScellular and TDS Telecom for the past 6 years. We are confident that he will be an excellent leader for Array. Turning to TDS Telecom. The third quarter was Ken Dixon's first full quarter as its CEO. TDS Telecom continues to be laser-focused on its fiber transformation. In the quarter, the company achieved an important milestone of 1 million fiber addresses. You'll hear more from Ken and Kris Bothfeld on this achievement and TDS Telecom's other accomplishments later in the presentation. TDS has also strengthened its capital structure, having received a $1.6 billion special dividend from Array in August, and we expect to receive additional proceeds after the close of the pending spectrum transactions. The proceeds received to date have enabled the substantial paydown of debt and will support the existing fiber expansion program at TDS Telecom. As we receive the proceeds from the additional spectrum sales, we expect to further expand our fiber program and to use a significant portion to support the new $500 million share repurchase program that the company announced this morning. Vicki Villacrez will provide additional details on our capital allocation program during her remarks. And lastly, we are keenly focused on our culture. Transformational changes are never easy, but TDS has a strong culture and our associates are effectively executing against our objectives through their continued hard work, collaboration and professionalism. I want to personally thank all of the teams whose efforts have put the enterprise in this strong position heading into 2026. I will now turn the call over to Vicki. Vicki Villacrez: Thank you, Walter, and good morning, everyone. At TDS, we are focusing heavily on capital allocation decisions in light of the UScellular transaction to T-Mobile, the debt reduction at TDS and Array and the anticipated closing of Array spectrum sales to AT&T and Verizon within the next year. At Array, we anticipate, as we have disclosed previously, that cash received upon closing of the AT&T and Verizon transactions will be used subject to the determination of the Array Board, primarily to fund ongoing business operations and special dividends. We anticipate the pending AT&T transaction of $1 billion to close either in the fourth quarter of 2025 or the first half of 2026, depending on government approval. While any decision on dividends will be made by the Array Board, we anticipate that following the closing of the AT&T transaction, the Array Board would declare a special dividend in the amount of approximately $10 per share. At TDS, our capital allocation plan has 3 priorities. The first is to invest in our fiber business. As Walter highlighted, we continue to believe that our fiber business has numerous opportunities for investments with attractive return profiles. We will use a portion of the anticipated special dividend proceeds to fund both our current fiber program and additional fiber builds that are incremental to our current goals. These additional opportunities are mostly edge-out communities adjacent to our markets and could be at least several hundred thousand service addresses or more. We believe there's an immediate window of opportunity to plant our flag and pursue investments in communities without a fiber provider. We are currently working through the business cases and we'll update you in February. Our second priority is to achieve inorganic growth through M&A. We intend to be opportunistic and disciplined only considering those opportunities that are accretive and meet our return objectives. To that end, we would specifically be interested in smaller, highly synergistic accretive M&A fiber opportunities, particularly adjacent to our existing markets. As we have demonstrated in the past, TDS will remain financially disciplined and business case-driven and any M&A pursuits. Clustering to achieve synergies will continue to be an important strategy at TDS Telecom. The company has recently divested ILEC markets that were not a strategic fit to its fiber objectives. Our third priority is to return capital directly to shareholders. In September, TDS began repurchasing its stock and bought back a little over 1 million shares during the third quarter under its existing stock repurchase authorization. In addition, TDS's Board authorized a $500 million increase to our existing share repurchase program, leaving the remaining authorization intact. This authorization reflects the Board's confidence in the company's long-term strategy and the belief that repurchasing TDS shares at present valuation is an attractive use of the company's capital. The timing and manner will be determined at the company's discretion and will be dependent on closings of the announced spectrum transactions as well as general business and market conditions. We believe share repurchase is tax efficient for our shareholders while also providing flexibility for the company. To be clear, TDS also expects to retain its current regular quarterly dividend. All decisions regarding dividends in future quarters, of course, are subject to the determination of our Board. I think these balanced capital allocation priorities will make TDS stronger, both operationally as we make investments in our fiber business and by returning capital to our shareholders in a measured way. Thank you. And I now will turn the call over to Ken Dixon to discuss his vision for TDS's fiber business. Ken? Kenneth Dixon: Thank you, Vicki. Good morning, everyone. My first quarter at TDS Telecom has been fantastic. One highlight, of course, was achieving 1 million fiber passings. It was a significant milestone for the business and years in the making. I have also enjoyed traveling to our markets and listening to our TDS frontline associates who are executing every day on our fiber build plans and growth strategy. Before we get into the slides, I'd like to take a moment to reaffirm our strategic priorities. These include executing on our build plan, accelerating fiber penetration, advancing our business transformation program and delivering an excellent customer experience. These pillars are central to our long-term growth strategy and will continue to shape our path forward. Turning to Slide 6. We delivered 42,000 fiber addresses in the quarter, which puts us just over halfway to our goal of 150,000 service addresses for the full year. Consistent with historical trends, we expect to have our strongest address delivery here in the fourth quarter. We generated 11,200 residential fiber net adds in the quarter, contributing to a 19% growth in residential fiber connections since last year. Fiber net adds have improved sequentially every quarter this year. On the sales and build front, we recognize that performance isn't where we want it to be. We are taking actions to change this trajectory. Since the end of the second quarter, we have nearly doubled the number of construction crews we have across our markets and are continuing to increase crew counts through the end of the year. We are focused on executing our build plan, so we have a large funnel of addresses to sell into and increasing penetration rates in our existing launched fiber areas. And lastly, our enhanced A-CAM or E-ACAM builds are very well underway, which will help bring fiber to the most rural markets in our footprint over the next several years. On the next slide, I want to share a little bit more about E-ACAM, which will be absolutely a transformative program to our network, our business and our customers. First, this program enables us to replace a substantial portion of legacy copper infrastructure. This will add approximately 300,000 new fiber addresses, which includes E-ACAM addresses as well as addresses that will be picked up along the route. This directly supports our long-term goal of reducing copper to less than 5% of our total network footprint. This will greatly improve network reliability and the customer experience. As construction activity ramps up, we expect to see strong copper-to-fiber conversions as well as new customer growth throughout our rural footprint. Second, the program delivers over $1.2 billion in regulatory revenue support over a 15-year period, providing a funding stream that supports this continued investment in fiber. Third, these markets are uniquely positioned for success. With no gig capable competitors, we anticipate penetration rates between 65% and 75%, which translates into very attractive returns. In short, E-ACAM is an outstanding program strategically, operationally and financially. It allows us to bring world-class fiber services to communities that were previously cost prohibitive, while delivering meaningful value to both our customers and to our business. Before turning over the call, I want to say how much I've enjoyed my first quarter here. We have a lot of work to do, but I'm excited about the direction we're heading and the opportunities ahead as we transform TDS Telecom into a fiber-centric company. I'll now let Kris Bothfeld take us through the quarter results. Kris? Kristina Bothfeld: Thanks, Ken. Turning to Slide 8. You can see our progress towards the long-term fiber goals we shared earlier this year. We are targeting 1.8 million marketable fiber service addresses, and we crossed the 1 million fiber address mark this quarter. Across our entire footprint, our goal is to have 80% of total addresses served by fiber compared to 55% today. We expect this percentage to grow as our E-ACAM deployments ramp. And finally, we expect to offer speeds of 1 gig or higher to at least 95% of our footprint. We finished the quarter with 76% of our footprint at gig speeds. As a reminder, we will use a combination of fiber and coax technologies to reach this target. Turning to Slide 9. The graph on the left shows the most recent 5 quarters of fiber service address delivery. Address delivery typically increases throughout the year given seasonality impacts. As Ken said, we are behind schedule for the year, and we are working to get our build plan back on track and are expecting the fourth quarter to be the strongest of the year. The graph on the right shows the significant growth in our fiber footprint, nearly doubling over the last 3 years. Turning to Slide 10. The graph on the left shows the last 5 quarters of residential fiber net additions. We delivered 11,200 this quarter, up 8% year-over-year. We have seen year-over-year and sequential improvement in residential fiber net adds this quarter, and we expect to see improvement in fiber net adds in the fourth quarter. The graph on the right highlights our residential fiber connection growth. Connections have nearly doubled over the last 3 years, driven by our expansion efforts and copper to fiber conversions. As we continue to invest in fiber, we expect broadband connection growth to continue. Broadband penetration remains a key metric for our fiber program with our expansion markets hitting 20% to 25% penetration on average within the first 12 months of launch and approximately 40% in steady state by year 4 to 5. On Slide 11, average residential revenue per connection was up slightly year-over-year. Consistent with industry trends, fewer broadband customers are bundling with our video product, which dilutes this metric. As we shared earlier this year, we anticipate more modest growth in residential revenue per connection as we focus on driving penetration. The chart on the right shows our revenue comparison year-over-year. As a reminder, divested markets accounted for a $6 million decrease in revenues compared to the prior year. Now let's talk about revenues on Slide 12. Total operating revenues were down 3% in the quarter compared to prior year. Excluding the impact of divestitures, revenues were down 1%, driven by continued declines in our legacy cable and copper markets, partially offset by growth from our fiber investments. Adjusted EBITDA is down 3% year-over-year, which is pressured by the divestitures and legacy revenue stream declines, offset in part by disciplined cost control. A key priority for the company is to drive business transformation, and we are starting to see benefits from these efforts to improve our cost structure. Capital expenditures are up compared to the same period last year due to spending on the E-ACAM program as well as higher expansion address delivery. We expect both CapEx and service address delivery to continue to increase in the fourth quarter as we accelerate construction to meet our full year address target. Over 80% of our 2025 capital expenditures will be focused on fiber. Slide 13 shows our 2025 guidance, which remains unchanged from last quarter. In closing, Ken and I want to thank the entire TDS Telecom team. We have significant opportunities and transformation ahead of us, and it would not be possible without the hard work and dedication of our associates. I will now turn the call over to Doug. Douglas Chambers: Thanks, Kris. Good morning. The third quarter was momentous as we closed the sale of our wireless operations and returned significant value to shareholders in the form of a special dividend. We also launched our operations as an independent tower company, and the team has done an outstanding job of executing a seamless transition and delivering strong results, which were bolstered by the new T-Mobile MLA that commenced on August 1. In addition, we continue to make progress on our process to opportunistically monetize our spectrum as we entered into additional agreements to sell spectrum. As a reminder, Array's business has 3 significant value drivers: retained wireless spectrum, tower operations and noncontrolling investment interest. Further, our strategic imperatives included on Slide 17 continue to be focused on fully optimizing our tower operations and monetizing our spectrum. I will discuss these value drivers and progress on our strategic imperatives as I walk through our third quarter results. From a financial reporting standpoint, given the divestiture of our wireless business in the third quarter, results from wireless operations, including the book loss on sale of such operations are presented as discontinued operations in our financial statements. This discussion is solely focused on our continuing operations and therefore, excludes wireless operations results and the related book loss on sale. Further, now that we are an independent tower company, we have adjusted our reporting to include relevant tower company financial measures, including adjusted free cash flow, which is similar to the adjusted funds from operations or AFFO measure reported by other tower companies and also includes the cash flows from our noncontrolling investment interest, which are a significant portion of Array's total cash flows. Starting with an update on our spectrum monetization process. As shown on Slide 18, we have made substantial progress and to date have reached agreements to monetize 70% of our spectrum holdings. In conjunction with the sale of our wireless operations on August 1, we conveyed 30% of our spectrum to T-Mobile. In addition, as previously announced, we signed agreements to sell spectrum to Verizon and AT&T in separate transactions in exchange for $1 billion on each transaction. In August and October of 2025, we signed additional agreements with T-Mobile to sell spectrum for total gross proceeds of $178 million. This primarily includes the sale of 700 megahertz A-Block and the exercise of approximately 80% of T-Mobile's call option on the 600 megahertz spectrum. The pending spectrum transactions are subject to regulatory approval and closing conditions. As it relates to expected close dates on the pending spectrum transactions, we expect the timing of regulatory approval to be impacted by the ongoing federal government shutdown. Given this, as mentioned by Vicki, we expect the pending AT&T transaction to close in either the fourth quarter of 2025 or the first half of 2026 and the remaining transactions to close in 2026. Our remaining spectrum principally consists of C-band spectrum, and we continue to believe that this is attractive beachfront spectrum for 5G, and there is an existing ecosystem so carriers are easily able to put this spectrum to use. And although there are build-out requirements for this spectrum, the first one does not apply until 2029, so there's plenty of time to monetize the spectrum. Turning to Slide 21. The T-Mobile MLA significantly increases our revenue, and we are focused on partnering with T-Mobile to ensure the integration process is well executed. Growing colocation revenue outside of the T-Mobile MLA also remains a priority and both revenue growth and new colocation application volume remains strong. Overall, site rental revenue, excluding noncash amortization components, grew 68% on a year-over-year basis in the third quarter of 2025 and excluding the impact of T-Mobile revenue on interim sites grew 46%. This reflects both the significant impact of the MLA with T-Mobile as well as strong revenue growth from other tenants. Further, our decision to in-source our sales and intake operations at the beginning of 2025 has helped enhance our sales results as new colocation applications, excluding T-Mobile applications, which are subject to the MLA, have increased 125% on a year-to-date basis through September 30, 2025, relative to 2024. Related to site rental revenues, we received a letter dated September 2025 from DISH Wireless, whereby DISH asserts its master lease agreement with Array has been impacted by unforeseeable actions by the FCC, and therefore, DISH believes it is relieved of its obligations under the MLA. And despite this, DISH plans to continue to operate certain sites for a period of time. Array believes DISH's assertions are completely without merit and DISH's obligations under the MLA remain intact. Array plans to enforce DISH's performance and payment obligations under the MLA. Array expects to recognize approximately $7 million of site rental revenue from the DISH MLA in 2025 and DISH's obligations at similar levels from 2026 through 2031 with a declining revenue commitment in 2032 through 2035. Slide 22 summarizes Array's financial results. In the third quarter of 2025, we estimate approximately 40% of selling, general and administrative or SG&A expenses include costs to support the following activities: wireless operations prior to divestiture that are not reflected as discontinued operations, wireless operations wind-down costs incurred after the August 1 close date, administrative expenses associated with managing spectrum assets and expenses associated with the ongoing strategic alternatives review. We expect legacy wireless operations wind-down expenses to persist into the first half of 2026 at levels similar to the third quarter of 2025. And while some wind-down expenses will remain after that time, we expect such expenses to begin declining in the second half of 2026. Turning to Slide 24. T-Mobile has until January 2028 to finalize the selection of 2,015 committed sites under the new MLA. Based on these final selections, Array expects to have between 800 to 1,800 tenantless or naked towers. We are aggressively continuing our efforts to lease these naked towers, and we'll also plan on working with our ground lessors to rationalize ground rents based on the economics associated with naked towers. Over time, based on the results of these efforts and the projected future lease potential of each tower, we will assess the economics of each naked tower and evaluate alternatives, including potential decommissioning. Slide 25 summarizes the result of noncontrolling investment interest. As noted, historically, greater than 80% of our investment income and related distributions are attributable to 4 wireless operating entities operated and managed by Verizon and AT&T. Investment income and distributions for the 9 months ended September 30, 2025, were impacted by several events, including the following 2 items: First, we own noncontrolling interest in 3 additional entities that had wireless operations and have tower operations in the state of Iowa. These 3 entities sold their wireless operations to T-Mobile in 3 separate transactions on August 1, 2025, the same date that Array sold its wireless operations to T-Mobile. As a result of these 3 separate transactions, Array recognized $34 million of equity income and received $42 million of distributions in the third quarter of 2025. Second, in the first half of 2025, Array received distributions from Verizon managed entities of $25 million related to proceeds from Verizon's prepaid tower lease transaction with Vertical Bridge. I want to thank the entire Array and TDS teams who have worked tirelessly to close the sale of our wireless operations and stand up an independent tower company. It has been a transformational and highly successful quarter. I also want to thank the Array Board for their trust in me to lead Array for the past several months. It has been an absolute pleasure to lead our outstanding Array team. Lastly, I am pleased to turn the reins over to Anthony. I had the pleasure of working alongside Anthony, while we are both members of the UScellular leadership team and have great confidence in Anthony as both an outstanding strategic thinker and leader. And combined with the existing Array team, I am confident that Array has a very bright future. I will now turn the call back to Walter. Walter C.D. Carlson: Thank you, Doug. As you can see, TDS is in a vital period of transformative change. The successful close of the T-Mobile transaction has unlocked tremendous value, enabling us to expand and deepen our fiber program, stand up a strong and growing tower business and strengthen our capital structure. We are making good progress, but there is much more to do. Let me again thank all of the outstanding associates across the TDS enterprise for the fine work you do every day to serve our customers and advance our business. Operator, please now open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Rick Prentiss with Raymond James & Associates. Ric Prentiss: A lot of moving pieces, but a lot of interesting things going on here. First, Doug, I have enjoyed working with you. Good luck in the future. And I appreciate the adjusted free cash flow similar to AFFO calculation that we've been asking for. So thanks for that, Doug, and thanks for working with you. Douglas Chambers: Thanks, Rick. I appreciate it. Ric Prentiss: Yes. Vicki, I think one of the more interesting things is, obviously, we're looking for an update in February on the fiber plan. You mentioned several hundred thousand or more might be added. So that helps us frame it a little bit. One of the other things we're interested in is, can you give us some cohort analysis or something to take a look at how the older markets of fiber, say, 1, 2, 3, 4 years ago are doing because it's kind of blurred, right? You guys are spending CapEx, you're spending OpEx and trying to understand the progress towards those penetration rates. So any thoughts on -- when you give that update in February, can we start getting some -- maybe some cohort analysis or some thoughts on how the prior markets are doing? Vicki Villacrez: Yes. Thank you, Rick. Two piece parts to your question. Let me take the first one and then address the several hundred thousand fiber opportunity. First of all, we are a fiber-centric company, and we love the markets that we're operating in. And so we see a lot of opportunity, and I'm going to have Ken talk about some of that opportunity he sees as he's joined the company. We are currently right now in the process of evaluating our business cases and our engineering designs as we evaluate those opportunities. And we do see several hundred thousand or more, and we'll come back and update investors in February on that -- on what that looks like from a capital allocation perspective. Second, on the cohort penetration. We've heard you loud and clear for sure. And to be honest, we did go back and we looked at what the industry is reporting, and we didn't find a lot. There seems to be little reporting out there. And quite frankly, it wasn't enough information really to set a clear industry standard for us. With that said, with Ken just coming on board, we are internally aligning as a team as we're ramping up our fiber builds in a number of markets, evaluating our edge-out opportunities. And so we're aligning on what the appropriate success measures are going to look like. Kenneth Dixon: Right. As Vicki said, I'm very bullish on the markets that we selected. I think they're fantastic. The E-ACAM program, along with our expansion program gives us tremendous fiber opportunities going forward, especially to convert our copper to fiber transition. So great programs all along. But as Vicki said, when we look at these expansion markets as we've been first to fiber and have planted our flag, we look around and we see adjacent neighborhoods, adjacent communities that candidly do not have a fiber provider, and we can continue to be first to fiber. And so we're evaluating all those markets now, and -- but we do see several hundred thousand as an opportunity. Ric Prentiss: Okay. I think one of the other interesting and exciting things actually, Vicki, was the stock buyback program. Historically, TDS, USM, now AD have not done a lot of buybacks except for really kind of handling stock comp kind of creep. So it sounds like this is something a big change for you guys that you are seeing -- you did something in September, you're seeing value in the stock. How should we think about that sizing of the $500 million, the execution of that? And am I right to interpret that this is actually a pretty big change for TDS? Vicki Villacrez: Yes. Well, thanks, Rick. First off, I think that this move and the authorization, the recent authorization by the Board really demonstrates the Board's confidence in the company's long-term strategy and belief that repurchasing its shares is an attractive use of capital. I see it as a really important part of our capital allocation plan, and we are going to balance that with investment back into the business. So first -- first and foremost is investing into the business. We see a lot of fiber opportunity. We're in the process of evaluating and quantifying that. But I think this is a real balance. And it's going to be something that's balanced with timing and the opportunity and the timing of our builds over time. Execution of it, I would say, certainly to the management's discretion, but the timing and matter, first and foremost, is dependent on the successful closing of our spectrum transactions. And that is a priority. It's a top focus for the leadership team. And then, of course, we'll execute in a disciplined, opportunistic manner as we evaluate the current business environment and the market environment. Ric Prentiss: Great. Okay. And last one for me, a more mundane question, back to Doug. Obviously, calling out the SG&A at Array, 40% kind of not your tower operating kind of numbers. Can you help us understand how much was that wind-down component so we can understand a little more what run rate going forward might be for the next couple of quarters? And I got to admit, I'm just wanting to understand a little bit more about spectrum management. What is that? How long will that go on as you kind of wind down your spectrum position? Because I think there was some spectrum management up in cost of service as well. Douglas Chambers: Yes. Thanks, Rick. So with respect to the 40%, we're not going to break down those 4 components individually. What I would say about that, though, if you're trying to triangulate to a run rate is there's that 40%. But in addition, there's structural costs that we have being a large wireless company that we also have to work on within the SG&A infrastructure. So it's not just that 40%. It goes beyond that. Think about IT platforms that we use to support wireless and the related IT support we have for that. That's an example of additional opportunity that is beyond the 40%. So just keep that in mind as you're thinking about a run rate for SG&A. There's still quite a bit of work for us to do on SG&A. We completely expected the SG&A cost to be high in Q3. We expect them to be high through the first half of next year as we indicated. Spectrum management costs, I mean, we still hold spectrum, as you know. And so we incur costs. So we're still fulfilling coverage requirements for certain spectrum. incurring some cell site rental costs on that. We have legal costs. We have personnel that manage the spectrum. All that is components of costs we're incurring that will ultimately be temporary as we're, of course, in our process of opportunistically monetizing the spectrum. So with time, those will eventually go away. Operator: Your next question comes from the line of Eric Luebchow with Wells Fargo. [Operator Instructions]. We will move on to our next question from Vikash Harlalka with New Street Research. Vikash Harlalka: I have a couple of questions on the Array side and then some on the TDS Telecom side. On the Array side, what is the naked tower strategy from a go-to-market standpoint, but also from a sale or decommissioning standpoint? How long is too long to wait? And do you have exit rights on the land leases? And then I'll ask the TDS questions after this. Douglas Chambers: So with respect to the naked towers, in the slide that we included, it at a high level, articulates the strategy, which obviously, we're working hard to lease up all our towers. That continues, and we hope over time, that minimizes the naked towers. The other thing we're doing is an initiative going to our ground lessors, and we obviously can't rationalize the rents we're paying on a lot of our naked towers, and we're going to seek to reduce those rents over time. We also have fairly robust analysis, and we're continuing to refine it on future leasability of the towers. So where competitor towers are using crowdsourced traffic, understanding our view of what the leasability is. And then after going through all those steps, and this will be a multiyear process, and it will be on a tower-by-tower basis, we will make decisions as to what to do with each tower, hold some other strategic option and then potentially decommission some as well. And then Vikash, sorry, you asked the question, what was your second question? Vikash Harlalka: My question was, do you have exit rights on the land leases? Douglas Chambers: Exit price, I'm sorry, what? Walter C.D. Carlson: Exit right. Vikash Harlalka: Exit rights on the land leases, right. Douglas Chambers: The land commitments, by and large, we have some that are extended, but they're fairly minimal. A large portion of our ground leases, we're able to terminate upon very short notice. So those are not significant commitments overall in our portfolio. There's some, but they're minor. Vikash Harlalka: Got it. And then I have one sort of financial question on the TDS side and then one strategic question on the -- on your leverage target of 1.5x for TDS Telecom, it's probably the lowest that I've heard from any of the wireline operators. One, does it include the impact from the several hundred thousand fiber passings that you're going to announce next year in February? And then two, just help us understand like how did you land on this target? And I mean, why not just lever up more and return more capital to shareholders? Vicki Villacrez: Okay. Thank you. Yes, let me -- this is Vicki. Let me address the leverage target question. First off, let me just say, we're really pleased with where our current leverage is and our balance sheet strength with our preferreds. We think it maximizes our future flexibility, and we feel comfortable with where our leverage is at currently. When you think about our leverage at TDS, currently, as of the end of the quarter, on a gross basis, we're at 1.4x. And we intend to stay under that leverage ratio. Now we've got cash on the balance sheet as we're anticipating funding the fiber builds through the rest of the fourth quarter and into 2026 and through 2026. And at the same time, we also have tax obligations that are -- that will come due with the closing and the sale of the transaction to T-Mobile. So our leverage targets are intended to -- with the principle that we're going to put our cash to use over time. And therefore, that plays into our philosophy on our capital allocation strategy. Kristina Bothfeld: And Vikash, you did ask about, does this include the updated fiber goals? What we publicly stated so far is that we plan to double our fiber addresses from where we ended 2024 from around 900,000 to 1.8 million, and we said we will do that over roughly a 5-year period. What that doesn't include are the additional edge-out opportunities that we've been discussing that we believe are several hundred thousand or more. And in February, we will come back and update everyone on our new goals. Vikash Harlalka: Got it. That's super helpful. And my last question, sort of a strategic question. So you obviously gave us some color on potential fiber targets. That's helpful. Just flipping that a little bit, would you be open to getting acquired by someone like a Verizon or AT&T? Walter C.D. Carlson: Vikash, this is Walter, and thank you for the question. TDS has been in business for a long time. Our objective is to remain in business and be very successful for all of our shareholders for a long time going forward. Operator: Your next question will come from the line of Eric Luebchow with Wells Fargo. Eric Luebchow: Just a couple of questions for Doug on the tower side. Doug, I know you've talked about getting to a 45% to 50% margin longer term. Maybe you could just talk about some of the moving parts there between the decommissioning of the towers, the expense rationalization, your ability to bring down ground rents. Like how should we think about the pacing of that over the next couple of years as we kind of think about the growth, not just at the top line, but at the bottom line as well? Douglas Chambers: Yes. Thanks, Eric. You hit on a lot of them in your question. So when we think about increasing margins over time, obviously, growing our colo revenue is a priority and that we're very focused on. I talked about the SG&A expenses. We expected them to be high in Q3. We expect them to be high through the first half of next year. But also, over time, need those to go down, obviously, as wind down and other costs subside as well as what I talked about in response to Rick's question, making structural changes as well to some of our SG&A infrastructure. So focused on that. Ground rents, there's really 2 components of that. One is I talked about rent rationalization with our ground lessors and that initiative. So we're focused on that. And then at the end of the day, if towers are uneconomical, making the decision as to potentially decommissioning them to, again, rationalize ground rents. Offsetting that somewhat, I mean, recognize -- I think we recognize that the interim revenues on the T-Mobile sites are going to go away over time. T-Mobile has the ability to cancel those on fairly short notice in a 3-month period. But certainly, margins, we're looking to increase over time, and we expected as we launched Array because of all the reasons I just went through that margins were going to be lower and will increase over time. Eric Luebchow: Great. I appreciate that. And maybe just one follow-up. I know you're looking at potential spectrum monetization and you still have some extended build-out time frames for the C-band kind of the bulk of your remaining spectrum assets. I guess given there's an auction plan in the upper C-band in a couple of years, how does that kind of influence the timing of when you may look to monetize that just in terms of the supply of spectrum coming to market? Douglas Chambers: Eric, all along, our objective has been to get the best price. I mean, certainly, injections of supply may impact that. But the reality is mobile traffic is still increasing at a rate of 30% per year. Our spectrum is available now and can be deployed immediately and the carriers have the ecosystem from an equipment standpoint to do that. So we still think our spectrum has a lot of value, notwithstanding the fact that supply has been dynamic with that and EchoStar sales and so forth. Operator: [Operator Instructions] Our next question comes from the line of Sergey Dluzhevskiy with GAMCO Investors. Sergey Dluzhevskiy: First of all, Doug, it has been a pleasure working with you over the years, and good luck with everything going forward. Douglas Chambers: Yes, likewise, Sergey. Thank you. Sergey Dluzhevskiy: Great. And maybe my first question is for you. So you talked a lot about the kind of organic opportunity for the tower business. I guess my question is, what role do you expect M&A to play in the tower business strategy? What types of assets could potentially amplify or accelerate your strategy? And also on the flip side, are there disposal opportunities? Obviously, you're going to look at naked towers, but just looking maybe at clusters of towers. I mean, you have some towers in California, Oregon, Washington that appear to be not as clusters maybe as others. So I was wondering if there is monetization opportunity there. Douglas Chambers: Yes, Sergey, thanks for the question. So -- with respect to inorganic acquisition and/or disposals, that's not a strategic focus right now. We have so much on our plate operationally and really great things on our plate with integrating the T-Mobile MLA. I mentioned how you saw our tenant growth on a cash basis -- cash revenue basis for the quarter grew 8% this quarter, and our apps are up year-to-date, 125%. So operationally, things are going so well, and we have so much to execute on. That is our sole focus. Longer term, after a few years, whether we start focusing on inorganic M&A or disposing of towers, that's always something that will be looked at over time. But right now, that's not our strategic focus. Sergey Dluzhevskiy: Got it. Great. And my next question is for Walter or for Ken, kind of also on the M&A side, but also related to edge-out opportunities that you're considering at TDS Telecom. So you mentioned that you see a number of edge-outs where you have the ability to be first to fiber. But you're not the only one looking obviously at those spaces and a number of larger companies are looking at remaining white space as well. So maybe I understand that you're going to provide more guidance in February, but maybe if you could provide more color on how you think about those opportunities in terms of edge-outs, what is realistic for the company, the size of TDS Telecom? And in regards to M&A, what would be the primary determining factors for you to -- in choosing to buy something versus doing an organic fiber build? Kenneth Dixon: Right. From an Edge-Out perspective, the areas that we're really looking at are the areas that are adjacent to current operations. So think of these as Tier 2, Tier 3 markets, what we would refer to as not urban areas, but rural markets where we already operate, already have facilities, already have garages and candidly, already have a brand and customers. And we see the opportunity to edge out into additional communities because we've already been first to plant a fiber flag in these rural markets. It's just extending our plant to these additional communities. And the advantage that we have is because we were first to fiber, these are opportunities we already have the transport. We already have our operations there. So it's just a natural extension. So those are -- when we talk about edge-out opportunities, it's expanding and flexing from where we're today already operating in the Tier 3 -- Tier 2 and Tier 3 markets, okay? Sergey Dluzhevskiy: Got it. And in terms of kind of buying something versus building organically? What are the primary determining reasons for you? Walter C.D. Carlson: So Sergey, this is Walter. I think your question is, in addition to the potential edge-out opportunities, what sort of possible M&A opportunities might be looking at. And without getting into specifics, as Vicki described, we are very much focused on those types of ILECs or other owners who are proximate to our existing footprint, where we believe in a disciplined way, we could expand our footprint in a clustered basis. We don't know whether that's going to be successful, but there are opportunities there, and they are being very closely looked at. Vicki Villacrez: Yes. And Sergey, I would just follow up and say again, with respect to M&A, we're going to be highly disciplined. It will be accretive to our business. And it fits in with the organic cluster strategy that Ken was describing. We've embarked on this fiber strategy out of footprint and our selection of our markets were very centered around where we saw clusters of growth. And so whether it's organic or we see a synergistic M&A opportunity, that's how the whole picture will fit together. So it's really executing on that strategy going forward. Sergey Dluzhevskiy: Great. And my last question is for Ken. So I think earlier this year, TDS Telecom has been making investments in sales and marketing, including door-to-door sales force. I guess with you coming in, what are your thoughts on kind of the level of success and improvement in gross additions that you could attribute to some of those efforts? And what other initiatives as part of your go-to-market strategy, do you expect to improve and contribute to kind of improving your conversion rate of fiber passings into paying customers? Kenneth Dixon: Yes. Thank you. One of the things that I've noticed is that a lot of our sales activity is based on address delivery. So if we have a quarter where we don't deliver the addresses, we see sales suffer. So mission #1 is to get our build plan to execute and to deliver service address delivery in the markets that we're building. And I will tell you that we have doubled our crew counts in our expansion markets here in the third quarter. So we have a record amount of crew counts for 2025, and we actually increased our crew counts here in October of '25, and that's key in delivering on our targets in the fourth quarter. So we will execute on that new open for sale when it comes in. We also are looking at additional vendors that we've brought on to canvass our different communities and help us with presale and also with our door-to-door efforts. And I think that variable cost model will help us with penetration. And we're also -- as part of our transformation efforts, we are putting a lot of time, effort and energy into our dot-com business. As you know, website is open 24 hours a day, 7 days a week, and we think that's a big opportunity for us as well to penetrate some of these new cohorts. But also, we recognize that we have a lot of ILEC fiber that we can still sell into. So a tremendous amount of initiatives in place. I believe we have some nice momentum, but that is a key focus is go-to-market strategy, executing on the fundamentals and delivering sales and penetration goals. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning, and thank you for standing by. My name is Ludy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silvercorp's Second Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Lon Shaver, President of Silvercorp. Please go ahead. Lon Shaver: Thank you, Ludy. On behalf of Silvercorp, I'd like to welcome everyone to this call to discuss our second quarter fiscal 2026 financial results. They were released yesterday after the market closed and a copy of our news release, MD&A and financial statements are available on our website and SEDAR+. Before we get going, please note that certain statements on today's call will contain forward-looking information within the meaning of securities laws. And also please review the cautionary statements in our news release as well as the risk factors described in our most recent regulatory filings. So let's kick off the call with our financial results. We delivered more solid performance in Q2 highlighted by our revenues of $83 million, which was up 23% from last year and marks the second highest quarter ever. Additionally, cash flow from operating activities was $39 million, and that was up 69% from last year. This performance was mainly driven by a 28% and 37% rise in the realized selling prices for silver and gold compared to last year. Also notably, the amount of gold sold in the quarter was up 64% compared to last year. Silver remains our most significant revenue contributor at approximately 67% of net Q2 revenue, followed by lead at 16% and gold at 7%. Moving down the income statement. We reported net income of negative $11.5 million for the quarter or negative $0.05 per share. This is down from positive $17.8 million or $0.09 a share in Q2 of fiscal 2025. However, this quarter had a significant $53 million noncash charge on the fair value of derivative liabilities, which was partially offset by a $22 million gain on investments. Removing noncash and onetime items such as this, our adjusted net income for the quarter was $22.6 million or $0.10 a share versus $17.7 million or $0.09 a share in the comparative quarter. Note that the average shares outstanding used to calculate EPS this quarter was 218.6 million compared to 206.5 million in the same period last year. On the capital spending side, we invested nearly $16 million at our operations in China and $11 million in Ecuador during the quarter. We generated $11 million in free cash flow for the quarter, which supported our strong closing cash position of $382 million. This cash position does not include our investments in associates and other companies, which had a total market value of $180 million on September 30. And after quarter end, we participated in New Pacific Metals equity financing and acquired an additional 3 million common shares for roughly $7.8 million. Also, subsequent to quarter end, in October, we made the first draw on our $175.5 million Wheaton Precious Metals streaming facility for the El Domo project. We drew down the first $43.9 million tranche, which will be used to fund our ongoing construction at El Domo. Now to just quickly recap our operating results. As we reported last month, in Q2, we produced approximately 1.7 million ounces of silver, just over 2,000 ounces of gold, 14 million pounds of lead and 6 million pounds of zinc. Silver production was essentially flat, but gold production was up 76%. So silver equivalent production, considering just the silver and gold was up 5%. Lead production was up 8% and zinc production was down 3%. Production at Ying was impacted by the temporary closure of certain mining areas, which have since reopened. We expect to mine approximately 346,000 tonnes of ore in this current quarter Q3 compared to the 265,000 tonnes mined in Q2. At the GC mine, production in Q2 was interrupted for about 10 days by Typhoon Ragasa. Year-to-date, we have produced 3.5 million ounces of silver, 4,135 ounces of gold, 30 million pounds of lead and 11 million pounds of zinc, which represents increases relative to last year of 3%, 78% and 4%, respectively, in silver, gold and lead production and an 11% decrease in zinc production. On the cost side, Q2 production costs averaged $83 per tonne at Ying which was down 11% from last year. The improvement reflects greater use of shrinkage stoping over the more labor-intensive cut-and-fill resuing method along with higher ore throughput. Year-to-date production costs also averaged $83 per tonne, which was below the Ying annual guidance of between $87 to $88 per tonne. Ying's cash cost per ounce of silver net of byproduct credits was $0.97 in Q2 compared to $0.62 in the prior year quarter. The increase was driven by a $4 million increase in production costs due to 26% more ore being processed, while silver production grew by only 1% as shrinkage mining tends to have higher dilution rates. This was partially offset by a $3 million increase in byproduct credits. Q2 all-in sustaining cost per ounce net of byproduct credits was $11.75 at Ying, up 30% from the prior year quarter due to a $1.4 million increase in mineral rights royalties following its implementation in China in Q3 of fiscal 2025. A $2.6 million increase in sustaining CapEx and those previously mentioned factors that impacted cash costs. Overall, for the operations, consolidated mining operating income came at $40.8 million in Q2, with Ying contributing $38 million of that or over 93% of the total. Turning to our growth projects. At Ying, we invested $6 million in the quarter for ramp and tunnel development to enhance underground access and increased material handling capabilities. This work goes hand-in-hand with our efforts to expand mining capacity across the 4 licenses at Ying. Recall that last year, the SGX mine permit was renewed for another 11 years with capacity increase to 500,000 tonnes per year. The HPG permit was also renewed and expanded to 120,000 tonnes and the DCG permit was increased to 100,000 tonnes. We're now in the process of applying to increase the TLP LM permit to 600,000 tonnes per year with approval expected later this quarter. Once all approvals are in place, Ying's total permitted annual mining capacity will rise to 1.32 million tonnes from approximately 1 million tonnes currently. At Kuanping, that's the satellite project north of Ying, mine construction continued with 831 meters of [ ramp ] development and 613 meters of exploration tunnelling completed in this quarter. Kuanping has a mining permit to produce 200,000 tonnes per year, which at a full contribution, would bring our total mining capacity at Ying up to 1.52 million tonnes per year. Switching to Ecuador. Construction at the El Domo project is moving ahead steadily. In Q2, around 1.29 million cubic meters of material work cut for site preparation. Roads and channels, and that was a roughly 250% increase over the previous quarter. A 481-bed construction camp has been completed and work on the tailings storage facility began in September. For the 6 months ended September 30, approximately 1.66 million cubic meters of material were cut or removed, and $14.6 million of expenditures were capitalized. Contracts for 4 sections of the external power line have been awarded to qualified Ecuadorian contractors, pending review by the state power distributor, CNEL. Additionally, orders for equipment with a total value of $22.2 million have been placed. Overall, since January of this year, approximately $18.9 million has been spent on capital expenditures and prepayments for equipment purchases related to El Domo. At the Condor Gold project, we kicked off the [ PEA ] for an underground gold operation and expect to complete this study before the end of the year. As a reminder, at Condor, our plan is to construct 2 exploration tunnels into the deposits, which will allow us to conduct underground detailed drilling. In order to do this, we required environmental license and water permits. The studies to support these applications have been ongoing over the year. And during the quarter, we submitted our application for the water permits. The application is now pending final approval. We have submitted our application for the environmental license, and it is under review by the relevant authorities. And with those updates, I'd like to open the call for questions. Operator: [Operator Instructions] With that, our first question comes from the line of Joseph Reagor with ROTH Capital Partners. Joseph Reagor: I guess first thing on El Domo, the guide for CapEx compared to what you spent year-to-date, is it a matter of -- there's a big lift coming here soon or some long lead items that you guys have to pay for? Or is it -- are things maybe tracking a little slower than anticipated as far as capital spending goes? Lon Shaver: I was probably tracking a little slower initially. We began construction this year focusing on earthworks, and it was clearly a wetter year than Ecuador has experienced in past rainy seasons. But I think we've ramped up significantly here in recent months as indicated by the results that we published this quarter. And going forward, we should be able to provide an update on our construction progress this quarter, particularly as we are looking to execute the contract for bid package #2 in due course. And that's obviously the contract associated with stripping of the open pit and actually mining of the deposit. And we'll be in the position here shortly to share results from the metallurgical testing program that we've undertaken this year. So we expect to have an update prior to year-end where we can bring all these items forward and provide any updates. Joseph Reagor: Okay. And also on El Domo with the Wheaton drawdown, I think initially, when you guys made the acquisition, there was some thought that there was a potential to maybe buy that stream out or not use it in some way, but now you've drawn down on it. Does that just reflect that there was no way to really negotiate out of it given gold and silver prices have moved so positively since it was signed? Lon Shaver: Well, I think your last comment really indicates what we'd be dealing with to renegotiate. There was contractually an opportunity to adjust the stream at the time of the acquisition. It didn't make sense at the time, and it still doesn't make sense based off of those numbers. What might be available to negotiate with Wheaton, I can't comment on. You'd have to speak to them as well in terms of what their expectations are based on the contract that they entered into with Adventus. Joseph Reagor: Okay. Fair enough. And then just on guidance, it sounds like you guys are expecting a pretty strong catch-up quarter at Ying in Q3 and that, that will get you back in line with guidance, whereas if you were operating at normal rates, you'd kind of be tracking a little below after the Q2, let's call it, issue for lack of a better word. Lon Shaver: Yes. I mean, clearly, Ying is a mine in transition as we look to increase mechanization, we've certainly been demonstrating other than the temporary setback in this last quarter, the ability to generate tonnes. So that has been ramping up nicely. Also, we've been able to deliver more tonnes and produce more gold. So that is a bit of a shift in the profile. But whether we're able to make up for what was missed in so far this year, a little early to tell. I think it will depend on our ability to run at those expanded rates, great profile going forward and also Q4, just -- last year, we had some excess tonnes and we had a brand-new mill with excess capacity to work through those. So it kind of remains to be seen what we can push through in Q4 to get away from what has seasonally been a slower quarter. So still a bit early to tell. But as you point out, we're in a bit of a catch-up mode here. Operator: [Operator Instructions] And we have no further questions at this time. I would like to turn it back to Lon Shaver for closing remarks. Lon Shaver: Okay. Well, great. Thanks, operator, and thanks, everyone, for joining us today. If anyone does have any further questions after the call, please feel free to reach out by calling or e-mailing us. We look forward to hearing from you, and we look forward to catching up to discuss the results of our third quarter. Thanks, everyone, and have a great day. Operator: And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to the Joint Corporation Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Richard Land from Alliance Advisors. Please go ahead. Richard Land: Thank you, operator, and good afternoon, everyone. This is Richard Land of Alliance Advisors Investor Relations. Joining us on the call today are President and CEO, Sanjiv Razdan; and CFO, Scott Bowman. Please note, we are using a slide presentation that can be found at ir.thejoint.com/events. This afternoon, the Joint Corp. issued a press release for the third quarter ended September 30, 2025. If you do not already have a copy of this press release, it could be found in the Investor Relations section of the company's website. As provided on Slide 2, please be advised that today's discussion, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some important factors that could cause such differences are discussed in the Risk Factors section of the Joint Corp's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA and system-wide sales. A description of these non-GAAP financial measures is included in the press release issued this afternoon and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website. Turning to Slide 3. With that, it's now my pleasure to turn the call over to Sanjiv Razdan. Please go ahead. Sanjiv Razdan: Thank you, Richard, and I welcome everyone to the call. Today, I will review the third quarter results and recent events. For those new to the call, we provide affordable, accessible and approachable chiropractic care and help consumers relieve and manage their pain while supporting their ongoing wellness journey. There is a significant need for this with Americans spending $20 billion a year on back pain. To capture a leading share of this market opportunity, we have been strengthening our management team and executing on our strategies to reignite growth and improve profitability. Although the full financial benefit of these strategies will take time to come to fruition, the following initiatives will improve the financial position of our franchisees and stockholders. To drive new patient acquisition, we have shifted our brand marketing campaign to focus on pain relief, which we are amplifying by moving a portion of our advertising spend from local to a national campaign. And we are strengthening our digital marketing campaigns with SEO and clinic microsite. To grow system-wide sales, we are conducting a 3-tiered pricing pilot for our wellness plan. To elevate our patient experience, we continue to upgrade our patient-facing technology. Recently, we launched the second release of our mobile app with a range of new features. To become a pure-play franchisor, we continue to pursue the refranchising of our corporate clinics. And to improve new clinic performance, we have implemented robust preopening protocols for new clinics to reduce time to breakeven and ensure a strong early sales volume. Before I elaborate, for those of you who are new to The Joint, we are the largest franchisor of chiropractic care clinics. Our mission is to improve the quality of life through routine and affordable chiropractic care. And our big bold vision is to become America's most accessible health and wellness services company. I'll summarize our Q3 2025 financial results compared to Q3 2024, and our CFO, Scott Bowman, will provide greater detail in a moment. Revenue from continuing operations increased 6%. Consolidated adjusted EBITDA increased 36%. This improvement reflects the impact of work done on rightsizing our costs, which has helped to offset a 1.5% decline in system-wide sales and negative comp sales of 2%. Since our last conference call in August, we have repurchased $5 million of stock, and the Board recently authorized an additional $12 million of our stock repurchase plan. At September 30, 2025, our unrestricted cash and cash equivalents remained strong at $29.7 million. Turning to Slide 5 to discuss refranchising. We have entered into an initial agreement to sell 45 corporate clinics in Southern California for $4.5 million via an asset purchase agreement. We are continuing to negotiate certain terms, and we'll update if and when we align on final terms. While macroeconomic headwinds are resulting in a longer lead time due to lender-related dynamics, we are actively negotiating asset purchase agreements with potential buyers for our 33 remaining corporate clinics. Let's review our marketing efforts. Turning to Slide 6. For Q3, similar to Q2, our patient attrition was on par with last year, and conversions were better. However, Q3 sales comps were less than expected. The main shortfall was due to lower new patient count, which we are addressing by initiating a national marketing refresh, SEO improvements and advanced pricing test. Our research identifies pain as the biggest trigger to seek chiropractic care. Our patient base proves this to be true with 80% of our new patients citing aches and pains as the reason for coming to The Joint. In August, we launched our compelling new brand awareness campaign, Life, Unpaused. We have shifted marketing content from broad wellness-focused communications to a message centered on chiropractic care for pain relief. Our goal is to drive stronger new patient demand and lead generation. While brand awareness initiatives tend to take longer to produce results, they are inclined to attract patients who remain with us longer. We are moving a portion of our marketing efforts to target an earlier stage in the sales funnel, shifting from predominantly local spend to one that also leverages our national scale of 962 locations in 43 states and the District of Columbia, which is equivalent to approximately 57% of metro statistical areas in the U.S. This campaign will educate consumers much earlier on. And before we experience pain that The Joint offers an affordable solution to alleviate pain. The goal is to get individuals at the first sign of discomfort to think, I should visit The Joint, it's convenient, affordable and they can help. As alluded to last quarter, we have been actively engaging our franchisees regarding our new strategy. I am pleased to report in October, the franchisees elected to reallocate $500 or approximately 1% of their gross sales per clinic per month from local advertising to this new national marketing effort. This adjustment does not increase the total amount contributed by franchisees. It simply redirect existing funds to enhance our national brand awareness and patient activation. We are also strengthening our digital strategy through accelerated SEO initiatives designed to improve search visibility, page authority and discovery, including within AI-driven search environment. These are all key drivers of organic traffic and leads to our website. New microsites or localized clinic pages are demonstrating strong early performance. In September, a pilot rollout of 35 clinics averaged a 20% to 40% increase in organic search traffic within the first 2 weeks of launch. A phased refresh of all remaining clinic pages began earlier this week with completion expected before end of the year. In parallel, enhancements to local Google business profiles are increasing engagement. Together, these efforts are expanding our local search presence and improving conversion pathways from search to clinic. At the same time, updates to national website pages are enhancing visibility among early awareness audiences searching for topics such as back pain, neck pain and mobility or lifestyle improvement. These tactics are broadening reach, bringing new users to our website and positioning The Joint chiropractic as a credible trusted authority at the beginning of the consumer decision process. Collectively, these initiatives are designed to reach audiences wherever they search and support the full marketing funnel from awareness to lead generation to wellness plan purchase. These actions are intended to drive new patient count, which, in turn, will help improve cost. Turning to Slide 7. We are happy to welcome our new Chief Marketing Officer, who will lead their implementation and further fortify our marketing. Debbie Gonzalez started at the beginning of October. She is experienced in transforming global brand strategies and strengthening marketing capabilities across multisite retail and health and wellness businesses. Debbie has served as Chief Marketing Officer in publicly traded, private and consulting companies, where she drove customer acquisition, brand development, performance marketing, digital initiatives and innovation. Also, during her tenure at the franchisor, Massage Envy, she led the development of the recurring revenue membership model. Turning to Slide 8. We have unveiled dynamic revenue management initiative to drive sales and long-term profitability. In July, we introduced our new Kickstart plan. Our doctors prescribe tailored treatment plans to meet our patients' specific needs. Often, new patients need multiple adjustments a week during the early phase of their care to get out of acute pain. Kickstart offers an attractively priced pack of 4, 8 or 12 adjustments beyond the 4 included in the standard wellness plan. This offering is a real win-win as it helps patients get rapid relief affordably and generates more revenue for clinics. Already, approximately 25% of new patients are taking advantage of these packages. Now we are expanding our core wellness plan pricing analysis to better understand patient sensitivity for revenue optimization. Our latest pilot launched early November test 3 different levels of price increase in 3 different diverse demographic areas. We will monitor performance metrics and analyze trends to help determine next steps for the rest of the system. Based on the results of these pilots, we will optimize our nationwide pricing structure and roll out adjustments across our system. Turning to Slide 9. We are focused on elevating our patients' experience through improved technology. We believe this will foster referrals and extend the length of time they maintain their wellness plan. In July, we officially launched our patient-facing mobile app with basic in-clinic check-in functionality. We are excited that the adoption rate among our wellness plan holders has reached 18% of new patients at the end of quarter 3 with over 178,000 downloads. At the end of August, we released our second app version, enabling patients to look up their visit balance, plan type, cycle date, at-a-glance visit history, treatment plan and progress report; download records like receipts and visit notes and complete a patient experience survey. Upcoming features will enable credit card updates and gamification such as getting badges for adjustments, check-ins or watching a video of the stretches that help with your condition. With that, I will turn the call to Scott. Scott Bowman: Thanks, Sanjiv. Turning to Slide 11, let's discuss our operating metrics. In the third quarter, system-wide sales were down 1.5% to $127 million. Comp sales were down 2%, and adjusted EBITDA for consolidated operations grew 36%. Turning to Slide 12. Let's discuss our clinics and new clinic performance. We sold 8 franchise licenses in the third quarter compared to 7 sold in Q3 of last year. And at September 30, we had 149 franchise licenses in active development. In the third quarter, we opened 9 franchise clinics, including our first in the state of Delaware and closed 11. Of the 21 clinics opened in 2025, the breakeven point has significantly improved versus clinics opened in recent years, which was due to preopening protocols implemented by our operations team. We closed 3 company-owned or managed clinics, and we refranchised 1 clinic, bringing the year-to-date total to 40 refranchised clinics. At September 30, we had 884 franchised clinics or 92% of the portfolio. We are also focused on improving new clinic performance through better training and marketing. For example, we are now requiring a minimum number of leads to be generated prior to opening to support strong opening sales momentum. This practice has helped improve our breakeven timing from around 2 years to under 1 year. Turning to Slide 13. Let's discuss our financials. I'll review continuing operations for the third quarter compared to the same period last year. Revenue grew 6% to $13.4 million, mainly due to the greater number of franchise clinics in operation. Cost of revenues was $2.7 million, down 6% compared to the prior year, reflecting lower regional developer royalties due to the repurchase of the Northwest territory rights in the second quarter. Selling and marketing expenses were $2.8 million, up 13% compared to the prior year, reflecting our digital marketing transformation efforts. Depreciation and amortization increased $100,000, mainly due to software development for our new mobile app. G&A expenses decreased 3% to $7.3 million as we continue to rightsize our cost structure. And income tax expense was $10,000 for the quarter, reflecting an effective tax rate of 3%. Q3 consolidated net income was $855,000. This compares to a net loss of $3.2 million at the same period last year, which was mainly due to impairment expenses related to refranchising. Net income from continuing operations was $290,000 or $0.02 per diluted share compared to a loss of $414,000 or $0.03 per basic share in the same period last year. Adjusted EBITDA from consolidated operations improved 36% to $3.3 million. And for continuing operations, adjusted EBITDA was $1.4 million compared to $262,000 in the same period last year. Turning to Slide 14. Let's discuss our year-to-date financials for the 9 months ended September 30, 2025, compared to the prior year period. Revenue grew 6% to $39.7 million. Consolidated net income increased $7.7 million to $1.9 million. Net loss from continuing operations improved $1.3 million to $1.2 million. Adjusted EBITDA from consolidated operations expanded $1.3 million to $9.4 million, while adjusted EBITDA from continuing operations improved $1.2 million to $1.5 million compared to $300,000 in the prior year period. On to Slide 15, I'll review our liquidity and stock repurchase plan. At the end of the third quarter, unrestricted cash was $29.7 million compared to $25.1 million at the end of last year. We maintained our line of credit with JPMorgan Chase for $20 million and had 0 funds drawn during the quarter. In addition, we extended the maturity of the facility an additional 6 months to August 2027. During the third quarter, we repurchased 228,000 shares for $2.3 million, averaging approximately $10 per share. Since quarter end, we bought back an additional 312,000 shares for approximately $2.7 million. Most recently, the Board authorized an additional $12 million for repurchases, continuing to emphasize our confidence in the long-term growth strategy. On to Slide 16, we are revising our full year 2025 guidance as follows: We expect system-wide sales to range from $530 million to $534 million, which compares to prior guidance of $530 million to $550 million. We expect comp sales to be in the range of negative 1% to flat, which compares to prior guidance of an increase in the low single-digit range. We are maintaining guidance for consolidated adjusted EBITDA to be in the range of $10.8 million to $11.8 million, and we are maintaining our new clinic openings guidance to be in the range of 30 to 35. Reflecting our refranchising efforts and realignment of our corporate cost structure, we have made significant progress reducing our operating costs. As a result, we expect 2026 continuing operations to be more profitable than 2025. When we report Q4 2025 results, we will provide annual 2026 guidance as well as the key attributes of our go-forward 100% franchise model. And with that, I'll turn the call back over to Sanjiv. Sanjiv Razdan: Thanks, Scott. Turning to Slide 18. I am proud to report that The Joint continues to receive accolades. We were recognized on the Annual Franchise Times Top 400 for the sixth year in the top 200 listing of brands. In 2025, we jumped 11 spots, landing at position 139. We are part of 2 of the fastest-growing industry sectors for 2025, health and medical and personal services. In summary, we are on track to becoming a pure-play franchisor. Combined with our diligent cost-saving initiatives, we are confident this will lead to improved operating leverage going into 2026 and beyond. And our stock repurchase plan extension demonstrates our strong conviction in the progress we're making toward our long-term goals of growing system-wide sales, comp sales, net new clinic openings and adjusted EBITDA. With that, operator, I am ready to begin Q&A. Operator: [Operator Instructions] The first question comes from Jeff Van Sinderen from B. Riley FBR. Jeff Van Sinderen: Just wanted to follow up on getting to the pure franchise. At this point, I realized I think you said you're in 40-some-odd units, you're in some sort of stage, it sounds like due diligence. And then I think you have another 30-some-odd to go after that. What time frame do you think seems feasible to complete all of the refranchising at this point of the corporate clinics? Sanjiv Razdan: Jeff, at this stage, like we mentioned on our prepared remarks, we have got an initial asset purchase agreement for 45 clinics in Southern California. We are still negotiating some details around that. And then we've got 33 other clinics which remain that we are also negotiating asset purchase agreements for. I think as a result of the overall macro climate, we found that the lender dynamic was impacted and it impacted our timing as it related to buyers securing lending, added some additional complexity, but we feel confident that we're making progress. And whilst exact timing may be hard to predict, I think we're pretty confident that we'll be able to get this done. Jeff Van Sinderen: Okay. And then just turning to the steps you're taking to turn around the same-store sales or comps. You mentioned the pricing plan pilot, I think it was. Can you speak more about that? I'm just curious about what you're doing there. Sanjiv Razdan: Yes, absolutely. So as you know, we took pricing, any meaningful pricing on our wellness plans going back in March of 2022. So it's been a minute since we've taken pricing. Inflation has gone up since then as a result, eroding some degree of clinic margin. So we've got to figure out the right balance of making sure we're affordable and accessible whilst also taking a fair price increase in line with market. To make sure we understand that thoroughly, given the market dynamic, we have taken 3 different price increase levels, 3 different tiers that reflect 3 different levels of aggressiveness of price increase, if you will. We have -- those tests went -- or pilot markets went live in November itself. And I think over the next few weeks, we expect to learn what is the optimum level of price increase that the market and our patients can bear at the moment and learning from that, the plan is to then scale that out enterprise-wide. Jeff Van Sinderen: Okay. I guess I'm a little bit -- I'm not sure what the word is, but it seems to me that if your comps are running slightly negative that you might -- that -- I mean, it almost seems counterintuitive to be raising price into the comps running negative. So I'm just wondering how you think about that, how you think about sort of the -- I know you gave a new set of guidance for the year for comps and so forth. But how are you thinking about pricing versus driving comps? Sanjiv Razdan: I think it is one of the many levels that we are contemplating. If I was to share with you or recap the levels that we've got that we talked about, I think one is to shift the external messaging to pain, which seems to be the most relevant trigger to bring patients in at the moment. To amplify that message and our new brand campaign, we have worked with our franchisee and agreed that they will shift $500 per clinic per month from local investment in marketing to a national spend that allows us to advertise more effectively and invest behind more high-impact media nationally. So we've just started doing that. I think that will make a significant impact. We are also investing some of that money to accelerate some of the very critical work that needs to happen around addressing change in consumer search behaviors due to AI, which I just enumerated. And then in the context of some of these other things that we're talking about, including patient and present technology, one of the levers, as you might expect, is also pricing. We think there's some room there just to determine what the right level of pricing is instead of doing that without due diligence. That is exactly why we've got 3 different price increase tiers that we're testing to make sure that we're not getting ahead of our skis and the consumer is ready to bear that price increase. So it is one of many other things that I think will help us get into positive comp. Operator: The next question comes from George Kelly from ROTH Capital. George Kelly: A couple of questions for you. First, on -- I guess, looking for a little more detail. You mentioned in your prepared remarks about certain initiatives aimed to improving the breakeven point. Can you walk through what those look like? Sanjiv Razdan: Absolutely, George. I think what we were referring to here is the new clinics, right, achieving that we open, reaching a breakeven point rapidly. And then, of course, from there on, we expect them to get to mature sales level also faster than they have historically done. We have opened 25 clinics thus far. And what we found is that we've used a more robust protocol learning from best practices around our own system on what needs to happen in order to ensure that these clinics open right from day 1 at a higher sales volume and then ramp up faster. So to give you an example, one of the things that we found that makes a very significant impact is to make sure that even before the clinic opens, our franchisees and our operators have achieved a few hundred, and there's a specific number that we target, potential leads. And so the moment we actually open the clinic, we already have a very significant amount of leads, very specific leads that we can then follow through and convert into patients very early in the opening phase of that clinic. That mechanically is done through tools like local tabling where basically our operators who sit within the community set up these tables and collect leads, educating our consumers. So it's really very local community level blocking and tackling that we are codifying, sharing as best practice and enforcing that our clinics open, following those protocols. As we have followed those protocols, we are seeing -- very encouraged by the results we're seeing of the cohort of clinics opening in 2025. So that is what we were referring to earlier in terms of reaching breakeven sales pretty quickly. George Kelly: Okay. And then I guess I've got a couple more. On comp growth, can you explain at all or give us the trends that you saw during the quarter? And what have you seen post quarter? It seems like your updated guide reflects a step down from 3Q in 4Q. So is that the case? Scott Bowman: Yes. Let me give a couple of comments there. So as we looked at current trends, as we ended the quarter, our comps were slightly softer than the average of the quarter. So that was one thing that we considered. But we also looked at last year. So in the third quarter last year, our comps were up about 4%. In the fourth quarter, they're up about 6%. So we have much tougher compares in the fourth quarter than we did in the third quarter. So that's the other component. So a little softer at the end of the quarter and then just tougher compares up against last year. George Kelly: Okay. And just one last one for me. There was a comment about SG&A expense reductions next year that are planned. And I think you said that you expect to grow income from continuing operations versus 2025. Can you remind me what of your adjusted EBITDA guide is from continuing ops? And can you be more specific? It's been a long time. This plan has been underway for quite a while. I know there was a management change, but can you be more specific about what level of SG&A reductions you're targeting? Scott Bowman: Yes. What I can tell you is we have taken a very close look at our G&A structure now versus what it should be post refranchising. And so we've already started to make some adjustments there. And a good point of reference is in our earnings presentation on Slide 13, where it shows you kind of the breakdown of why our adjusted EBITDA was better for continued operations compared to last year. So what's happening there is as we refranchise these units, they come into the GAAP revenue stream with additional royalties and fees. And so that's why revenue -- GAAP revenue was up 6% in the quarter. But if you look at G&A costs, they were actually down 2% against that revenue increase. And so you can kind of see some of the rightsizing starting to happen. There's more to come, and we have the areas targeted that will give us the most reduction. So we're starting to see some benefits come through, which is very encouraging. Also, I'd point out that cost of revenues was actually down 6% as well against revenue up 6%. So that certainly helps. And that's mainly because we bought back those territory -- regional developer territory rights in the Q2 time frame that we mentioned on our last call. And so that's paying some benefits, right? So we no longer have to pay those RD royalties. And so our cost of revenues is less against higher revenue. So kind of to answer to your question, so the next steps that we're looking at is continuing to refranchise clinics. As we do that, we'll see some pretty big reductions in big categories like salaries and wages, employee benefits, insurance. If you think about workers' comp insurance, big reduction with fewer employees and then other things like legal fees and travel and some other expenses. And so as we've kind of done a little bit deeper dive in analyzing line items, we have very good plans on how they should be reduced and when as we continue to refranchise these units. So early days, we're seeing some really good signs, but the bulk of it is yet to come. And so as we continue this transition process, things are fairly fluid, but we kind of have our sights target on where the opportunity areas are. And on our next call in Q4, we'll be able to lay that out in a good amount of detail in terms of what the outlook looks like in a more kind of fully franchised model. Operator: The next question comes from Jeremy Hamblin from Craig-Hallum. Unknown Analyst: This is Will on for Jeremy. First, I wanted to go back to the pricing. I guess my question is, are you taking a blanket approach to raising price? Or is it -- are you taking price on certain packages and plans maybe to drive customers to different categories? Sanjiv Razdan: Yes, I can answer that for you, Will. Almost 80% to 85% of our revenue comes to a recurring revenue model, right? So our patients are on membership plans that are recurring in nature. So that is where the bulk of the opportunity is. That -- those wellness plans are where we are testing 3 different levels of price increase, right? And they range anywhere between $2 to $10 to try and understand what is going to be the patient sensitivity to those price increases, and we're also testing them across a variety of different geographies. We've got approximately 200 clinics in those 3 pilot group. So it's a pretty comprehensive, well-thoughtful test, 3 different price increase levels, lots of different geographies and demographics. We will learn from that on what the most appropriate level of price increases given the current climate, and then we can scale that out nationally. So that is where we are looking at this pricing pilot. Will, does that clarify your question? Unknown Analyst: Yes, that's helpful. And then just one more for me, going back to the units in Southern California. I guess, are you able to kind of categorize just general performance of those 45 units? I mean, are they kind of average, better, kind of weaker performing units? I'm just trying to get a sense of valuation. Scott Bowman: Yes, I can start there. I think in general, those clinics in Southern California are good performing clinics overall as a group. And so as we look to refranchise those, it's critically important that we find good operators. And so that is one of the things that we're really focused on, and we want to make sure that we take the time to get good operators in those clinics because good locations. And in the past, a lot of those clinics have performed quite well, but there's still opportunities there. So it's a good position for a strong operator to step in and continue the good practices that they have, but also enhance what they do to make it even stronger. Operator: The next question comes from Tom McGoverns from Maxim Group. Thomas McGovern: So this past quarter, you guys sold, I believe you said 8 franchise licenses compared to 7 a year ago. Just trying to get an understanding of where the demand is coming from. Can you give us any insight on whether or not these licenses are being sold to maybe existing franchisees or if they're all new interest, new franchisees? Sanjiv Razdan: It's a mix, Tom, both existing franchisees as well as new franchisees. Thomas McGovern: Understood. The other question I had was on the app. So it looks like you guys have some pretty strong initial data points there. It says in the slide, 178,000 downloads and 18% of new patients are signing up for that. Do you guys have any metrics that you can provide for us now in terms of utilization or engagement through the app? Have you guys seen already an increase in those that have the app scheduling appointments? Or is it just too early to tell? Sanjiv Razdan: Tom, it's too early to tell. But the feedback from those patients that we're seeing because we're also, as I indicated, starting to measure patient experience through the app, we're seeing extremely high metrics coming back. So what we're encouraged with, whilst it's early signs that the overall experience that they're having is very strong, and clearly, as we've seen, a strong patient experience typically will lead to longevity, and that's really what we're going after here, making sure that there is lifetime value because there's less friction in the experience, but too early to be able to share data points that are demonstrating those metrics already. Thomas McGovern: Got you. Appreciate that insight. And final thing for me. So just wanted to kind of piggyback on the pricing question. I see in your slide as well that you guys plan to take pricing in 1Q '26. Is that a steadfast plan? Or is there any reason you might take pricing earlier than that if you have the right insights in the fourth quarter or anything that could possibly push that into the second quarter or later in 2026? Sanjiv Razdan: I think at this point, considering that the pricing test just went -- those pilot markets just went live earlier in November, I think the most likely scenario is that we will read them, see the impact and most likely, given the time frames involved that we should be able to activate against them for our system in quarter 1. Now should something emerge from that test that gives us pause and reflection and needs us to pivot and test them more, then of course, we will consider that. But at the moment, given that we have got 3 different options in test, we believe that one of them is more than likely going to be the right option for us to then scale out nationwide sometime in the first quarter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Sanjiv Razdan for closing remarks. Sanjiv Razdan: Thank you for joining us. Have a really good day. And know that at The Joint, we always have your back. So I appreciate everyone. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, everyone, and thank you for joining this Gray Media Q3 2025 Earnings Call. [Operator Instructions] As a reminder, today's session is also being recorded. It's now my pleasure to turn the floor over to our host, CEO and President, Mr. Hilton Howell Jr. Please go ahead, sir. Hilton Howell: Thank you, operator. Good morning, everyone. As the operator mentioned, this is Hilton Howell, the Chairman and CEO of Gray Media and I want to thank all of you for joining our third quarter 2025 earnings call. As usual, all of our executive officers are here with me in Atlanta; Pat LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin Latek, our Chief Legal and Development Officer; and Jeff Gignac, our Chief Legal -- I'm sorry, our Chief Financial Officer. And then also we had Jim here for the last formal time to join us here but he won't be doing anything but telling us what the right answers are. And so we will begin with a disclaimer that Kevin will be providing. Kevin Latek: Thank you, Hilton. Good morning, everyone. Today, we filed with the SEC on Form 8-K, our earnings release and an updated investor slides. Later today, we will file with the SEC our quarterly report on Form 10-Q. These materials are all available on our website, which is www.graymedia.com. Included on the call may be a discussion of non-GAAP financial measures and in particular, adjusted EBITDA, leverage ratio denominator and certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in its analysis and valuation of our company. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on our website. All statements and comments made by management during this conference call other than statements of historical facts should be deemed forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors that are contained in our most recent filings with the SEC. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. And now I turn the call to Hilton. Hilton Howell: Thank you, Kevin. Today, we are very happy to announce that our results for the third quarter of 2025 compared favorably to our Q3 guidance for both revenues and expenses. Total revenue in the third quarter of 2025 was $749 million, at the high end of our guidance for the quarter. Total operating expenses before depreciation, amortization, impairment and gain or loss on any disposal of assets in the third quarter were $592 million, which was $17 million below the low end of our guidance. While some of this was due to tightening the belt at the corporate headquarters, I'm going to take a moment to thank our TV stations who uniformly contributed to a much lower expense than we have had in previous operating quarters. So thank you, Gray. Net loss attributable to common stockholders was $23 million in the third quarter of 2025. Adjusted EBITDA was $162 million in the third quarter of 2025. And political advertising revenue hit $8 million, which finished above our expectations for an off-cycle year. In addition to these operating results, third quarter saw a significant acceleration of mergers and acquisition activity as we look to identify and negotiate accretive transactions that strengthen our business and our balance sheet. All told, we -- as we have described previously, we anticipate entering into 6 new markets by acquiring the local news station that was ranked #1 in their respective markets in 2024. We also plan to create 11 new Big Four full duopolies. And we may deal with this in questions but we believe these duopolies are absolutely necessary for our industry and to preserve local news in respective smaller markets. We also made significant progress on strengthening our balance sheet during the third quarter of 2025. The financing transactions completed in July were transformational and provide additional avenues for us to manage our debt and our leverage. As noted in our press release this morning, our Board of Directors has declared an $0.08 per share quarterly common dividend, which is consistent with recent quarters. And as always, the Board will consider capital allocation each quarter in light of other opportunities to deploy capital for growth. Operationally, we continue to enhance our local content offerings in the third quarter of 2025. We renewed our partnership with the Suns and the Mercury and we expanded our sports portfolio to include the Dallas Stars outer markets. Investigate TV premiered its third season in September and also launched a multi-platform project to educate viewers about artificial intelligence. We also announced a first-of-its-kind partnership with Google Cloud powered by Quickplay to revolutionize how our viewers find and connect with our content. This new streaming structure will begin rolling out in all Gray markets in January next year. In August, we announced that we renewed our affiliation agreement covering our 27 FOX markets for 2 additional years. WANF, our station in Atlanta, became an independent television station on August 16, and as we expected, is off to an exceptionally strong start, adding over 25.5 hours of news and other locally focused programming in our home market here in Atlanta. Finally, we are continuing to work with potential development partners at Assembly Atlanta who are contributing their financial resources and development expertise as we look to further monetize our investment in this remarkable asset. We expect to have more announcements in the following quarter and next year about all of these exciting plans. We have made a lot of progress so far in 2025, and we are excited that we're capitalizing on opportunities across multiple aspects of our business to enhance value for all of our stakeholders. At this time, I'll turn our call over to Pat to address our operations. Patrick LaPlatney: Thanks, Hilton. Q3 continued the theme we've been describing throughout '25, with advertisers remaining somewhat cautious due to the macro environment. Through the quarter, though, we saw core activity strengthen more than we had projected back in August, we ultimately finished on the high side of guidance. Remember that the Olympics on NBC provided about a $20 million uplift in July and August of '24, of which about $16 million was core ad revenue and $4 million was political. Factoring that in, our third quarter was up about 1% over '24. From a category perspective, in first and second quarters and as we guided for third quarter, automotive finished down high single digits. Services as a whole were up, driven by legal, which continues to grow at double-digit percentages versus last year and is the top 5 category for Gray. The financial services category is also a bright spot, up high single-digit percentages. Digital continued its healthy growth, and our new local direct business was up low single digits over the same period in '24. Our sales teams continue to perform admirably in a challenging environment. Political ad revenue exceeded our expectations in the third quarter of '25. Our guide for the third quarter was $6 million to $7 million and our actual results came in at $8 million. Some of this revenue was generated from issue advertisers supporting the President's legislative priorities. We also saw early spending supporting 2026 U.S. Senate candidates and generated good results in Virginia from the '25 Governor and Attorney General races. Our fourth quarter '25 guidance is for core ad revenue to be up low single digits as we have less challenging comps due to political displacement in the prior year quarter. October finished up low double digits, which really isn't surprising given the significant demand from political advertisers in the prior year period. It's also encouraging that as of today, November and December are pacing up slightly. Across categories in the fourth quarter, we're seeing a lot of green in services like legal, financial, home improvement -- yes, in financial home improvement. Supermarkets and travel and tourism are trending better, and it's good to see automotive flattening out at a new run rate down low single digits as opposed to the higher single digits numbers we saw earlier in the year. Jeff will now address the key financial developments. Jeff Gignac: Thanks, Pat. As Hilton mentioned earlier, we continued to make progress on our balance sheet during the third quarter. We took advantage of strong debt market conditions in July to extend our maturity profile out to 2033. Our capital markets activities addressed all material maturities through December of '28 with a modest impact of less than 25 basis points on our overall cost of debt. We finished the third quarter with over $900 million in liquidity and $232 million in availability on our open market repurchase authorization. Our leverage metrics at 9/30/25 were 2.72x first lien leverage ratio, 3.66x secured leverage ratio, which includes the second lien that's new this period and 5.77x total leverage ratio, each of those calculated as prescribed in our senior credit agreement. On our second quarter call, we discussed the expected impact of our pending M&A transactions on our leverage. We continue to estimate that if we close those transactions today using cash on hand and/or revolver borrowings, our total leverage ratio, again, as defined in our senior credit agreement, would be approximately a quarter turn lower than where we finished the quarter. Our expense reductions continue to show up in our results, and we're proud of our team for the company-wide focus on cost containment. In third quarter of 2025, our station level operating expenses, excluding network affiliation fees, were actually down $8 million or 2% compared to third quarter of '24, and that follows a decline in first quarter versus first quarter of '24 and flat in second quarter versus second quarter of '24. We've had a lot of questions about net retrans, so let me provide a little more context to help everyone understand the current situation. We've discussed our multiyear effort working towards sustainability with our MVPD and network partners. In third quarter, our network affiliation expenses declined by 9%, while our retransmission consent revenue declined by 6%. Our fourth quarter guide, which now fully excludes the expected impact on both revenue and expenses related to WANF, is that our retransmission consent revenue less network affiliation fees will decline slightly compared to the prior year period. That decline is primarily attributable to WANF and Atlanta shifting to be independent. Our guide for full year cash taxes for 2025 remains at $39 million, and we continue to expect that we will have no further cash tax payments this year. We've reduced our expected CapEx range for full year 2025 by $15 million to a new range of $70 million to $75 million, again, reflecting a company-wide effort on where and when to invest. We expect the further reimbursement related to public works construction at Assembly Atlanta to be received prior to year-end, such that our net capital investment in Assembly Atlanta during 2025 will be 0. That concludes my remarks, and I'll turn the call back to Hilton. Hilton Howell: Thank you so much, Jeff. And so operator, let us open it up to any questions anyone may have. Operator: [Operator Instructions] We'll hear first from the line of Dan Kurnos at the Benchmark Company. Daniel Kurnos: Nice print. I guess, Jeff, thanks for the color around net retrans. Super helpful. You're finishing the year at this $202 million to $203 million. Is that kind of the right run rate we should think of as we start heading into '26? How should we think about things kind of puts and takes there on the reverse side? And obviously, you have renewals. So I know you're not going to guide to net next year but it just feels like it could be an accelerating net year. So just any directional color would be helpful. Jeff Gignac: Yes, Dan. So let me focus the commentary more on the net because that's really where -- how we think about it. There's hundreds of contracts that underlie all of this. So the way to really think about it is that we -- you can see how much it has flattened out, even if you go back to '24 versus '23 and where the guide implies for full year '25 versus '24. So you're seeing the quarters flatten out. And it's too early to give a guide for full year, but there's really this flattening that's occurring in front of us and look, ideally, it can turn positive, and we're hopeful, but the big input there is some declines, and we don't know those. Operator: Our next question will come from Aaron Watts at Deutsche Bank. Aaron Watts: Core advertising was down 4% in the first half of this year, down 3% in the third quarter and you're guiding flat to up low single digits for 4Q. I know there's some noise in those numbers. But you're closing the book on a tough 2025 with improved momentum. How does that frame the discussion on core for next year when you'll have the typical political crowd out and what's expected to be a very healthy political spending cycle but also a lot of incremental sports content and hopefully firming across key verticals as well. Patrick LaPlatney: Yes. Aaron, it's Pat. I would say that we're really optimistic about 2026. we have some early Q1 numbers that are encouraging, in fact, very encouraging. Towards the end of the year, we'll obviously get political crowd out, as you saw in the comps for this year from last year. But as we sit here today, we are very, very optimistic about 2026. Operator: Our next question this morning will come from Patrick Sholl at Barrington Research. Patrick Sholl: Just another follow-up on the ad trends. With the rebrand of the Atlanta Station, could you maybe just talk about like the advertiser reception to that increase in news content and if there was any sort of, I guess, disruption in how that viewership of that as that station transitioned? McNamara Breland: Yes. This is Sandy. We've had really good reception to what we're doing in Atlanta. We added 25 hours of local news and sports and viewers are responding. We're seeing gains in mornings and key demos and in prime access, and we're able to really serve the community with hyperlocal content and they're responding. And it's quality content. This is a team that won 26 Southeast Emmy awards and a National Emmy Award this year. And so the quality of the content, people are finding it. They're staying with us longer and we expect those numbers to continue to grow. Hilton Howell: Well, and Patrick, I just want to tell you, I wasn't there because I was previously committed with Sandy and Pat were plus our whole team at WANF and for the first time ever and so we may be repeating this in the future. We used the stage at Assembly Atlanta, and we had a full-scale local WANF, Telemundo, Peachtree TV, CW Upfront for all of the advertising community and it was hugely well attended, and it really helped set the whole transition off to an independent station in a remarkable, remarkable way. We see this as being -- the WANF as being the local CNN from the days when Ted Turner owns CNN for our local market in this really growing and really exciting city of Atlanta. And that upfront was unique, different and special. Patrick LaPlatney: I'd add that we renewed our Hawks deal and our Braves deal for 2026 is going to kick in, in March with a 10-game spring training schedule and the ratings last year were great for those games. So there's a lot of momentum over there. Operator: [Operator Instructions] we'll hear next from the line of Craig Huber at Huber Research. Craig Huber: My one question has to do with the Assembly Atlanta. Can you remind us, please, of what the total cost, the net cost you've done there so far? I believe it's around $600 million. But along those fronts, can you just touch on when you think you're going to get a proper ROI off that spend? I see your production company EBITDA was about $3 million in the quarter. But just when do you think you'll be getting fuller lease commitments, et cetera, but the number will go up significantly? Hilton Howell: We are not a development company but we are actually and have been from day 1 on the building portion of what we had at the old General Motors plant, which is the studios. It is doing quite well. The partnership between NBCUniversal and Gray Media is probably stronger than ever. They're bringing their shows in. We have leased out things and we actually heard last night and we kind of think that the dam may be broking that Hulu renewed a third season on a show that we believe is going to occupy 3 of our stages out there. I can't commit to you today that's going to happen, but it is. And so each of those parts add to a growing EBITDA out of what's been built. We're not making money, Craig, on raw land but we are in negotiations with a wide variety of parties who will bring their financial assets. And we will be entering into joint ventures with them to create assets that we would like to maintain an interest in and then other assets like an apartment complex. We may just absolutely sell and liquidate. As Jeff mentioned, we have finished up sort of the last obstacles to getting about $25 million back from the cities, which we will be picking up in Q4. And so we're not going to go and like tout what we've got coming, but it's really, really, really exciting. And I think within 12 to 24 months, I think it will be the biggest cash flowing operation we've got in the company. Jeff Gignac: And Craig, just to follow up on the numbers. It's around $650 million of net investment thus far. There will be, as Hilton just mentioned, some of the development ideas that are being basically diligence at this point. Those will -- we can get return either of capital or on capital as those come to fruition. So as Hilton mentioned, later in the year, hopefully, by the time we have our next call, hopefully, we'll have more to report. There's a lot of activity and a lot going on up there. Operator: We will hear next from Mr. Steven Cahall at Wells Fargo. Steven Cahall: So a question on M&A. I mean, you've been very active already this year between the announced deals and the swaps and related to pushing some of the debt out. So I know you're in a strong position to figure the next few years out. There's always the risk that things happen, I guess, that you're not a part of in terms of mergers and acquisitions. So how do you think about maybe something that's more strategic on the M&A side right now? And what do you look for that would be a particularly attractive sort of large-scale transaction if that is indeed something that could be on your radar? Kevin Latek: Steven, it's Kevin. Just to repeat what we said last time, we are laser-focused on the deals that we announced in the third quarter. The government being shut for so long has clearly delayed our efforts to work on that approval process and transition. But we remain fully committed and fully occupied by those transactions. Looking sort of down the road into the future, I think was really your question. We think there are other opportunities to do transactions like the ones we've done here, which is, say, sub-$200 million deleveraging deals that improve our portfolio and our balance sheet. Those we will look at, again, down the road as we get through these transactions. Also closing these transactions will give us some real intel on where the new regulatory restrictions will be. We have FCC proceedings that are ongoing and more news will come out of that by the end of this year which will provide all of us some additional insight into what our real opportunities are. I would say from the very beginning, this company was essentially single TV station. It was about becoming a large company with very, very high-quality TV stations. And we've stuck to that now for decades. It's #1, strong #2 TV stations. There are a lot of stations out there that would, we think, be good fits for Gray. And we're going to continue our focus on transactions that improve the overall portfolio that don't tax the balance sheet with high-quality assets and great employees. So again, thinking down the road, nothing has really changed in our views there. Hilton Howell: I will add to that, Steven, like with regard to smaller acquisitions and what we announced in Q3, we did a lot of transactions of markets that really helped fill in our footprint, particularly a footprint that we want to address with regard to our sports partners that we have created. And so you need to know that's very much part of what we're doing. And we've created -- I can't remember how many, Sandy? different sports networks across the United States. McNamara Breland: Yes, 13. Hilton Howell: 13. So -- and they literally go really from coast to coast. And we like to fill those holes in. And so you can kind of look at our map and get a guess where we might be interested in going. In terms of really big transactions, obviously, there was sort of some news on TV news check this morning and we're well aware of that. And -- but there's nothing that we are in deep negotiation with at the moment. But we're in a period of time in our industry where things change faster than I've ever seen it. And for the first time in the history of our business, we are really operating in the wild, wild west. No one knows what the rules actually are. And anybody that tells you that they do is just -- I mean, they just don't, they can't. Now there's a lot of things that we think we can do. But also, the one thing I don't want to get to happen to our company is to do any deal that would put the basic company in any kind of risk. We have 10,000 employees and all of their families to look after. And that's sort of my first job is looking after what they do. Now there's a lot of big opportunities to grow. But unlike perhaps some of our competitors, I don't believe and my management team unanimously does not believe that Gray actually has to do anything. I mean that we're just fine where we are and we can carry on our previously announced efforts to just reduce our debt and pay it down and then return more to our shareholders. But if not, and if we get an opportunity at the right price to get much bigger, we're not going to run from it. We're not going to run from it. There are a lot of opportunities to make a bigger company that does better by its shareholders and then from our standpoint, does better by creating more local news within its individual community. If you go back and you look at the full 30-plus year history of building this company, the reason we only bought #1 and #2 stations is because we know that those stations deliver something that is absolutely needed. And today, local news is threatened. And we're going to do everything we can to make sure that, that threatened piece of what needs to be done in our country is retained and enhanced. So that will drive our M&A discussions. Operator: [Operator Instructions] we'll hear next from Shanna Qiu at Barclays. Gengxuan Qiu: Sorry if I missed this, but I think historically, 4Q ahead of a political year generated $20 million, $30 million of revenue. And I think in the fourth quarter guide, it's $7 million to $8 million. I guess just what's driving that delta if it seems like political is still going to be a reasonably strong year into 2026. Kevin Latek: This is Kevin. The first half of this year is essentially the same political revenue we had in the first half 2 years ago and 3 years ago, and there's always puts and takes. There was some Georgia Senate runoff money in early '21, for example, some ballot initiatives pop up. generate a lot of money. A couple of years ago, Maine had a ballot issue that was brought more money than the Virginia governor raised for us despite our bigger presence in Virginia. So there's always sort of puts and takes. The second half of this year, we just -- we did not see up until this week, we've not seen as robust spending on races that we have seen in prior off years. We would attribute that not to any sort of change in the dynamic of the rate -- sorry, our coverage of the races, but rather the fundraising levels were really different this year. For the last kind of 10 months, there's been at least in my world in Washington, the feeling that the Trump administration was doing more than any prior administration and the Democrats were not, let's say, effectively addressing those issues. And there was a lot of seemingly some handwringing on the Democratic side about Trump administration's efforts. And the election on Tuesday showed that not only were the polls radically wrong, but the Democrats did exceptionally well from statewide races in Georgia to California, Virginia State House across the board. It would appear this week that the Democrats have a much better shot at races that were written off as recently as a week ago. Some races that we expected to not be competitive will be competitive and that fundraising for the Democrats is going to change in a very material way now that the electric showed on Tuesday that the Democrats do have a really good shot in a lot of races. So we have seen not a lot of, frankly, very strong democratic fundraising this year to support the races we went into on Tuesday. And at least as of our last read on pacing last week that we used for our guidance, we have not anticipated a huge upsurge in spending in the fourth quarter of this year for races that happen next year like we've seen in the last couple of off cycles. We're pretty optimistic that's going to change because of the outcome on Tuesday of this week. And we certainly hope to see that democratic fundraising flow through pretty quickly to supporting races that are going to happen in the primaries next year and of course, the General next November. And what we do know is Democrats are spending heavily, the Republicans will follow. We've seen a number of races where we're -- it seems candidate quality is where we've talked about the last couple of elections. It's back in the dialogue again this week and some races next year seem to be attracting some marquee names on both sides. So I think we're set up really well for next year. This year, we are a bit disappointed in the fundraising levels that have impacted us in the second quarter, but we also went into the year expecting political not to be as strong as it has been. So we're actually pretty happy with how political has done versus our expectations at the beginning of this year. So that would be our view on political at this time. Hilton Howell: Shannon, this is Hilton. Let me just add something. I stayed up late and watched the returns on Tuesday night and it was a democratic blowout. And I left regardless of where people come out on political, what I love is a great fight out there. And I think the Democrats are going to be able to raise a ton of money. And I know the Republicans are going to be able to do the same thing. And so my confidence in the level of political spend in the midterm this year is tremendous. I think it's going to be gargantuan. I'm really looking forward to seeing it all rolling in. Operator: Next question today will come from the line of Avi Steiner at JPMorgan. Avi Steiner: I would love to get your thoughts on the YouTube TV carriage dispute. What might the impact be on future negotiations and maybe between affiliates and networks as well going forward? Patrick LaPlatney: Sure. Avi, it's Pat LaPlatney. Look, the situation with our ABC stations going off YouTube is frustrating. Obviously, we prefer to have a voice in the MVPD negotiations for our stations. We don't. Hopefully, they get it worked out soon. And I can't really speculate on what's going to happen here, how it's going to impact the market going forward. But this is -- these are 2 very big companies have very big footprints. And again, it's our hope that for the good of both companies and candidly, the American consumer, they get something worked out soon. So that's our thoughts. Hilton Howell: It is. But it is very frustrating that we're getting penalized and have no control over the outcome of that dispute. But like the government dispute, we hope they all come to a positive conclusion soon. Operator: Ladies and gentlemen, we thank you all for your questions and comments today. Again, if you did have a question or comment or follow-up that we didn't get to today, you are invited to reach out to management following today's conference. It is now my pleasure to turn the call back to Mr. Hilton and our management team for any additional or closing remarks. Hilton Howell: Thank you, operator, and I'm going to thank you all for the questions. In closing, I just want to say that the first half of 2025, the third quarter was very, very busy, and we accomplished a tremendous number of objectives that will have long-term benefits to Gray Media and all of its stakeholders. We will continue to take actions to enhance the value for our advertisers, for our investors and for the communities and families that we serve. And I really want to take everyone -- to thank everyone for joining the call today, and we'll talk to you next quarter. Operator: Thank you, ladies and gentlemen, for joining today's Gray Media Q3 2025 Earnings Call. You may now disconnect your lines, and have a good day.
Operator: Good day, and welcome, everyone, to the HEALWELL AI Third Quarter 2025 Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to [ Hefton Seni ], Investor Relations. Hefton Seni: Thank you, operator. Joining me on the call today are James Lee, CEO of HEALWELL; Dr. Alexander Dobranowski, President of HEALWELL; and Anthony Lam, HEALWELL's CFO. I trust that everyone has received a copy of our financial results press release that was issued yesterday. Listeners are also encouraged to download a copy of our quarterly financial statements and management discussion analysis that was filed on SEDAR+. Please note portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Please refer to yesterday's press release and to our management discussion and analysis for more details on the company's risks and forward-looking statements. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based, except if it's required by law. We use terms such as gross margin and adjusted EBITDA on this conference call, which are non-IFRS and non-GAAP measures. For more information on how we define these terms, please refer to the definitions set out in our management discussion and analysis. There will be a question-and-answer session at the end of the call, which will be limited to analysts only. To ask a question, analysts are required to call in to the conference using the dial-in number provided in our press release. And with that, let me turn the call over to James Lee, CEO. James Lee: Thank you, Hefton. Thank you, everyone, for joining us today. Look, Q3 for was HEALWELL was a very busy period, both in terms of productivity and change. So we're excited to share our progress. Obviously, as you know, in Q2, we completed the acquisition of Orion, and we had a major milestone becoming adjusted EBITDA positive. And as we enter Q3, we set ourselves 2 really simple but clear goals. We want to simplify the business and focus the business to maintain growth and a balance of adjusted EBITDA positivity. We announced in Q3 and we've completed this week the simplification of HEALWELL, forming a major milestone where we've gone from a conglomerate to a pure-play software service and AI business. And we've seen the strength of the diverse geographic and product mix, allowing us to maintain a positive adjusted EBITDA during the traditional slower Northern Hemisphere summer quarter, which we'll talk about later. These milestones are a critical event for us. They shape our future as a focused and simplified business. We have the resources now to succeed on our journey of creating a globally relevant and leading preventative care AI business. Now I'd remiss if we didn't thank everyone, like this wouldn't have been possible without the support of our key partner, WELL Health and the hard work both from our Board and our broader team members. So I want to thank everyone for a really busy and productive Q3. Now Post Q3, the business now is a simplified software and AI business. But looking at our Q3 results, Q3 has been another positive step for us in our journey. Our continued operations achieved revenue of $30.4 million versus $6.7 million in 2024 and adjusted EBITDA of $0.7 million. While we saw a quieter start to the quarter due to the summer period, we ended the quarter strong in our AI and data division, and we see good momentum for the rest of the year and into 2026. Now in Q3, we announced that we are integrating our AI platform, DARWEN, into our software platform, Amadeus. And this combination with -- in conjunction with our expansion here in the U.S. has begun to show really promising signs, which we'll talk about shortly. We're very early in the adoption cycle of AI tools and health care systems. So having the appropriate resources and becoming increasingly efficient with these resources is really important. So our goal is to maintain that balanced investment and maintaining adjusted EBITDA positivity. You heard us and you will continue to hear us talk about the word simplify and focus a lot today. As we talk about and shift the strategic focus over the last 6 months in the quarter. But I'd be remiss if we didn't talk about why we've done it. Now AI is a powerful tool. It's in the infancy of its understanding and adoption, but we believe that in health care, it's the most valuable use case that AI is currently able to do. At its heart, it's capable of consuming significant amounts of data looking to signal. But the impact we're seeing in the health care system for what we can do today is undeniable. Our AI engine, DARWEN, can identify hard to find patients using existing clinical data. Now unlike precision medicine when you need new data, we can find signal from existing data. As we've begun to expand DARWEN across the global footprint, we've seen the sheer size of the opportunity to expand materially. So to achieve our stated goals, which I mentioned before, of investing while maintaining and improving operating margin required us to have a really disciplined and focused business. Now, that let us taking the hard decision to simplify our business and product offering, which you've seen us execute this quarter. We've integrated our AI business. We acquired the balance of Pentavere. We've begun aligning our software businesses. We've expanded in the U.S. and we simplified our business lines and added some resources. So going into the final quarter and the first quarter of 2026, we have 2 primary areas of focus. In Q4, our goal is to complete the integration plans to maximize position and flexibility, allowing us to maintain improved operating margins year-on-year while investing. And in Q1 next year, our goal is to demonstrate commercial validation of AI platform and health care systems outside of life sciences. Maintaining and keeping focus on a well-defined set of goals in the immediate future allows us to remain disciplined so we can demonstrate both value to our customers and to our shareholders. Finally, I'd like to give a little bit of context about the opportunity in front of us in AI. Now I think it's [ one-off effect ] that the earlier you identify treatment path ensure the great path is identified, the better both the patient outcome and the cost of the system will be. Our AI platform, DARWEN is uniquely placed to help extract meaningful insight from existing unstructured clinical data, allowing us scalable improvements to both. We've already begun a number of proof points and what we call proof of values to multiple health care systems right across North America with the ability of identifying at-risk patients. Our priority is, obviously, as we mentioned, is to take advantage of the leadership of our field, demonstrate commercial value to the health care systems and to our shareholders. During Q&A, we'll talk a little bit about the opportunity and where we're looking to deploy and how many of our algorithms. But for now, on behalf of the team, I want to thank you all for your continued support. We look forward to sharing progress over the coming quarters. Anthony, I'll hand it over to you for the financial results in more detail. Anthony Lam: Thank you, James. Before I begin, I'd like to remind everyone that all of the figures I will be discussing today are in Canadian dollars, and our financial statements are presented in accordance with IFRS International Financial Reporting Standards. Our third quarter 2025 results are as follows: HEALWELL achieved quarterly revenues of $30.4 million during Q3 2025. This compares to $6.7 million generated during Q3 2024, an increase of 354% Revenue growth in the quarter was primarily driven by the acquisition and integration of Orion Health, along with both organic and inorganic initiatives. HEALWELL achieved gross profit of $16.5 million during Q3 2025, an increase of 330% compared to $3.8 million in Q3 of 2024. This increase was tied directly to higher revenues in the quarter. HEALWELL achieved gross margin percentage of 54% during Q3 2025. This compares to 57% in Q3 2024. During Q3 2025, HEALWELL reported positive adjusted EBITDA of $0.7 million compared to an adjusted EBITDA loss of $2.8 million in Q3 of 2024. This marks the company's second consecutive quarter of positive adjusted EBITDA, highlighting continued execution improvements and stronger financial performance. HEALWELL reported an IFRS net loss from continuing operations of $16 million for Q3 of 2025. This compares to a net loss of $8.7 million in Q3 of 2024. HEALWELL ended the quarter on September 30 with $15.6 million in cash, an increase when compared to $9.4 million at the end of Q4 2024. Looking at our revenue segments. As of November 1, 2025, following the divestiture of the company's Clinical Research and Patient Services division, HEALWELL now generates revenue across 2 core segments: first, AI and data science; second, health care software. Our AI and data science segment achieved revenue of $2 million in Q3 2025, marking a 79% year-over-year growth compared to Q3 of 2024. The commercial adoption across all of our offerings, including Khure and Pentavere technology, drove strong organic growth in the quarter, reflecting increasing demand for HEALWELL's AI-powered disease identification and clinical insight tools. The second revenue stream is health care software, which generated $28.4 million in revenue in Q3 2025, an increase of 408% from $5.6 million in the same quarter last year. The acquisitions of Orion Health and VeroSource have been the primary drivers of growth in this segment. With the recent divestiture of noncore assets, HEALWELL is now fully focused on driving growth, innovation and profitability across its 2 high-margin scalable segments, AI data science and health care software. With that, I'll turn the call over to our President, Alexander Dobranowski, for an update on progress that we made with regards to our AI division. Alexander Dobranowski: Thank you, Anthony, and thank you, James. I'd like to take a few minutes to highlight some of our progress we have made in Q3 with regards to our AI division. Most notably, in Q3, we achieved full ownership of Pentavere, enabling deeper integration of DARWEN AI with Khure Health for early disease detection and clinical insight generation. In addition, we launched Amadeus AI, integrating DARWEN into Orion Health's Amadeus platform, extending HEALWELL's AI capabilities across global health care systems. From a peer-reviewed validation perspective, our teams under the leadership of our Chief Medical Officer, Dr. Chris Pettengell and the Co-Founders of Pentavere, Aaron Leibtag and Steve Aviv have now published over 40 peer-reviewed scientific publications, underscoring HEALWELL's leadership in validated and clinically proven AI solutions. Subsequent to the quarter, as James and Anthony mentioned, we recently announced a 50-50 joint venture with WELL Health to build an AI-driven clinical research platform. By actioning this, we have transitioned HEALWELL into a pure-play AI and SaaS health care company focused on preventative care and early disease detection. Our AI platform powers this JV, automating patient recruitment, trial execution and real-time data insights. Ultimately, now, our strengthened balance sheet and focused operations enable global expansion of HEALWELL's AI commercialization strategy. From an outlook perspective, we are currently demonstrating continued expansion of proof-of-value AI projects with health care systems across North America. Our ongoing and progressing discussions with global pharmaceutical and research organizations to extend AI-driven real-world evidence and clinical data programs continues to progress, and we are now commercially active with 8 of the top 10 world's largest pharmaceutical companies, and this roster continues to grow. We also recently announced one of the world's first examples of using AI to generate regulatory-grade real-world data for supporting patient access and advancing the pharmaceutical industry. These types of capabilities are key differentiators of HEALWELL and our artificial intelligence engine, highlighting us as leaders in this section. A key focus for us in 2026 is scaling DARWEN AI commercialization and demonstrating measurable clinical and economic outcomes. And with that, I'd like to thank everybody today for attending this call, and I'll now hand it back to the operator and move to the Q&A portion. Thank you. Operator: [Operator Instructions] We'll take our first question from Allen Klee at Maxim Group. Allen Klee: Nice to hear from you guys. Just on what you're doing with Orion and cross-selling opportunities with the rest of your business and how you're thinking about how that can all expand your total addressable market and opportunities? James Lee: Look, and if I've understood the question correctly, what you've asked is how we look and expand the overall market as we integrate through the Orion network. I think what you've seen there is that it's not just the existing customers, the Orion network that we're spanning over. What we've actually found is the broader footprint Orion has and reputation has significantly enhanced the size of that market. So while we thought the original proposition was we would cater to existing customers, actually, the brand recognition in different regions has been really, really favorable. But if you think about the market opportunity, what it's led us to do is go from just being at the governmental and integration layer levels right down now to the hospital level. We are seeing that the market size from where we can add value is like I'll make up a number, but 10x to 15x larger. Allen Klee: And then just last question on -- with your AI business, what are the main areas that you're kind of -- you're working on proof of concept, but just in general, in terms of commercializing the business more. Can you talk about kind of what the main initiatives are? James Lee: Sure. And just for the vernacular, we use proof of value because I think the concept and an important distinction is the concept is clearly been proven. What we're demonstrating now is that our deployments are providing value to a health care system. So look, as we look across the opportunity set, the best way to think about it is that if we just take a small subset to get the numbers relevant, if you took the top 100 health care systems in the U.S. and what you have there is a patient identification of where just 100 disease states would mean up to 2 million patients are being either misdiagnosed or underdiagnosed. And so for us, the opportunity set there is to take just a small subset. So to prove that value that we could take 10 most relevant, whether that's from [ heart valves ] or through oncology, what we're trying to do is take a very small subject to prove value before we take the wider array of products out. But in general, we can find 105 different disease states, and we think just the top 10 would cover about 1/3 of the opportunity. So we're trying to remain disciplined and focused with a smaller subset so we can prove scale first in the North America. Operator: We'll move next to Michael Freeman at Raymond James. Michael Freeman: Congratulations on the quarter and all the action. I wonder if -- first, congratulations on the launch of Amadeus AI. I'm glad to see this being deployed through the Orion network. I wonder if you could describe some of the traction you're seeing, some of the reasons why your customers might be adopting this. And then I wonder if you could describe, I guess, preview for us, a product road map of where you're going to further leverage your internal AI capabilities through the organization. James Lee: Yes, great question. I guess let's start with the reasons. So we'll just use one example. And so the example we like to use as we go through it. So if we've got 105 disease states, what does that actually mean? The one that we try and use is the cardiovascular. So Alex, do you want to give a rundown, obviously, we presented that recently of the one project we're running through in the U.S. right now. Alexander Dobranowski: Yes, sure. We would love to. And Michael, thanks very much for the question. So I think one capability that, of course, we kind of anchor around the mission of the company, right, is early disease detection, okay? So -- and what does that mean now practically deployed, right, within a health system or a public sector partner? Well, one example is our capability to be able to screen patient populations and find these at-risk patients and effectively produce a list that then physicians can go and take action on. And one particular example we're working on is there's a number of patients that have worsening heart disease, and they're great candidates for having a heart valve to be replaced. So we're able to identify these patients that are fully reimbursable that should be on track to have this intervention. They're effectively patients that have fallen to the wayside. And we're able to identify them, get those lists to the physician, the physicians can then take action. And then it leads to a number of interesting outcomes. Number one, of course, the patient is on the right and appropriate care pathway. But number two, this is also a revenue-generating initiative for the hospital system. So that's kind of one clear example of us working very focused in one area, which is in cardiology. And then there's, of course, a host of other areas and domains where we have expertise to be able to execute against this. James Lee: Thanks, Alex. Well, I think it's that definition in the U.S. that the American market sees it as a revenue opportunity as opposed to a outcome you see in Commonwealth countries, which has been both not surprising, but really encouraging about the adoption rate in the U.S. Michael Freeman: Okay. And I wonder, in that cardiology example, it appears that the health care system is your customer, where there might be -- there also may be an opportunity with the specific heart valve companies like working with in Edwards, and which resembles the approach perhaps that you're taking with the life sciences companies linking up with Cure Health. Can you describe the reason -- I guess, the rationale for pursuing health care systems versus working directly with life sciences companies in this way? James Lee: Yes. Look, I guess there's a bunch of stuff in that. I'd start from the basis they're not mutually exclusive. So we can do both. It's the same data with the same signal. The second thing I'd say is that it depends where the data sources, right? And so if you're using a hospital's data rather than our data, the hospital is using the componentry of what they already have for their own benefit, and we're enabling that and giving them insight. They may not wish other people to have that access to that data. But more importantly, we think about it as 2 flywheels. And so what I mean by that is that the flywheel we have in Canada of identifying patients and working with life sciences creates more opportunities and more disease states and knowledge to then go to a health care system and say, there are other ways we can use this data. And what we're finding is you can do both. So yes, we can maintain our work with our life science customers. But in different regions, the health care system, what you got to remember is the core component of what we put together, why Orion and HEALWELL made so much sense because their business is health care systems as opposed to life sciences businesses. But the adoption of AI within health care systems will be at a different rate than it will be in life sciences. So we see them as not mutually exclusive, but we actually see them as complementary, Michael. Michael Freeman: Okay. All right. And last very quickly. We just -- from last quarter to this quarter, we saw health care software revenue step down marginally. Can you explain this step down and perhaps let us -- get us your thinking on when we expect that segment revenue to turn around and begin growth? James Lee: Yes. Good question. I think, look, professional services, there are 2 things going there. Obviously, it's not a straight line. It's a lumpy business. So you'll have one quarter will be up, one quarter will be down depending on deliverables. What I would say is that the growth comes in is not a linear line. It will come in like every time a new customer comes is significant, but it's not a week. And so professional services quarter-by-quarter will be lumpy. This quarter, we were working through obviously Northern American summer. So customers being ready to take product as a core component of professional service revenue and hitting key milestones. So look, I don't want to give the impression that it's a straight line professional services. There will be some quarters. Obviously, Q2 was a positive quarter. It was above expectations. In terms of growth, you should expect that some years, that business will grow at 5% and the other years it will grow much higher rate than that depending on whether -- when new customers land because when you win a new customer, professional services revenue comes in before recurring. And that can be a 1-year lag before we implement into the recurring from professional service revenue. So our focus in '26 is clearly driving our AI and data science revenue, which is probably more linear. Operator: We'll go next to [indiscernible] at Canaccord Genuity. Unknown Analyst: Congratulations on the quarter and recently announced divestments. So my first question is on the Middle East partnership that you recently announced through an MOU with Lean Business Services. Would you be able to tell us more about your plans in this region and what this opportunity entails? James Lee: Yes. Look, Lean has been a wonderful partner for the business as it is before. Look, I think what we see with Lean is that they've built real capability in the region and over the top of our existing products. So the opportunity set for us is taking what they've already built across our platform globally, and then within the region for them to be a reseller of what we've built in their environment. That will open up materially new markets that we don't have access to in sales capacity within the Gulf. And our global footprint of taking some of their products is material as well. So we see it as one of the few win-wins you can have in health care where it's noncompetitive. We look at the region the relationships, the expertise they have to expand, and we obviously have the global reach within our network. Unknown Analyst: That sounds pretty exciting. And then maybe a follow-up on HEALWELL's appetite for additional M&A. So following your recent meetings with several potential targets from the U.K., as you mentioned, and what does your pipeline look like? And given the recent divestments, do you think you're in a better position to resume M&A activity? James Lee: Look, M&A activity has been a core component, being good allocators of capital for HEALWELL. We're maintaining a deep pipe of various stages across all parts of the market. The reality is that we're looking currently at tuck-ins, as we said, the key focus for us in the next 6 months is remain disciplined and focused, but not give up the pipeline. So what I mean by that is the deals that we're looking at will take longer than 3 months to consummate, but we don't want to distract the team from what the opportunity set is improving value. I'm sure everyone on this call is looking forward to when we can show the clinical validation and commercial validation across the Orion network. And we're very, very focused on demonstrating that. So what I think you can expect is that M&As will be a core component of the business. But for the next quarter or 2, we need to demonstrate the organic and commercial validation of what we're doing, not just the clinical validation. Unknown Analyst: Sounds great. Certainly, I'm looking forward to hear more good news from you guys. Operator: We'll take our next question from Rob Goff at Ventum. Rob Goff: Congrats on all the efforts and successes within the quarter. James Lee: Thanks, Rob. It's been a busy quarter, but the teams did really well. So it's exciting to be here. Rob Goff: Very good. And looking forward, can you discuss the current POVs outstanding? And how would you measure the success or performance of expanding that pipeline of POVs in the first quarter? James Lee: Well, I think Alex did a great job of explaining one of those POVs. What we're doing is -- but I'll talk about sort of how it works. We take a small portion of their data to prove the value that we're talking about. So rather than give them a list on all of their patients, we give them a list of what they can deal with in the next quarter. And so it's -- what we're building in the -- particularly in the U.S. is a rinse and repeat model, so we can go and take the same algorithm to a different non-competitive health care system. And so given the sheer size of the U.S., what we're trying to do is focus on a small set of subsets of our capability, demonstrate it at scale and then land and expand. Now what we're seeing is that there are multiple different uses. So we're not looking at just like hospital systems. We're looking across med tech businesses, government entities, regulators, pharmacies. So what we're trying to do is demonstrate the breadth of different health care systems that we can integrate with not just -- and I use health care systems as vernacular to anything outside life sciences. The core components, the insight that we can get from that clinical data, whether that's used by health care systems, life sciences, hospitals, insurers is the same insight. It's just got multiple use cases. Rob Goff: Okay. And perhaps it's simplistic, but in terms of tracking it, is something where you could say you currently have 5 proof of values and you're looking to add another 5 in the first quarter or anything to track the momentum there? James Lee: Yes. No, in first quarter, we'll come through how we think about those numbers. But I think the numbers you had there, we're doing more than those. What we're trying to do is be very disciplined this quarter to ensure they're successful. And then we'll start tracking out both the scale of where we're going in the different markets. But our initial approach is to try and have one in each region and one in each product. And so there's well north of 5. But you'll see us talk about those numbers in early 2026. Rob Goff: Very good. And one last question, if I may. Could you discuss your RFP pipeline? Is it an active market at this time? James Lee: Look, yes, the RFP pipeline is actually quite active. What we're finding is that there's multiple RFPs for all of our products in most regions. AI-enabled platforms are now becoming part of the RFP process. We're starting to see in Europe, in particular, the RFPs, including other common use cases, including how you integrate with life sciences. I think health care systems are becoming a lot more open to what they do with their own data. And so our experience of working in life sciences in North America is a real value outside the rest of the world. Yes, 2025, we saw an election cycle, both in Canada and the U.K., which slowed down adoption. But what we're seeing now is that the RFPs are back on right across the business. In fact, every part of our business has got a significant pipeline of RFPs. Obviously, what I would say in health care systems, they are long-dated, big processes, big dollar values. Operator: Our next question comes from Brian Kinstlinger at Alliance Global Partners. Brian Kinstlinger: So as adoption of your AI increases, and I know you're targeting 50% plus annual growth or more, how should we think about the mix of professional services versus subscriptions in that one segment? James Lee: Look, that's a really good interesting question, something you'll see us define more clearly in forward quarters. I think professional services in our AI business probably looks more reoccurring. And so it's not as professional services like it is in software. And so often we find in life sciences that it is a multiyear relationship, not a one-off PSG. So I think we're going to -- we've obviously taken the feedback on that from the investor and analyst community that we need to do a better job of describing that what is PSG and software is not PSG and AI and data science. Brian Kinstlinger: But the sequential reduction in professional services, that was a one-off project, yes, excluding the divestiture. James Lee: Now are we talking now in AI and data science? Brian Kinstlinger: We are, yes. James Lee: Yes. No. So Northern Hemisphere quarter, the summer is you're going to see seasonality. We definitely see in life sciences, holidays being taken. And that's why we saw the ramp-up in September, significant ramp-up in September versus July and August. Brian Kinstlinger: That's helpful. My last question is, as we look at the subscriptions revenue piece of AI, I know pharma and life sciences makes up the majority of that. Are there any hospital systems or clinics or anyone else taking outside of life sciences that are paying for subscriptions yet? James Lee: We do work with all of them. I think the reality is that they're de minimis in the scheme of things currently, the life science is the bulk of them, that you'll start to see that revenue be recognized and grow materially as we go into 2026. Operator: We'll go next to Daniel Rosenberg Paradigm. Daniel Rosenberg: My first one just comes around the proof of value that you spoke of. I was just curious how easy or hard is it to go to market with these proof-of-value concepts? Do you find it's early adopters? Or is it more broadly than that? People are curious to explore the capabilities of the AI. James Lee: Look, I would say the adoption cycle in North America is faster. It's not just early adopters. I think the reality is that it's a new segment in the U.S., helping burdened and profit struggling entities find patients where they can generate revenue and give better patient outcomes is something that hasn't really existed over there. So I think what we're actually seeing is that it's not just the early adopters, but actually people with large bases. It means the conversations are swiftly with CFOs, not just with medical offices. So what I would suggest is that what we're seeing in the U.S. because of the profit-centric nature of that health care system is that the adoption cycle to get to procurement is faster. Procurement and legal is still a slow process. It's weeks and months, not days, but I would say that we are at the very front line of what AI experimentation has been happening in the U.S. I mean a lot of what is workflow tools and our tools are very different to that. Daniel Rosenberg: And then you mentioned some -- the time it takes to go through procurement and legal. So how do you think about the sales cycle? And then perhaps as you think about competitors trying to go to the market, is there an advantage you have there just based on Orion's history, the Pentavere research you have out there? How helpful is that getting you through the door? James Lee: Look, immensely helpful. I mean, at the end of the day, what you need in any market is cut through. So we have an established brand that's been there 20, 30 years. We're not a start-up. We have clinically validation -- clinical validation on multiple disease states. We're not picking on one thing with one department. We can talk across most components of health care. And so we are peer-reviewed published, and I think the number grows every day, but from my understand, it's well over 50x now, I think 45x, 3 months ago. So we're publishing on a regular basis, new disease states. And I think even our validation we've got with life sciences, we work with the largest life sciences companies in the world. So I think that validation component and reputation is vastly important because privacy and security is a core competency in the U.S. you're using health care data. So as we walk along in a, what I would say, sea of AI, I think we really stand out. It's very hard to find anything that's been clinically validated and peer reviewed published as often as we have. And certainly, it's very hard finding with the long-term reputation that Orion has had. So going back to the industrial logic of the 2 acquisitions, Pentavere and Orion, we are seeing market fit and why that works in the U.S. right now. But I use U.S. loosely, like I think North America is probably is a better phrase than just the U.S. Daniel Rosenberg: Good to hear. Last one for me, if I may. It sounds like early disease detection, we're obviously in the very early days of AI, very early days of proof of concepts and showing -- commercializing it. But it sounds like it can expand dramatically. I'm just wondering how do you think about that balance of taking one concept, growing it, scaling it versus expanding into other verticals and the cost and resources to do that. James Lee: Yes. Look, we've taken the approach of "crawl, walk, run" as Sacha, our COO, will talk about. So what we've gone into is make sure that the foundations of how we get the data out and how we put into our algorithms is scalable and repeatable. And so a lot of the work at the moment from the team and make sure the technology is deployed on the ground. So our core part of this is going to the U.S. is the data can't leave the U.S. So we have to deploy a team there. But once we've got the infrastructure right and we know what disease states, it's actually a relatively fast follow-on of the next step. Once the pipes are in, if you think about it, of how we get the data out, we know what to look for and set DARWEN over. We just need to tune it. So it's the same clinical data we're pulling out and it's just different insights we're drawing from it. So when you think about the model, the model was new health care systems, there is a deployment of getting the data into DARWEN. But once you're in there, then expanding it over 1 disease state to 10 to eventually 105, that stage is a much faster and easier deployment cycle than a new customer. And so our focus today is to go wide and then go deeper. Operator: We'll move next to Justin Keywood at Stifel. Justin Keywood: Nice to see the results. On the MOU with Lean Business Services in Saudi Arabia announced last week, are we able to quantify that opportunity? I know historically, Orion has been very active in the Middle East. And how should we monitor that opportunity going forward? And any indication of the potential TAM or size? James Lee: Yes. Look, obviously, it's early days in any MOU. But what I would suggest is, yes, there has been success in the Middle East, but I think the Middle East is a much bigger market. And as health care systems grow, the wonderful thing that the Middle East has and why Lean is such a great partner is there are regions where we don't have people on the ground. And so working with them to deploy some of our platforms in either the Middle East or even if they take it to Africa, the regions that we're not focused on currently. And so the reality is what is a wonderful partnership because what it brings to us is that we focus on our core markets where we've got expertise, people on the ground, talking Europe, North America, Asia. But in the areas where we don't have capacity, we don't have to give up on those. And so Lean is a wonderful partner in that thing that it's a conjunct, if you like to think about it, and bring parts of the market that we're not currently servicing. Justin Keywood: Interesting. Absolutely. And then just on the growth in the quarter, obviously, a big step-up. Is there any indication of the organic expansion? James Lee: Yes. Look, the short answer is that, obviously, AI is predominantly organic expansion and growth. And I appreciate your comment that much of our software growth has been the Orion and VeroSource acquisitions. The reality is in the sector is that between Q2 and Q3, the professional services number was flat to down. And so the organic growth was, therefore, very low between the quarters. I think you will continue to see that PSG being volatile, as I said before, and that will come in a lumpy stage. The nature of the contracts is they are very large, but long dated. And so it won't be a straight-line quarter-by-quarter growth. Operator: Next, we'll move to Gianluca Tucci at Haywood Securities. Gianluca Tucci: Just one question here. Could you perhaps update us on how you're seeing cost synergies play out across the entities post Orion acquisition? James Lee: And, [ Lam ], why don't I leave that to you. Anthony Lam: Yes, absolutely. Great question, Gianluca. Since the acquisition, we've been really ramping up our work with the team at Orion. And we've got, as you can appreciate, a mature experienced team there and looking at the best of all our business units, and we're finding that there's some really good synergies that we will realize. It will take a little more time for us to see that. We'll see that benefit as we get into the 2026 fiscal year, but we're certainly seeing a lot of benefit to having the large team there that has the experience we need across the organization. And so those synergies will be realized. It just -- it will be something that we'll see in 2026. Gianluca Tucci: Okay. And if I could just ask follow-up question on the sales cycle process. As you work through these POCs or POVs, James, are you seeing more eagerness from clients who have a better understanding of the technology just given the state of AI globally today? James Lee: I'll sort of paraphrase that a little bit. But the -- particularly in the U.S., the understanding and willingness to deploy AI is very high. Some of our health care systems have got 50-plus projects that have been [ tried them ] in any quarter. So there's definitely an understanding that to improve profitability, they need to use AI a lot. And there are a lot of different products. What I would suggest is that most of the workflow products that they've seen currently to reduce that burden. You've probably all seen charts that the administrative burden of health care is way outstrip the cost of health care from a clinical point of view, particularly in the U.S. So they're trying to solve that burden. And where we're coming in a different space because of the willingness to look at AI is that we're in a very narrow field of -- by the way, we can find revenue. You can focus on your cost through the other providers, but we are a different type of AI solution for you. And that has a real cut through. Operator: And that concludes our Q&A session. I will now turn the conference back over to James Lee for closing remarks. James Lee: Look, I just want to thank everyone. I really appreciate the engagement. Look, Q3 was a big quarter for us. I think I read a research report saying it was surgical amputation, which I thought was a lovely way to phrase it that we've gone through the business. We've looked at what we need to sharpen our business. And going into the end of the year and next year, we're really excited about what we're seeing. I think we're looking forward to talking to you early next year about these proof of values and showing commercial validation. But thank you for everyone's support to the team. Thank you for your hard work and throughout to the Board and to our shareholders, we appreciate all the support. All the best. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the AMC Networks Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nick Seibert, SVP, Corporate Development and Investor Relations. Please go ahead. Nicholas Seibert: Thank you. Good morning, and welcome to the AMC Networks third quarter 2025 earnings conference call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Patrick O'Connell, Chief Financial Officer; Kim Kelleher, Chief Commercial Officer; and Dan McDermott, President of Entertainment and AMC Studios. Today's press release is available on our website at amcnetworks.com. We will begin with prepared remarks, and then we'll open the call for questions. Today's call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to AMC Networks' SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made on this call today. We will discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found in today's press release. And with that, I'd like to turn the call over to Kristin. Kristin Dolan: Thanks, Nick, and thanks, everyone, for joining us this morning. We're pleased with our performance in the third quarter and our progress in several key areas. We delivered another quarter of healthy free cash flow and are on track to achieve our increased guidance of $250 million in free cash for the full year. The results we reported today mark a key milestone in our transition from a cable networks business to a global streaming and technology-focused content company. Streaming revenue growth accelerated in the quarter and offset affiliate revenue declines, resulting in stable domestic subscription revenues. As we have previously discussed, we expect streaming to be our single largest source of revenue in our domestic segment this year. This is a first for us and a meaningful inflection point as we continue to manage the business for the long term. As much larger companies spin off assets or split up to find clarity in a complicated time, we've built the components of a modern media business that is nimble, independent and well suited to today's environment and whatever comes next. We have a successful studio that produces programming and franchises that attract passionate and engaged viewers. We're home to the world's largest collection of targeted services, bringing fans of specific genres and unmatched level of curation and depth. We window our owned content across a full distribution ecosystem of domestic and international networks, streaming services, theaters and FAST channels. And we service all of this with a unified technology platform that allows us to deliver our content to viewers wherever they want to watch in a scalable way with predictable costs. A few highlights before I turn things over to Patrick. As previewed on our last call, we renewed and expanded our branded content licensing agreement with Netflix, which has been beneficial for both companies. We reserve new seasons of our most important franchises for our own platforms and get the promotional benefits of making prior seasons available to Netflix's large base of U.S. subscribers. This new agreement also expands to select international markets with a combination of first and second window rights focused on our biggest franchises like Anne Rice, Dark Winds and The Walking Dead. Turning to other key partnerships. We renewed a long-term distribution agreement with DirecTV, which expands the availability of our networks and programming across linear, FAST and streaming. Next year, DirecTV will hard bundle the ad-supported version of AMC+ in video packages that include AMC's linear network and will also add Shudder to one of their genre packages. We continue to work with Charter to raise awareness among Spectrum TV customers that ad-supported AMC+ is now included in their video package. More than 850,000 Spectrum customers have opted into AMC+ since its inclusion in the package earlier this year. We've also expanded our relationship with Cox. All 5 of our linear networks are now included in their streaming-only TV plan, Cox TV Lite. Just this week, we launched our first triple bundle with Amazon Prime Video offering AMC+, MGM+ and Starz a significant savings over stand-alone pricing. During last quarter's call, as we were finalizing our upfront negotiations, we noted a more than 25% increase in digital advertising commitments. I'm pleased to say the final figure was an increase of 40%. This is meaningful growth in an increasingly important category as our digital presence expands and advertisers see the impact of reaching viewers across all platforms that feature our popular and critically acclaimed programming. Our FAST and AVOD business continues to grow. We recently renewed our distribution with CTV leaders, Samsung and Roku and expect to launch 4 new FAST channels by the end of the year. As discussed last quarter, we are also implementing this successful strategy internationally. We currently have FAST channels in the U.K., Canada, Germany, Spain and Latin America. Globally, as of the end of September, we have 33 FAST channels distributed across 22 platforms totaling 215 active channel feeds. Combined, our portfolio of streaming services delivered an all-time high in viewership during the quarter, including the highest ever viewership of AMC+. Acorn TV, our streaming service focused on international crime dramas and mysteries, is having its best year ever. We're thrilled with the new talent, energy and momentum we're bringing to this beloved service now in its second decade and one of the world's first and most successful targeted streaming services. Irish Blood, the new series starring and executive produced by Alicia Silverstone, premiered in August and is already Acorn's #1 series ever and has been renewed for a second season. We're currently in production in Nova Scotia on a new series called You're Killing Me, starring and executive produced by Brooke Shields. We just completed another successful FearFest, one of our biggest programming events of the year, now spanning thousands of hours of programming across AMC, AMC+ and Shudder. Brand partnerships included an integrated show sponsorship with Hyundai, a Universal Studios promotion on Shudder for Black Phone 2 and multi-platform partnerships with Bacardi and Kraft Heinz, anchored by full week placements on Sphere as well as on our linear streaming and social platforms. On AMC and AMC+, we just brought fans a third series in our popular Anne Rice Immortal Universe, Anne Rice's Talamasca: The Secret Order. The first episode has already been seen by 2 million viewers across all platforms and is pacing as the most watched series premiere since The Walking Dead: The Ones Who Live. Interview with the Vampire will return next year with a new season called The Vampire Lestat focused on the popular character Lestat as the world's first truly immortal rock star. We've completed production of a new series that will premiere next spring on AMC and AMC+ called The Audacity, written and produced by Better Call Saul and Succession writer, Jonathan Glatzer. It's a provocative, timely and darkly comedic series featuring an amazing cast, including Billy Magnussen, Sarah Goldberg, Zach Galifianakis, Rob Corddry and Simon Helberg. Next year, we're planning to go into production on a new franchise, Great American Stories, the first season of which will be focused on John Steinbeck's The Grapes of Wrath. Our film group is experiencing one of the most successful years in its history with recent theatrical release, Good Boy joining this summer's Clown in a Cornfield to deliver 2 of the 3 highest grossing opening weekends we've ever had. Dangerous animals also saw solid box office results this summer. Just as important as the theatrical success is the impact these films have when they move to streaming on AMC+ and Shudder, extending the reach of our high-quality IP with minimal audience duplication. Earlier, I spoke about the strategic components of our business and our commitment to remaining fast-moving and adaptable as our industry evolves. Our achievements are only possible because of our people, and I'm extremely proud of the work we're doing and the culture we have built together. To support our employees during this dynamic period in media and to advance our company with dedication and focus, we recently offered a voluntary buyout program to most of our U.S. workforce. This program did not have specific financial targets, rather its purpose was to strengthen our talent base and ensure we have the right skills for the future. The result of this initiative is a less than 5% reduction in our total employee base. We are thankful for the contributions of those who have chosen to pursue new opportunities and of course, those who are driving this new era of the company. AMC Networks continues to differentiate itself during this changing time in media. As I said at the top of the call, when I look across our business, I see a company that has the pieces and the people necessary to succeed in this environment and to move quickly to find new and better ways to bring engaged fans to the content they love. And now I'll turn the call over to Patrick. Patrick OConnell: Thank you, Kristin. We are pleased with our third quarter performance. And today, we are reiterating our outlook for the full year. We delivered another quarter of healthy cash flow generation with free cash flow totaling $42 million in the third quarter. We remain well positioned to achieve our 2025 outlook of approximately $250 million of free cash flow. Third quarter consolidated net revenue declined 6% year-over-year to $562 million. Favorability in foreign exchange rates resulted in an approximately 65 basis point tailwind to our consolidated revenue growth rate. Consolidated AOI declined 28% to $94 million with a 17% margin, and adjusted EPS was $0.18 per share. I'll now review our segment results. Domestic Operations revenue decreased 8% to $486 million. Subscription revenue was flat year-over-year with streaming revenue growth of 14%, partly offset by a 13% decline in affiliate revenue. Streaming revenue growth in the quarter benefited from the implementation of rate initiatives as well as year-over-year streaming subscriber growth of 2%. We ended the third quarter with 10.4 million streaming subs. We've implemented price increases across all of our streaming services this year. Retention and engagement remain healthy across our portfolio of services, and we continue to anticipate an acceleration in our streaming revenue growth rate for the fourth quarter. As Kristin highlighted earlier, streaming revenue is expected to be our largest single source of revenue this year in this segment. Moving to Advertising. For the third quarter, Domestic Operations advertising revenue decreased 17% due to linear ratings declines and lower marketplace pricing. The ad market remains challenging for everyone, but we are encouraged by our strong upfront performance, the strength of our programming and our significant advanced and digital advertising capabilities. As Kristin mentioned, we are pleased to have renewed and expanded our licensing agreement with Netflix in the third quarter. Recall that licensing revenues often vary quarter-to-quarter due to the timing of agreements and delivery schedules. For the third quarter, content licensing revenue was $59 million, reflecting the timing and availability of deliveries in the period. Demand for our high-quality content remains healthy, and we now anticipate that Domestic Operations content licensing revenue will exceed $250 million for the full year. Domestic Operations AOI was $112 million for the quarter, representing a decrease of 25%. The decrease in AOI was largely driven by continued linear revenue headwinds. Moving on to our International segment. Third quarter International revenues were $77 million. Excluding the favorable impact of foreign exchange in the current period, International revenues decreased approximately 50 basis points. Subscription revenue, excluding FX, decreased 6% due to the nonrenewal with Movistar in Spain, which occurred in the fourth quarter of 2024. Advertising revenue, excluding FX, increased 10% due to strong ad performance in the U.K. and Ireland. International AOI for the third quarter was $12 million with a 15% margin. Turning to the balance sheet. We remain focused on continuing to reduce gross debt and extend maturities. We ended the quarter with net debt of approximately $1.2 billion, a consolidated net leverage ratio of 2.8x and approximately $900 million of total liquidity. We continue to believe that our securities will offer attractive opportunities to deploy cash across the capital structure to create meaningful equity value over time. In the third quarter, we repurchased $9 million of our unsecured senior notes due 2029 at an average price of $0.84 on the dollar. Subsequent to the end of the quarter, we also paid down approximately $166 million of our Term Loan A and amended our credit facility to push the maturity of the majority of our revolver availability to late 2030. Regarding capital allocation, our philosophy remains consistent. First, we look to support the business by creating and acquiring compelling programming that resonates with our audiences while maintaining healthy levels of free cash flow generation. Second, we remain focused on reducing gross debt and extending debt maturities as evidenced by our third quarter open market repurchases and recent partial repayment and extension of our credit facility. Lastly, acquisitions and share repurchases will be opportunistic and measured. Moving to our outlook. We are reiterating our 2025 outlook today. We remain confident in our ability to drive free cash flow and are on track to deliver approximately $250 million of free cash flow in 2025. With $232 million already generated in the first 9 months of the year, we are well on our way to achieving this goal. We continue to expect consolidated revenue of approximately $2.3 billion, reflecting continued linear headwinds, partially offset by streaming and content licensing strength. And we also expect consolidated AOI in the range of $400 million to $420 million for the full year. We are proud of the meaningful progress we've made in transitioning our business. We've built all the necessary components of a nimble and opportunistic modern media business. All the while we've continued to create and curate the high-quality content that engages fans and builds valuable lasting franchises. We remain grounded in our consistent strategy of making great content, distributing that content broadly, generating meaningful free cash flow and being prudent in how we allocate our capital. With that, I'll hand the call back to Nick. Nicholas Seibert: Thank you, Patrick. Well, operator, we'll now open the line for questions, please. Operator: [Operator Instructions] And our first question comes from the line of Charles Wilber of Guggenheim Securities. Charles Wilber: Just wanted to ask, I was hoping you could talk about your partnership with the Sphere and promoting FearFest. How are you thinking about similar partnerships in the future for other promotions like Best Christmas Ever or content premieres? And then on AOI, margins decreased in the quarter to kind of mid-teens range. I believe in the past, you guys have talked about long-term margins in the mid- to high 20% range. Is that still how you're thinking about margin potential over the long term? And what steps do you need to take to drive margin expansion? Kristin Dolan: Great. Charles, it's Kristin. Thanks for the question on Sphere. As you know, we sell cross-platform all of our inventory, and we do it against specific audiences. And having the opportunity to integrate with the Exosphere capabilities in Vegas has been really attractive to a variety of advertisers, particularly those in packaged goods where we can work with Sphere Studios to create an interesting companion on the Sphere to their linear FAST and AVOD purchases with us. So Kim can you expand a little bit, I think, on who we work with and how that's come together. Kimberly Kelleher: Sure. I'd just add, it's an incredible way to mark the campaign in a marquee global way where the Exosphere goes global on social, and it really -- it marks that kind of signature moment for the advertisers. So most recently with FearFest, we did Bacardi and Kraft Heinz with -- and to a great deal of success. And we do have partnerships in discussion for Best Christmas Ever and into other signature time frames for '26. Patrick OConnell: Charles, on the margin question, I think what we've been -- what we've said in the past is that we're trying to do 2 things at once. We're trying to, on one hand, continue to invest heavily in premium programming and at the same time, drive significant free cash flow through the business. You have seen over the last couple of years that our free cash flow conversion has increased materially. It's quite high, over 60% in 2025. And that will continue to be the focus going forward. So I would pay particular attention to the free cash flow in the business. Obviously, in the last quarter, we actually increased the guide for the year, up from an implied $225 million to $250 million this year. And so that's really the watch where I focus on the free cash flow generation. Operator: [Operator Instructions] Our next question comes from the line of Doug Creutz of TD Cowen. Douglas Creutz: Just as you become less of a linear business and more of a streaming business, how does that affect your overall cost structure? Are there ways that it's going to help you? Are there ways where it's going to hinder you? Can you talk how you -- about how you expect that to continue to evolve over the next couple of years? Patrick OConnell: Sure, Doug. I think we've got one of the most efficient models out there. When you think about how hard our programming dollars work against multiple distribution platforms, right? So when we program for AMC linear, it goes on AMC+ and the amount of incremental programming that's on AMC+ exclusively is relatively small from a dollar perspective. Certainly lots of episodes. There's a lot of Shudder content, et cetera, for subscribers there. So there's always something new with different and exclusive. But from a financial standpoint, the preponderance of our programming investment on AMC really does double duty across both linear and streaming. And then secondly, I'd point out some of the other more targeted streaming businesses where like Acorn, for example, where the unit economics from a cost structure are quite advantageous. The cost of production on those series is much, much lower than on kind of other larger streaming services, the audiences are extremely kind of tuned in and we've got good engagement churn metrics, et cetera. So we feel really good about the efficiency from a cost perspective of the way we approach the streaming business. And I would say kind of broadly across the overall business, we continue to have levers to pull. But we are primarily focused on continuing to invest in premium programming across all of these businesses. And we think we do it well and that we get it to work hard for us. Kristin Dolan: I would just add, Doug, thanks for the question. On the operating side, we continue to remind people that our strategy is to be a wholesale streamer. And in doing that, a lot of the costs end up on the size of our distribution partners, whether it's for acquisition or for customer service or for promotion and bundling. And then the technology work that we've undertaken over the last 12 to 18 months is driving a very predictable approach, right? So digital, when you're doing streaming, we have all of our content is nicely tucked away with Comcast Technology Services and then that supported with their second location, cloud location. So we know that our content is safe, it's stored efficiently and successfully through CTS and then our distribution for streaming and for digital is on the back of that deal, which, as we always say, it's a deal that we know what it can -- what it will cost us to deliver and that is -- it is scalable for as large as we want to grow. Operator: [Operator Instructions] Our next question comes from the line of David Joyce of Seaport Research Partners. David Joyce: Thinking about advertising, with the components of the upfront commitments you mentioned and the 850,000 AMC+ sign-ons with Charter Spectrum, what would be the glide path do you think with this increased streaming presence to turning advertising into a growth business again, granted the advertising level because of linear is half of what it was like 8 or 9 years ago. But what can make this a growth revenue stream again? Kimberly Kelleher: Charles (sic) [ David], it's Kim. I would point to the number Kristin shared in our successful upfront tied to the 40% growth in our digital advertising, which really aligns actually -- aligns and includes that 850,000 ad-supported Charter subscribers. We continue to kind of expand the inventory we have through our partners of AMC+. So we really continue down the road of focusing on making our inventory digitally or dynamically ad inserted, which actually allows us an opportunity to cross-sell across all our platforms, including CTV, our streaming services that are ad-supported, which we continue to add to with Shudder ad-supported coming shortly. It's just -- it's growing that overall pool, and that will align over time. Operator: [Operator Instructions] Our next question comes from the line of Steven Cahall of Wells Fargo. Steven Cahall: I wanted to ask about advertising as well. So you talked about the growth in the FAST channels. I was wondering if you could give us the percentage of either domestic or total advertising revenue you're now recognizing from those FAST channels just so we get the relative size as it grows. And then just on the upfront, we've heard from some peers that at least entertainment linear pricing might have been down year-on-year. So I was wondering if you could give us any color there. And then finally, you talked about streaming revenue as your biggest revenue bucket. Can you just confirm if that's subscription and advertising? And if we compare streaming subscription and advertising to linear subscription and advertising, is streaming now bigger, which I think would be a big turning point. Patrick OConnell: Steven, it's Patrick. I'll do the third piece first, and I'll flip it over to Kim on the advertising side of the business. Our streaming revenue is streaming revenue only. There's not the digital advertising embedded in that. So that's -- you can call it kind of a clean or pure number. Obviously, we've got a number of products in the market from an ad-supported basis, but those dollars get captured in our advertising dollars, not the streaming dollars. So hopefully, that clears up. Kimberly Kelleher: And I would just mention, as Kristin pointed out in her comments, we do have -- we have 33 FAST channels now across 22 platforms with over 250 global feeds, and that's creating a great deal of streaming digital inventory for us. We don't break that out, Steven. That's included in the overall digital inventory that we sell cross-platform. But what I would add is this is not just an advertising venture for us. We look at the FAST and AVOD marketplaces as an opportunity for us to garner interest for our programming with early seasons that actually help drive awareness and promotion and marketing towards our streaming services. So the majority of the new FAST channels we've launched recently are channels that actually sample our targeted streaming services like Acorn Mysteries or Scares by Shudder or ALLBLK Gems. These services samples the -- sample content from our streaming services and give us an opportunity to drive that kind of noncord connected audience to our streaming services directly. So we're really seeing them beyond just an advertising generator, but more of a marketing and promotional opportunity for us in streaming. Kristin Dolan: And I would just add we have one partner right now who's trialing with us the opportunity to click through a FAST channel to purchase the corresponding TSVOD. So that's an interesting experiment for us. So it goes beyond just using FAST as a barker channel. It's actually an interactive mechanism to purchase the correlated streaming service. So we're excited about that and hoping for some positive results. Operator: This concludes the question-and-answer session. I would like to turn it back to Nick Seibert for closing remarks. Nicholas Seibert: Thank you, everyone, for joining us this morning. We appreciate you giving us the time and your continued interest in AMC Networks. Have a nice day. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Operator: Greetings, and welcome to the Ready Capital Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Ahlborn, Chief Financial Officer. Thank you. You may begin. Andrew Ahlborn: Thank you, operator, and good morning to those of you on the call. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2025 earnings release and our supplemental information, which can be found in the Investors section of the Ready Capital website. In addition to Tom and myself on today's call, we are also joined by Adam Zausmer, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer, Tom Capasse. Thomas Capasse: Thanks, Andrew. Good morning, everyone, and thank you for joining the call today. Our focus remains on returning the company to financial health and profitability via rehabilitation of the portfolio yield, growth of our Small Business Lending operations, and management of our 2026 debt maturities. To begin, we continue to make progress in our balance sheet repositioning via reductions in our CRE loan exposure using sales of low-yielding assets in conjunction with our traditional asset management strategies. To that end, we completed 2 portfolio sales. The first discussed in the second quarter call was the sale of 21 loans with an unpaid principal balance of $665 million at a price of [ $78 ]. The transaction netted $85 million and provided incremental earnings of $0.02 per share in the quarter with $0.05 per share expected for the pro forma full quarter. The second, the sale of 196 small balance loans with high servicing costs with an unpaid principal balance of $93 million at a price of [ $97 ] netting $24 million. At quarter end, post completion of the sales, along with normal principal paydowns of $410 million, the portfolio totaled 1,120 loans with an unpaid principal balance of $5.4 billion and carrying value of $5.2 billion, split 94% in the core portfolio and 6% noncore portfolio. In the core portfolio, in the absence of adding new loans, we anticipate that the denominator effect will prevail as payoffs accelerate with portfolio seasoning and some loans migrate to delinquency, net of modifications. In the quarter, there were $40 million of new core net delinquencies, $131 million of core migrated to 60-day-plus, of which $91 million were resolved via modification or liquidation. As a result, delinquencies increased to 5.9% of the total. Levered yields in the portfolio increased 10 basis points to 11%. For core loans experiencing negative migration, our go-forward asset management strategy will favor liquidations. In the noncore portfolio, we liquidated $503 million in the quarter, leaving 31 loans marked to 79% of UPB. In the quarter, the noncore portfolio had an $8 million drag on earnings or $0.05 per share. We also have $648 million of REO across 28 positions, including the Portland mixed-use asset comprising 66% of the total. The remaining REO book of $218 million comprises 27 assets with a $3.7 million average value, creating greater liquidity on exit. In the quarter, we sold 5 properties valued at $50 million and added 4 REO totaling $54 million via foreclosure. Of note, collapsing the majority of our CRE CLOs has provided more flexible asset management, particularly quicker execution of foreclosure deed-in-lieu transactions to sell liquid multifamily properties. The Portland mixed-use asset represents 14% of quarter-end equity and is segmented into 3 components: the Ritz-branded hotel with 251 rooms; 169,000 square feet of office and retail space; and 132 Ritz residences. In the quarter, net operating loss on the hotel was $330,000, with occupancy of 48%, ADR of $504, and RevPAR of $240, both up sequentially and quarter-over-quarter. After 24 months of operation, the hotel continues to near stabilization. The office and retail are currently 28% leased and hit breakeven. As discussed last quarter, our new property manager, Lincoln Property, a global platform with expertise in hospitality, is executing our business plan. We have had 6 prospective office tenants tour the space since taking the keys and expect to make significant progress in lease-up over the next few quarters. Lastly, we have sold a total of 11 Ritz residences. We've engaged a top global firm in luxury condo sales and are launching a revised pricing strategy to improve future sales velocity. The net loss on the residences was $900,000. In total, the position is nearing breakeven on operations, with a net operating loss of $1.3 million, with an additional $3.7 million in interest carry. As previously stated, we will look to exit the position on the heels of ongoing stabilization, lease-up, and sales. In our Small Business Lending operations, despite pressure from the government shutdown, we continue to see growth opportunities. In the quarter, we originated $175 million of Small Business Administration 7(a) loans, 50% below our quarterly target. As discussed on prior calls, the primary hurdle to reaching target volumes has been access to the capital markets, which has been slow given SBA staff turnover earlier in the year. With that being said, the approval of our $75 million warehouse facility and 2 planned securitizations will open significant capacity for achieving volume growth in 2026. USDA production was $67 million in the quarter. Combined, the Small Business Lending platform generated $11 million in net income, adding 280 basis points return on equity before realized losses to the company's total. This platform continues to be a strong counterbalance to our CRE business with nearly $400 million invested and represents significant tangible equity value. Turning to our balance sheet. In 2026, we have $650 million of debt maturing, which is our top priority. We have multiple pathways to address these obligations. First, we have $830 million of unencumbered assets, including $150 million of unrestricted cash. Second, we expect $425 million in net liquidity from portfolio maturities and pending asset resolutions over the next 12 months. Third, we intend to further accelerate sales as we move out of nonperforming loan and REO positions. We expect the combination of these items to delever the balance sheet, which may pressure book value depending on the size, timing and pricing of such actions. And last, we've demonstrated our ability to access the capital markets, including our successful debt issuance earlier this year and expect new debt issuance to replace a part of the maturing debt. We expect a more conservative posturing of the company regarding new investments and dividend policy as we work through our maturities. Regarding the dividend, we will evaluate the current level in December and determine at that time the most appropriate level in the context of progress in the business plan, liquidity levels for managing the 2026 maturities, and competing sources of liquidity. With that, I'll turn it over to Andrew to go through the quarterly results. Andrew Ahlborn: Thanks, Tom. For the third quarter, we reported a GAAP loss from continuing operations of $0.13 per common share. Distributable earnings were a loss of $0.94 per common share and $0.04 per common share, excluding realized losses on asset sales. Several key factors impacted our quarterly results. First, net interest income declined to $10.5 million in the quarter. The movement was due to a $1.4 billion reduction in the CRE portfolio and $40 million of negative credit migration. In the core portfolio, the interest yield was 8.1% and the cash yield was 5.8%. The interest yield in the noncore portfolio was 3.1%. Second, gain-on-sale income, net of variable costs, decreased $2.6 million to $20 million. The change was the result of lower USDA and SBA 7(a) volume. The income was driven by the sale of $130 million of guaranteed SBA 7(a) loans at average premiums of 9.3% and the sale of $57 million of USDA production at premiums averaging 10.6%. Realized gains from normal operations were offset by $189 million of realized losses from the sale of assets. These losses were offset by the release of $178 million of valuation allowances. Third, operating costs from normal operations were $52.5 million, representing an 8% improvement from the previous quarter. The change was the result of a $4.1 million reduction in compensation expense, servicing expense, and other fixed operating costs, along with an increased tax benefit of $5.6 million. These positive movements were partially offset by the inclusion of the Portland mixed-use asset's net operating loss and carry costs, which totaled $5 million. Further, the combined provision for loan loss and valuation allowance [ decreased ] to $140.2 million. The net increase in provision for loan losses of $38 million was due to a net increase of $43.2 million of specific reserves, offset by a slight decline in the general provision. The decrease in the valuation allowance of $178 million relates to the reversal of previous marks taken on the $665 million loan sale upon settlement. And last, we reported a $24.5 million increase in the bargain purchase gain related to the closing of the UDF IV merger. The increased bargain purchase gain was the result of additional future cash flows expected to be received on the portfolio, which required an increase to the day 1 valuation. Loss from normal operations, net of tax, which can be found on Page 11 of the Financial Supplement, improved quarter over quarter to a $5.2 million loss. Reoccurring revenue declined $2.6 million due to lower net interest income and lower gain-on-sale revenue, offset by increased earnings from our JV investments. Operating expense improvement of $4.6 million offset the decline in revenue. Book value per share was $10.28 at quarter end, down $0.16 from June 30. The change was primarily due to the dividend coverage shortfall, partially offset by the repurchase of 2.5 million shares at an average price of $4.17, which offset the reduction in book value per share by $0.09 per share. Liquidity remains strong with unencumbered assets of $830 million, including $150 million of unrestricted cash. With that, we will open the line for questions. Operator: [Operator Instructions] The first question is from Doug Harter from UBS. Douglas Harter: You talked about having a more conservative posture for the company going forward. Can you talk about where you think the right level of leverage to run the business, and so in thinking about how much debt do you need to refinance versus pay down? Thomas Capasse: Yes. Doug, right now, our current gross leverage is around 3.5x. I think we're looking at a turn less than that on a pro forma basis. Douglas Harter: And then I guess, how do you think about what is the target mix of secured versus unsecured? Thomas Capasse: Andrew, do you want to comment on the target mix? Andrew Ahlborn: Yes. I expect, at least on the corporate side, the majority of our debt to be secured, at least for the immediate future. With that being said, we've accessed the unsecured markets via the baby bond market over the years quite frequently. So to the extent that market is open, I think we will tap that. But I expect more secured issuance, at least at this point. Operator: The next question is from Jade Rahmani from KBW. Jade Rahmani: Can you tell me what the current covenant is on the unencumbered asset ratio? I'm not sure if it's 1.25x or 1.2x, and the slide deck shows 1.2x as the current ratio. Andrew Ahlborn: So the unencumbered asset test, we are well covered within that 1.2x range. So the covenant is well in excess of that. Jade Rahmani: The covenant -- is the covenant minimum 1.2x. Andrew Ahlborn: No, no, 1.2x is our current coverage of that. The only debt we have that has that ratio is $350 million, and that's at a 1:1, so we're well covered. Jade Rahmani: So there's no requirement to be at 1.25. Andrew Ahlborn: No, it's just the $350 at 1:1. Jade Rahmani: The comment about the restoration of financial health is well taken. The dividend cost, as you know, around, I think, $80 million a year, seems unjustifiable to continue paying it, and also spending money to buy back stock in the face of these corporate maturities and the company's plans to reduce leverage. So it just doesn't seem justifiable to continue to pay dividend and to also buy back stock. Can you please explain the rationale and what the plan is going forward? Thomas Capasse: Yes. So, Jade, the company is adopting a very aggressive approach to repositioning the balance sheet. And in the context of your question, we think about it in terms of the rank order of liquidity. We currently have $150 million of cash, $150 million of warehouse lines, and organic projected maturities of about $425 million, $450 million. We're going to supplement that with -- we have $800 million of unencumbered assets. That will be supplemented by additional senior and unsecured issuance as well as asset sales to plug the gap. In that context, we're going to evaluate, obviously, the dividend in December to determine the appropriate policy in that context. But the rank order of liquidity will be to: a, reduce leverage; b, exit low-yielding assets and regenerating the resulting liquidity with a prioritization on the debt; and then subsequently, the potential for asset repurchases; and then reinvestment of ultimate free cash flow into new loans to rehabilitate the net interest margin. Jade Rahmani: Just one more, which would be on the other assets category, which continues to increase to now 5.7% of assets and 25% of equity. I guess that, I assume, will be evaluated at year-end as part of the audit. It includes significant deferred tax assets. And the duration of being able to absorb such assets seems quite long given current profitability and allocation of G&A to the SBA business. So do you think that, that category of assets will be evaluated at year-end as part of the audit process? Andrew Ahlborn: Jade, we certainly reevaluate the deferred tax assets on an ongoing basis, including at the year-end audit. What I would say is our expectation is that profitability in those businesses grow as origination volume grows to our target levels. And then the second thing I would add is, to the extent we monetize those businesses at some point inside the TRS, that tax benefit can be used in that way as well. So there's no limitations on the time period in which they can be used. And we think the pro forma profitability of those businesses, as well as the fair value of those businesses in excess of their current book value, provides a window to utilize those over time. Operator: [Operator Instructions] The next question is from Christopher Nolan from Ladenburg Thalmann. Christopher Nolan: On the Portland property, is that being carried at fair value or at cost? Thomas Capasse: Fair value-- the current fair value of $425 million. Christopher Nolan: Okay. And then -- yes, please go ahead. Andrew Ahlborn: Chris, just one thing. The property is actually broken out into 2 components. So the condos are being held for sale and they're at fair value. And then the other 2 components are held for use, so they're being carried at cost. But both were put on the balance sheet at the time of taking the property REO at fair value. Christopher Nolan: And would the Portland property be categorized as one of the unencumbered assets that Tom alluded to earlier? Andrew Ahlborn: No, there's currently leverage on that asset. Christopher Nolan: And I guess the final question is, I saw somewhere where there's a large office building in Portland, the Big Pink, I think it's called, I think it was the U.S. Bancorp headquarters. And they recently sold for $45 million. It was originally -- prior value was $373 million, like 5 or 10 years ago. And given that, and apparently it's a marquee property in Portland, doesn't that for -- as nice as this property seems, doesn't it seem like the valuations on these things is really going to take a dive? Just like your comments. Thomas Capasse: Yes. No, appreciate it, Chris. It really is an apples and oranges comparison. And as you're probably well aware, the office sector, especially for -- I think the Big Pink was an [ 80s-ish ] property, maybe a B, B minus, and it had very large tenant concentrations, and there was an outflow from the poor-quality, the B/C space, into newer space. Actually, we're benefiting from that with the small amount of office we have in the Ritz. But the Ritz is really a hospitality asset, a luxury hospitality asset. And it's the only -- in the Portland market, it's the only luxury-branded hotel. And most of what you have in Portland on the luxury end is more on the boutique side. So this is a one-of-a-kind property. So I think the economic forces that are driving the loss of tenancy in the Big Pink are actually benefiting a brand-new Class A office like the small amount we have. And then the hospitality is completely different. It's really not affected by the office trend. And as we noted, RevPAR has increased sequentially. And with the new Lincoln Property, they're best-in-class and they've had a lot of experience, not only just in the Portland market, but globally in these hospitality properties. And so we're 2 years into the stabilization, and we continue to see positive trends in the hospitality -- in the RevPAR at the hotel, which ultimately will drive condo sales, where we've hired a national firm that has experience with Ritz Residences to drive a different pricing policy there to get some momentum on the heels of the stabilization of hotels. So anyways, duly noted on the Big Pink. But it is really an apples and oranges comparison. Operator: There are no further questions at this time. I would like to turn the floor back over to Mr. Capasse for closing comments. Thomas Capasse: We appreciate everybody's time today. And again, I wanted to underscore the commitment of the management team to continue to drive the repositioning of the company. We're very confident of our ability to refinance our pending debt maturities, and we look to the fourth quarter call pending. Thanks for your time. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, and welcome to the Algonquin Power & Utilities Corp. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I'll now turn the conference over to Mr. Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations. Please go ahead. Brian Chin: Thank you, operator, and good morning, everyone. Thank you for joining us for our third quarter 2025 earnings conference call. Joining me on the call today is Rod West, Chief Executive Officer. To accompany today's earnings call, we have a supplemental webcast presentation available on our website at algonquinpower.com. Our financial statements and management discussion and analysis are also available on the website as well on SEDAR+ and EDGAR. We'd like to remind you that our discussion during the call will include certain forward-looking information and non-GAAP measures. Actual results could differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecasts and projections reflected in such forward-looking information. Please note and review the related disclaimers located on Slide 2 of our earnings call presentation at the Investor Relations section of our website at algonquinpower.com. Please also refer to our most recent MD&A filed on SEDAR+ and EDGAR and available on our website for additional important information on these items. On the call this morning, Rod will touch on our leadership and then provide a review of the key highlights and operational updates for the quarter. He'll also provide some commentary regarding the company's portfolio strategy. I will follow with details of our financial results. We will then open the lines for questions. We ask that you kindly restrict your questions to 2, and then requeue if you have any additional questions to allow others the opportunity to participate. And with that, I'll turn things over to Rod. Roderick West: Thanks, Brian, and good morning, everyone. Thanks for joining us on the call. Before we move into the quarter results, I'd like to briefly touch on the important leadership update we announced by press release earlier this morning. We're very pleased that Robert Stefani will be joining Algonquin as Chief Financial Officer, effective January 5, 2026. Robert brings to the role an exceptional blend of financial discipline, capital markets expertise and strategic acumen, having served the last 3 years as CFO at Southwest Gas Holdings and 4 years as in the same role and Treasurer of PECO Energy. We're excited to welcome Rob to the executive leadership team. I expect his capabilities and contribution will help us accelerate our path to becoming a premium pure-play regulated utility. I'd also like to take a moment to thank Brian Chin for stepping into the interim CFO role. I personally appreciate his partnership and steady hand during my early months as CEO, and we look forward to having Brian continue with us as a key member of the finance and leadership team and to assist in the leadership transition. On would we go. From a financial and operational standpoint, I'm pleased to report that it was a constructive and solid quarter. Our Q3 financial results were strong with double-digit year-over-year percentage increases in adjusted net earnings and adjusted net earnings per share, and our outlooks remain unchanged. On the operational front, we received approval of our EnergyNorth rate case settlement and our CalPeco rate case settlement is pending. At Empire Electric, we filed a settlement and recognize from commission feedback that we have more work to do to align on specific metrics and milestones to demonstrate improved and predictable customer service. Let me state, we always appreciate hearing from the commission. We are listening and we are committed to reciprocating the transparency. We will be working with the parties to consider how to factor the commission's feedback into our settlement. We have hearings in December on our New England Natural Gas rate case. And in our Litchfield Park case, intervenor testimony is due on January 2026 with hearings scheduled for March of next year. These 2 cases represent a combined total rate request of $73.6 million of the $326.4 million in total pending rate request. A few additional comments, while we're on the topic of our regulatory proceedings. We understand that any adjustments in rates can be challenging for some customers, and affordability is a concern we take very seriously. Rate requests go through a rigorous regulatory review process designed to support our continued delivery of safe, reliable and cost-effective utility services for our customers. with rates reflecting the very real cost of modernizing infrastructure, meeting safety and reliability standards and improving customer experiences and outcomes. These are investments made by the company to create sustainable value for all of our stakeholders. We recognize that while necessary, our investments must be balanced with affordability in mind, which is why we are committed to doing our part to continuously find ways to lower our costs and be more efficient in the way in which we work. And finally, before I turn things over to Brian on the results, a few comments on the company's portfolio optimization strategy. When I became CEO in March, I initiated a series of quantitative and qualitative screens of our portfolio including value accretion, dilution, credit strength and overall strategic fit. I heard the questions that many of you were asking me in my first days, hours and weeks in the role. With the benefit of that initial work now behind me, I am confident that our back to basics pure-play regulated strategy we laid out in June is fundamentally sound. Continuing our focus on lowering our cost curve, improving operational performance and stakeholder engagement is our best path to creating sustainable value, reducing risk and growing our business. That being said, with a stable balance sheet and robust organic growth prospects within our existing portfolio, we are poised to be opportunistic, should the situation arise. And regarding those opportunistic situations, you should first expect that any potential opportunity will -- must be first value-enhancing to our regulated pure-play strategy, whether it's through EPS accretion and/or risk reduction. And secondly, you should expect that we would have and articulate clear lines of sight on transactability. And thirdly, it should not be a surprise to you, given the fact that we're turning this company's performance around or aim to. It should not unduly distract management's attention from our central strategy of turning around our financial performance and keeping our promise to you to be steady and predictable. That being said, Brian, I'll turn it over to you for the quarter results. Brian Chin: Thank you, Rod. As Rod stated earlier, it was another positive quarter for our key financial metrics, and our 2025 financial outlook remains unchanged. Third quarter adjusted net earnings from continuing operations were $71.7 million, up approximately 10% from $64.9 million in 2024. Net earnings for the Regulated Services Group were up year-over-year, fueled by growth from the implementation of approved rates across several of the company's gas and water utilities as well as slightly favorable weather compared to the prior year at the Empire Electric system. Lower operating and interest expenses also contributed positively to the quarter with gains partially offset by higher income tax expense due to higher earnings before tax. Our expectation of an effective tax rate for the year in the mid-to-low 20% range has not changed. Net earnings for the Hydro Group were essentially flat for the quarter. And for the Corporate Group, a decrease of $14.7 million was primarily related to the removal of dividends related to the company's investment in Atlantica, which was sold in the fourth quarter of 2024, partially offset by lower interest expense of $8.9 million. Moving to our EPS walk. Q3 adjusted net earnings per share were $0.09, up 13% from last year's Q3 2024 adjusted net earnings per share of $0.08. Positive drivers for the quarter included $0.02 driven by stronger operational performance from approved rate adjustments and favorable weather compared to last year, another $0.01 related to lower operating expenses and a $0.01 onetime gain from the EnergyNorth depreciation deferral. We were down $0.01 due to the inclusion of a benefit in third quarter 2024 of a New York Water retroactive payment that did not repeat in 2025. Additionally, we benefited by $0.02 from lower interest expense from deleveraging, which was more than offset by the elimination of Atlantica dividends of $0.03 and then finally, a negative $0.01 of unfavorable taxes. And now back to Rod for his closing remarks. Roderick West: Thanks, Brian. And to close, this was another quarter of quiet but steady, thoughtful execution. As we continue our way forward, our focus remains on creating sustainable long-term value for our stakeholders and continuing to effectively serve our customers and communities. We're looking forward to seeing many of you at EEI in the coming days. Thanks again for your time and continued support, and we are happy to take your questions. Back to you, operator. Operator: [Operator Instructions] Your first question comes from the line of Baltej Sidhu from National Bank of Canada. Baltej Sidhu: Congratulations on the strong quarter. Just looking at the OpEx improvement, could you share any color as to what were the main drivers of this and if it's sustainable? Looking in the MD&A, you had highlighted favorable timing as a factor. Brian Chin: Yes. Thanks, Baltej. So as you know, we have been continuing to work on improving our cost discipline. You'll notice that we have taken cost-cutting measures as part of our ongoing strategy of improving value to our customers and stakeholders. We do say in the MD&A, and I'm glad you pointed it out, that we do expect a little bit of reversal on OpEx timing to happen in Q4, and that's part of the reason why our [indiscernible] remains unchanged. In terms of specific drivers, it's across the board. I wouldn't point to any one particular thing, Baltej. It's a myriad of improvements in efficiency and discipline across the board. So do be prepared for a little bit of reversal of that in Q4. But broadly speaking, we're pleased with the trajectory that we've been making. Baltej Sidhu: Great. And just another one for me. If you can provide some color on, if there's been any incremental conversations with data center players and/or if you expect any large-sized projects that would -- or could meaningfully contribute to your system or rate base? Roderick West: Yes. We wouldn't be talking about any conversations with customers unless they were aligned with us disclosing those conversations. I will say that our focus is on creating the conditions precedent to serving a multitude of customers, especially increasing transmission capacity in Southern Missouri, which we've already disclosed that we intend to do and certainly looking at stabilizing our generation portfolio in the region as well. And that's about all we'll say. Operator: Your next question comes from the line of Nelson Ng from RBC Capital Markets. Nelson Ng: Just a quick follow-up on the operating costs. So I think out of the $9 million of -- sorry, out of the $11 million of cost reductions we saw in Q3, $9 million was due to timing. So are -- so Brian, should we expect to see the $9 million all get pushed into Q4? Brian Chin: Nelson, I think that the timing aspect for Q4 is going to be an item that does crop up. Is it going to come out exactly at $9 million? We'll see what happens as we continue to progress through Q4, but the order of magnitude, I think, is correct. Nelson Ng: Okay. And then also in the quarter, I think restructuring costs were about $9.6 million for the quarter and I think $22 million year-to-date. Can you just talk about when you expect to see restructuring costs gradually roll off? Brian Chin: What I'd say is we're in the early innings of our restructuring efforts still. Obviously, given the history of the company, we believe we have a lot of opportunities to provide value across our cost curve. And so stay tuned for more, but early innings is how we would describe it here. Nelson Ng: Okay. So this could be a multiyear process? Brian Chin: Early innings, Nelson, is how I would phrase it. Operator: Your next question comes from the line of Rob Hope from Scotiabank. Robert Hope: As part of the portfolio optimization review, do you take a look at the domicile of the company just given the fact that the majority is now in the U.S. Roderick West: No, no question about it. I got those questions, as you know, and you guys were part of the queue from March on about the domicile question. It is an active conversation and consideration, as we think about providing sustainable value. The question for us, recognizing that we would need to get the support of our existing shareholder base is how does that play out. And while we have not made any determinations, I owe it to you and to my Board to do the due diligence to answer those questions. That work and that analysis is in flight. And that's all I can say. I do expect that at some point, we'll be in a position to opine as to whether it's something we pursue or not. Robert Hope: All right. Appreciate that. And then maybe just moving over to the regulatory front. Are the settlements at the various utilities kind of better or worse than you were expecting in your financial update in June? And more broadly, on the next go around for these regulatory filings, how would you as the new management team do things differently? Roderick West: Well, I'll simply say in our outlook that we laid out for you in June, we made certain assumptions around the reasonableness of our regulatory outcomes in the litany of rate cases. And I'll simply say that, as I alluded to in my opening remarks, everything is very much in flight. So I won't comment on whether or not where we are in our various settlement postures, is above or below expectations, but our expectation around reasonable outcomes remains as reflected in our outlook. In terms of what we are doing differently and what our existing, and certainly with Rob's arrival, our future management team would be doing differently, we'd be spending more time as we've sought to accelerate here, engage with our stakeholders long before we put pin the paper on a regulatory filing. And you've heard me say this before, but it bears repeating that our objective is that by the time we actually make a filing for any rate adjustment mechanism tweak or legislative change that we have reduced the number of contested issues to as few as humanly possible before we make the filing to give our regulators a lot better air cover in both assessing and deciding on regulatory outcomes. And that's just more work beforehand that really efficient and candidly, premium utilities, that's what they do, and we expect to mirror the attributes of those highly valued pure-play utilities. Operator: Your next question comes from the line of Mark Jarvi from CIBC Capital Markets. Mark Jarvi: Just on the activities at Empire, you had a nonunanimous settlement, OPC hasn't signed off yet. Are you in ability to negotiate with them and do a revised sort of more fulsome settlement in parallel to the public hearings that were ongoing? Roderick West: We're going to always be open to resolving disputes between every -- any and every stakeholder. I'm not singling out OPC, as I don't want to get ahead of any of the processes in Missouri. But the short answer is our objective is to get the support of the commission by bringing as many of the stakeholders along and resolving disputes. So OPC is an important stakeholder, but it's the commission at the end of the day who will call balls and strikes, and we're going to do our best to bring as many folks along as we can. Mark Jarvi: I'm also curious how you guys think about updating the market in terms of the journey on the cost cutting and navigating these rate cases. If you had sort of final decisions on CalPeco and Empire at some point in earlier 2026 and you've seen some progress on the cost reductions, would there be a view to update potentially '26 and '27 guidance at some point early or sort of midyear 2026? Roderick West: Yes, it's a great question. And I think it also aligns as I look out at the calendar with the arrival of our new CFO in January. I certainly would want -- if all things remain equal, not just with the timing of the various rate case developments, I'd want my new CFO to come in and weigh in because he, along with me, would own the path forward. So an update if it was -- if we thought that there was any need for -- to disclose a material change in our outlooks. I'd give him a little bit of grace in the early part of next year, but our foundation is sound. And my short answer is I'd always update if I thought there was a material change, but the arrival of the CFO gives us a chance to reflect and have fresh eyes on it as well. So the -- your assumptions on timing, I think, are pretty sound. Mark Jarvi: Okay. Makes sense. And then just, Brian, I know you mentioned the reversal in Q4 of some operating costs. But just as it stands today now, would you be tracking above the 2025 guidance on EPS? Brian Chin: No, our guidance is our guidance. So we're not going to make any comment about how we're thinking about things relative to that guidance. Operator: Your final question comes from the line of John Mould from TD Cowen. John Mould: Maybe just going back to the portfolio optimization aspect. I'm just wondering if you can elaborate a little bit on the risk reduction commentary. Is that chiefly a comment around utility or state-specific regulatory risk? Or are there other aspects of the portfolio optimization process where you see risk reduction opportunities as enhanced potential... Roderick West: Great question. The short answer is all of the above. It's risk period. So anything that would reflect a risk to our ability to achieve steady, predictable outcomes for the long term would be a consideration. So I don't mean to point to any specific one. But in the same way that I -- that we not doing the math on whether a specific transaction would be EPS accretive, the remainder of the considerations that would drive portfolio assessment, value assessment would be just how we articulate, identify and mitigate risk. So I appreciate the opportunity to be explicit on that. It's the generic enterprise risk to value. John Mould: Okay. And then maybe just one more on your customer and billing and data systems. I appreciate the challenges that we've talked about on previous calls, are pretty backward looking at this point. But can you just give us a sense of how that system is operating broadly across your utility footprint at this point? Roderick West: Yes. I am -- in the midst of all the noise from the customer disruptions with the billing issues we've had, I'm encouraged with the progress that we have made. When we brought Amy Walt on as Chief Customer Officer, it was her experience around SAP deployment and end-to-end customer systems that gave us confidence that there was a path forward for us to create different outcomes for customers. We're well on our way to doing that, which is why I was explicit and intentional in recognizing the guidance and feedback we got from Missouri, who themselves want to see better customer outcomes and are really focusing us on the metrics and milestones that not to be tried, the show-me state wants us to show them how we are improving the customer outcomes, which we know we are, but how do we know that we're doing it in a way that is sustainable. And I am really encouraged with the progress we're making internally and the fact that we have an opportunity in Missouri to show how the improvements we made are going to be sustainable. So we're making progress. We got a lot of work to do, but we are making progress. Operator: There are no further questions at this time. I'd like to turn the call over to Mr. Rod West. Please go ahead. Roderick West: Well, everyone, we are days away from EEI. So I thank you for your time and attention to our story, and we look forward to double-clicking face-to-face. Safe travels to everyone. Have a great weekend. Operator: This concludes today's conference call. You may disconnect.
Operator: Hello, everyone, and thank you for joining us today for the Claritev Corporation Third Quarter Earnings Call. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to your host, Todd Friedman, Head of Investor Relations, to begin. Please go ahead, Todd. Todd Friedman: Thank you, Sami. Good morning, everyone, and welcome to Claritev's Third Quarter 2025 Earnings Call. I'm excited to be on my first earnings call since joining the company. I look forward to working with all of you in the months to come. Joining me today are Travis Dalton, President and Chief Executive Officer; and Doug Garis, EVP and Chief Financial Officer. During the call, we will refer to the supplemental slide deck that you can find in the Investors portion of our website along with the third quarter 2025 earnings press release that we issued earlier this morning. Before we begin, a couple of reminders. Our remarks and responses to questions today may include forward-looking statements. These forward-looking statements represent management's beliefs and expectations only as of the date of this call. Actual results may differ materially from these forward-looking statements due to a number of risks. A summary of these risks can be found on the second page of the supplemental slide deck and a more complete description on our Annual Report on Form 10-K and other documents that we will file with the SEC. We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Claritev's underlying operating results. An explanation of these non-GAAP measures and the reconciliations to their comparable GAAP measures can be found in the earnings press release and in the supplemental slide deck. And with that, I will turn the call over to Travis. Travis Dalton: Thanks, Todd. Good morning, everyone, and thank you for joining us today. This is an exciting call for Claritev and for me personally. When I joined the company early last year, we laid out a multiyear journey to create a vision and a foundation that would deliver sustainable growth. We call 2024 the Year of the Foundation and established our guiding principles of clarity of purpose, alignment of talent and focus on results and boldly declared 2025 as the year of the turn. I'm proud to stand here today and say the turn has happened. We set out to be fit for growth by investing in people, tools and processes that will allow us to have better visibility into the business to apply our critical resources to areas with the highest impact. This has allowed us to have better telemetry into the business to call a number and hit a number, thus improving our credibility with internal and external stakeholders, what I call the say-do ratio in simple terms, and we are keeping our word. We will go into more detail over the next 20 minutes, but our Q3 results show a second consecutive beat and raise quarter and most significantly is our core business driving that strong performance. We will roll into Q4 ready to close a transformative year for Claritev and begin executing on the next phase of our 5-year strategy, what we will call the Way Up in 2026. On today's call, I'll provide some of the highlights from the quarter and share how we made the turn ahead of schedule. Then Doug will come on for the financial discussion, and I will end with some thoughts on the state of healthcare and how we see it impacting our progress. One strong quarter is a data point, but two strong quarters are the start of a trend. Revenue growth of 6.7% and adjusted EBITDA growth of 9.5% were both ahead of our internal expectations. Our strong results last quarter were important to build confidence and demonstrate the power of our strategy to drive horizontal products across multiple vertical markets. It is working. The Q3 results show focus, discipline and our sense of urgency. I tell the team urgency is about discerning the critical few priorities from the many things that hit the windshield and intense focus on finishing them. We are executing. We are building a company that delivers on our promises through our clarity alignment and focus on executing with clear priorities and performance metrics. I want to take a moment to explain why I think we successfully made the turn earlier than planned. It starts with our intense focus on our clients, our people and a clear mission that all of our associates understand. We exist to serve our clients and the consumers of the healthcare ecosystem. Put simply, we make healthcare more transparent and affordable for all. Our core solutions across our network, analytics and payment and revenue integrity businesses, combined with our commitment to delivery, play an important role in addressing healthcare's biggest challenges. Our significant investments in technology, data and AI give us a platform to continue to evolve and innovate as the market evolves. We have continued to align and upgrade our talent, provide opportunities for our existing associates and align the organization to focused KPIs built on our pillars for growth. All of this has enabled us to play a significant role in providing access to care, reducing costs for consumers, combating waste in a misaligned system and bringing pricing transparency to an opaque industry. Most importantly, we are an honest broker in healthcare that aligns market participants with the needs of the consumer, the patient. We have demonstrated the value of our solutions and with our improved execution throughout 2025, we have demonstrated how the core will continue to be a launching point that will deliver our long-term aspirations. Underpinning this confidence, as recently announced, we have renewed our top 10 clients for extended terms. This includes the single client we have discussed previously. These renewals provide visibility and stability for us to build upon as we enter the way up. Beyond that core, we have solidified our expansion into new market verticals, adding new clients, partners and solutions that I'll describe in more detail in a few minutes. Now turning to the highlights from the quarter. As we have noted previously, our company is now aligned to 6 focused market verticals, each with a clearly accountable leader and sales incentives to serve existing clients and new opportunity. This focus is a primary driver of the success we are seeing across the business. We are seeing increases in white space for existing clients, adding new logos and new solutions that expand our total addressable market. The underlying metrics in our core business support this view of a business that is on the rise. Through the first three quarters of this year, we're seeing improvements in the percentage of actionable claims while also increasing our revenue per claim, which Doug will cover in additional detail. In fact, we are seeing positive trends in our key growth metrics across the business. We added 5 new logos, bringing our year-to-date total to 20 and closed 180 opportunities. We closed another $15 million in Annual Contract Value, or ACV. Our average ACV per transaction is up more than 25% over last year, and our funnel continues to grow with a 67% increase in pipeline year-to-date. This is directly attributable to our strategy to focus on existing client value and also drive our horizontal solutions and to new client acquisition across those vertical markets. The growth team has done an outstanding job and honestly, it's just getting started under the leadership of our Chief Growth Officer, Tiffani Misencik. Now let's look at Q3 in each of our market verticals. At the core of Claritev are our payer and TPA client relationships. The growth in this vertical is the biggest reason we made the turn in our strategic vision ahead of schedule. We added four new logos and closed several 7-figure deals this quarter coming from expansion with existing clients who see our commitment to client success and value for them. As mentioned earlier, we now have renewed our top 10 clients during this year. That combination of growth, stability and visibility is the key reason we are optimistic about our continued success in this vertical. That optimism is bolstered for a solid Q4 based on early wins and a diverse pipeline. The broker and employer market continues to be a highlight for our vision to expand our reach across the healthcare landscape. We signed over 100 deals, including our first premier broker agreement with several more in progress to drive greater expansion of our products, including VDHP. We also hosted our first ever Broker Virtual National Summit with more than 300 attendees, which is in addition to four additional webinars and 7 broker conferences that we attended. Our traction in this vertical is growing, and we are seeing the results in continued pipeline growth. Turning to the provider market. We continue to see the opportunity to have a meaningful impact with healthcare providers who are seeking transparency and analytics solutions to optimize their operations and financial performance. Simply put, with CompleteVue and Analytics, we can drive revenue up, cost down and with efficiency, give providers more resources to deploy to patient care. We now have over -- we now have opportunities with 60 provider organizations in our active pipeline and continue to demonstrate success. We signed EPHC a 13-hospital consortium in the Eastern Plains of Colorado to use our payment accuracy and market analytics solutions. Rural hospitals, like those in the EPHC face unique challenges, especially in light of regulatory changes coming from HR.1. Healthcare consumers in rural areas will face significant barriers to care, and we are proud to work with hospitals to serve them as they strive to continue meeting this critical healthcare need. We opened our newest vertical market just over 5 months ago with our expansion to international, specifically the Middle East. We believe the international markets represent a significant growth opportunity where U.S. standards are widely used and our solutions can be quickly adapted and marketed in new countries. We launched our advanced code editing solution in the UAE with our first client ahead of schedule while signing new existing partnerships with iO Health and Klaim to accelerate development of new AI-driven solutions. I have personally spent time in the MENA region, including last week in Riyadh at Global Health and FII and believe this is one of our most exciting growth opportunities. Partnerships with iO and Klaim, while grounded in the MENA region, also have the potential to bring more value and solution innovation to our core U.S. markets. You'll hear more from us about this exciting potential. Briefly touching on the government vertical. We expect to have some positive news to share in the near-term with real tangible impact. We've been working on a number of opportunities with prime contractor partners and are seeing some decisions being made. I'm going to speak to some market trends later in the call, but we see opportunity with core set of solutions across existing government needs, but also with opportunities that we believe will arise with the implementation of HR.1. Our vision is very much aligned with government initiatives on price transparency services and reducing waste, and we are actively engaging in discussions where our experience can deliver immediate value. Lastly, it's been a busy quarter for our strategic partnership team. I mentioned a couple of our international partnerships. We also closed an agreement with [ QinetiQ ] to provide health and wellness consulting as an added service for our BenInsights and PlanOptix products. Perhaps the most visible sign of our partner engagement model was at Oracle AI World, where we were a title sponsor, gave a number of theater and breakout presentations and earned a shout-out in Oracle's subsequent Investor Day. We are actively working with our first pilot client and continue to make meaningful progress on embedding our solutions within Oracle's human capital management products. This would bring real-time insights and prediction to help employers proactively manage their health plans, identify risk, drive costs down and improve wellness. We're also seeing active pipeline growth with our payments powered by ECHO with over 30 opportunities. When you look at Claritev Payments powered by ECHO and our most recent partnership with Klaim, who is an AI-driven healthcare payment acceleration solution provider, you are beginning to see the early stages of a growing financial solutions business. It is one that we believe can expand our presence in the healthcare market and create another new vector for future growth. I won't elaborate just yet but expect to hear more from us on an innovative approach to one of healthcare's most vexing problems in the coming months. Before I turn the call to Doug, I want to take -- I want to make one last comment about our rebrand. As I've said to the team before, you don't simply change your name, a rebrand must be earned. Kudos to our marketing team as we aggressively campaign and create greater awareness in the market. Brand engagement is running high. Website visits are up more than 100% and engagement is growing across multiple channels. We're sponsoring more events and building an exciting calendar for '26. This all becomes part and parcel of a consistent market-leading company. You build the brand, you do the hard work to build pipeline, win rates go up, sales cycles begin to shrink and most importantly, you listen to your clients and solve problems. It is all part of the focus and discipline at the heart of a transformational journey. I'll come back in a few minutes to wrap up our prepared comments, but I'll close these opening remarks by saying this is the most energized I've been professionally. I visited a number of our offices this quarter on a CEO roadshow, and you can tell the momentum is building and enthusiasm across the company is palpable. Our teams are showing it and our clients are feeling it. It's a good time to be at Claritev, and I'm excited for how we're doing, how we're going to finish the year. With that, I'll turn it to Doug. Doug Garis: Thank you, Travis, and good morning, everyone. Q3 truly marked a turn in our business. Delivering on our promises is a grounding principle, and it's a reward for us to be able to share these results with you today. I will cover selected Q3 and year-to-date financial highlights, and we'll also give more color by service line as reflected in our supplemental earnings deck posted on our website [ this a.m. ], and then I'll end by sharing our updated capital allocation priorities. Let's get right into the numbers. Total revenue in Q3 was $246 million, up 6.7% year-over-year. Adjusted EBITDA was $155.1 million for the quarter, reflecting a 9.5% growth rate. Corresponding EBITDA margins were 63.1% in Q3 and 62.8% year-to-date, tracking to our guidance on a full year basis. Year-to-date revenue through September is up nearly 3% and adjusted EBITDA is up 3.7%. This is our best absolute revenue dollar performance in the last 12 quarters. It is worth a shout-out to our whole team who stayed on mission and executed with focus and discipline as we navigated through a foundation year in 2024 and we have turned Claritev back into a growth business. The strength of our core offerings should be reiterated. Our multiyear vision is based on strategically investing across the business and nurturing our expanding portfolio of products, solutions and end markets. We are in the middle of '26 planning and it is the stability, visibility and profitability in our core solutions that allow us to confidently think about next year and beyond. During Q3, core revenue grew year-over-year and sequentially. On a year-over-year basis, all three of our service lines grew at healthy rates, led by network revenue at nearly 15%. Analytics, our largest service line, grew 4.2% year-over-year and payment revenue integrity grew better than 7%. On a year-to-date basis, core revenue is up approximately 3%, further supporting our statement that the turn has happened. Digging into these numbers a little bit further, we are seeing strength in our two largest solutions, Data iSight and Financial Negotiations, with strong savings in revenue per claim performance on slightly lower volumes. Payment and Revenue Integrity continues to see good volume growth and higher savings yields on process claims. Our AI-based Advanced Code Editing product, ACE, posted yet another strong double-digit growth quarter and is poised to gain momentum as we more broadly deploy to new end markets. And it's worth noting, while a small contributor, Q3 marked our first revenue from our international expansion. We expect to continue to have good updates on progress overseas in coming quarters and years. Finally, similar to last quarter, a new commercial arrangement in the P&C business resulted in approximately $5 million of nonrecurring revenue benefit in the network business this quarter. We expect a similar benefit in Q4 that will not repeat in 2026. The approximate total of this benefit from this arrangement is expected to be between $15 million to $18 million on a full year basis in 2025. Our growth areas are also developing nicely. The growth pipeline continues to mature in dollars and number of opportunities with the expansion of our go-to-market team and now represents approximately 40% of our total dollar-weighted funnel. We have generated an additional net $80 million in new pipeline during the first 9 months of 2025, representing a 67% increase since January. Notably, we are seeing pipeline growth across all lines of business, demonstrating the success of our diversification efforts and the growing contribution from our growth areas with a roughly equal weighting between net new business and upsell, cross-sell opportunities organically present within the current installed base. We have closed approximately 500 opportunities for $45 million of ACV year-to-date. In total, we expect to book approximately $60 million of incremental ACV this year, which will largely convert to revenue in '26 and beyond. The volume and velocity improvements we have conveyed in our go-to-market stem from one of the key transformation objectives of business realignment. As the numbers indicate, this effort is starting to deliver tangible and measurable results. We remain disciplined with operating costs. Adjusted expenses grew roughly 2% in Q3. Personnel costs were higher due to talent and transformation-related investments, partially offset by lower expenses in facilities, legal and other operating costs. Our multiyear transformation road map is pacing on schedule. And as we progress, we may elect to pull forward investments if our business continues to perform ahead of internal expectations. Moving on to cash flow. Levered free cash flow was a use of $16.3 million in the quarter and was driven by investment in our transformation program and timing of interest payments, partially offset by lower cash paid during the period for income taxes net of refunds. Notably, unlevered free cash flow of $113 million and adjusted cash conversion of 73% are the strongest we've posted in 9 quarters. We ended the quarter with $39 million in unrestricted cash and successfully moved back under 8x net leverage. Now on to guidance. Based on our performance in Q3 and throughout 2025, we are raising full year revenue guidance to approximately 2.8% to 3.2% growth versus prior year and tightening our adjusted EBITDA margin guidance range to 62.5% to 63%. Combined, those two measures are helping us pace towards our aspiration to become a Rule of 70 company, rare error for any public company in any sector. We are maintaining our free cash flow guide and narrowing our forecasted CapEx spend range to a range of $165 million to $175 million. I wanted to end by sharing that our capital allocation priorities remain clear and disciplined. At the highest level, we continue to focus on organic investments to fuel our Vision 2030 plan. That's where most of our capital and energy are directed. These investments are driving innovation, operational excellence and helping us get fit for long-term growth. At the same time, we're maintaining a high priority on debt paydown with a renewed focus on value-creating M&A, both of which will strengthen our balance sheet and position us for sustainable and intelligent expansion. All of this aligns with our guiding principles to diversify and accelerate, expanding our solutions, verticals and channels to drive growth while also delevering and derisking to enhance cash flow and operating agility. On our next call, I will be excited to provide a lot more color on how we're thinking about '26 and beyond. I echo Travis' opening comments that this past year has been among the most rewarding in my professional career. With that, I'll turn it back over to Travis for some closing remarks before taking your questions. Travis Dalton: Thank you, Doug. Before taking questions, I'd like to discuss the healthcare market and the trends shaping Claritev's work. The industry continues to face structural, regulatory and reimbursement pressures heightened by inflation, rising employer plan costs, shifting employee burdens, complex regulation and growing demand for transparency. Fragmentation still drives inefficiency and waste, but that's where Claritev creates the most value. Our solutions in network advancement, pricing transparency, NSA and surprise billing compliance and payment and revenue integrity powered by world-class analytics are designed to address these challenges and strengthen our financial performance. We anticipate healthcare inflation will rise 6% to 9% with out-of-network claims stable at 5% to 7% and an increase in high-cost cases, particularly those in behavioral health. Our analytics and BenInsights platform are uniquely positioned to help clients optimize benefit plans, control costs and improve their outcomes. Healthcare remains a complex space with competing interest and misaligned incentives. Claritev sits at the intersection of healthcare, innovation and technology with a business model that's grounded in measurable ROI. We're well-aligned with the administration's focus on transparency and efficiency to reduce system misalignment and benefit patients. In Q3, we demonstrated strong execution of our strategic transformation, delivered our best revenue quarter in 12 quarters, renewed our top 10 clients, advanced our 6 market verticals and progressed in our digital transformation, migrating to OCI and modernizing applications for better speed and data integration. Claritev is on the way up to 2026. As we reflect on '25's achievements, I'm confident in our ability to drive sustainable growth, serve clients, support our associates and deliver shareholder value. Thank you for your continued trust and support. And with that, we'll take questions. Operator: [Operator Instructions] Our first question comes from Joshua Raskin from Nephron Research LLC. Joshua Raskin: I was wondering if you could talk a little bit about just starting with the guidance, revenues going up and then the EBITDA margin, at least at the high end, tempering a little bit. So obviously, a lot of fixed costs in the business, but were there investments that you were accelerating or is this part of that bundling strategy that you've talked about in terms of the top 10 accounts and others? Doug Garis: This is Doug. I'll take a shot at that. Yeah, so I think we've actually done a pretty good job of managing costs this year. And as we think about Q4, I know there's probably going to be a couple of questions. Well, we really look at the business on a year-over-year basis. And so we've provided sequential information historically just to show the trends, and we've improved our -- some of our supplemental materials. But if you take a look at the guide for Q4, it implies a quarter up roughly 2% to 6% on revenue with EBITDA up roughly 3% to 9%. So we feel pretty comfortable with that as a benchmark and again, sustained year-over-year performance. But that's how we're thinking about Q4 and the rest of the year. And then as we go forward, we have a multiyear transformation, and we're running a little bit ahead of our internal expectations. So to the extent that we have capital projects or OpEx that we might want to pull forward to drive revenue growth, we'll opportunistically do that as the quarters arise. Joshua Raskin: Okay. That makes a lot of sense. And then I know it's early for 2026, and we'll wait until next quarter. But maybe outside of that $15 million to $18 million of nonrecurring revenue that you suggested maybe we take out of the baseline. Any other big headwinds or tailwinds that we should be thinking about next year? And maybe more specifically, mid-single-digit revenue growth in the second half. Is that a reasonable starting point for 2026? Doug Garis: I would say, yes, in the second half without giving too much on guidance. Recall that the $15 million to $18 million started in Q2 of this year. There will be a lapping effect for Q1. But I think tailwinds are healthcare inflation. If you look at the sequential improvements to our [ PSAV ] volumes, Travis had mentioned that we still think volumes out-of-network claims, all else equal, will be approximately 5% to 7%. And we're seeing between 3 million to 3.5 million claims come through our windshield a quarter that we grab and price. And then you're also seeing things like behavioral health and even some inpatient -- some things go out of network inpatient that are higher dollars that have benefited us in the near-term. What's really hard to predict is when you look at the regulatory environment and the government shutdown, we're not so sure when those are going to resolve, but the underlying I would say, price environment for our business is very favorable, and we're highly encouraged. And then we're going to continue to focus on managing our large accounts, which we have a pretty good funnel. But I think that's probably a fair assumption for the second half of the year. Joshua Raskin: And maybe if I could just sneak in then and just on your last comment there, the 10 renewals then, as I think about headwinds, tailwinds, we shouldn't be thinking about that as headwinds. Is it fair to say that those were renewed generally similar to previous contracts? I know with big extensions, typically, you see a little bit of pressure on the margin. Doug Garis: That's correct. Travis Dalton: Yeah. I'll just comment on that. Yeah, that was -- Josh, that was foundational to kind of [ have ] the stability that we're trying to achieve inside of this year and last year. We actually -- not only is it not a headwind in my mind, a tailwind because we now have -- we can plan against that, we can execute with them. We've noted the last [ two ] quarters that our white space is growing dramatically inside of our installed client base. And so we view that as a great opportunity for us. And so I think the macro of healthcare, the stability of our client set are tailwinds for us. And the headwinds are normal business factors that you would expect, not existential things that we may have experienced. And competition, uncertainty, all of those things you navigate as a business leader are there for us. But we actually feel very good about the wind at our back as it relates to our core business and the macroeconomics and our growth thesis. Operator: Our next question comes from Daniel Grosslight from Citigroup. Daniel Grosslight: Congrats on another beat and raise here. Maybe I'll just stick on the 2026 line of questioning. It does seem like you have a fair amount of visibility now just given the renewals and all the ACV you have signed. But maybe I just want to double-click into how we should be interpreting that ACV growth. I think you mentioned it was -- it's going to be around $60 million of new ACV signed this year by the end of the year. Is all of that going to convert into revenue next year? And is that incremental on top of the core business or these renewals so that if the core business is growing, I don't know, call it, mid-single digit, 4% to 5%, we should think about $60 million being layered on top of that growth? Doug Garis: Thank you, Daniel. So for the -- let me answer the ACV first. So I think we had stated this on the last call. I know we introduced it as a new metric, and I think it's something that we'll continue to provide. The incremental -- the ACV that we booked this year, the approximately $60 million that we expect to book is incremental. So I would think about that as an addition to the core business, even though a lot of the ACV that we booked is within our core customers. And so our opportunities that we booked, the 500 that we've booked year-to-date, it's actually a very good mix of payers and TPAs within our core 700 customer set. The $60 million of ACV will largely convert to revenue next year. And so there is a timing element to convert with any business to convert a booking into the first dollar of revenue. That's something we expect to take a few quarters for each new deal to show up as revenue. Some deals will be a little bit quicker. If you have software, you turn it on and you have first productive use within a quarter. Some of our larger installs like Payment & Revenue Integrity or Data iSight or our network business might take 2 or 2.5 quarters to turn on. We feel pretty confident that at least 60% to 65% of the ACV we book turns into revenue and converts to revenue next year. And then without spending most of our time focused on '26 because we'll do that in the next call, the reason why we're being a little bit cautious is because the pricing environment and the inflationary environment is really high, right now. It's hard to tell if that's going to cool down or not next year. We still feel very good about the core business. And then I would give a big shout-out to our operations team who is actually identifying more savings, commanding more savings and revenue per claim. And when you look at Slide 14 on our supplemental deck, you've really seen the fruits of those efforts and putting in a general manager model over the last 10 to 12 quarters where we've been able to make our products work better, which provides more values to our customers and ultimately patients. And so without giving you all of the tea leaves for '26, we feel good about the kind of demand environment. We feel good about where out-of-network claims are landing in the volume environment. And then we're going to continue to expand our funnel and expand to new markets, and we think those all bode well for our medium- to long-term growth objectives that we laid out in March of this year. Daniel Grosslight: Yeah, that's great. That's great. And I'd also love to get an update on your NSA products and how that market is trending. We've heard that there are now a slew of third-party NSA vendors that are working with providers to really aggressively go after the national payers, particularly in the IDR process. What are you seeing there? Has that -- is that -- the trend isn't new, but is it accelerating? Is it diminishing a little? And has it had any material impact on you guys? Doug Garis: Yeah. Maybe I could start that off and then Travis, if you have a general comment. So when you look at our NSA business, it's performed pretty nicely with the exception of -- we mentioned the one large customer did in-sourcing. The rest of our business, we've actually put a lot of operational focus. And we've actually taken our unit cost down approximately 70% to service each IDR claim over the last year. And so we continue to think that is a growth area for us. But the reality is from a regulatory and a top-of-the-house perspective, providers still win 80% of NSA disputes, which is a structural problem that while we -- I would say we have the best performing NSA product in the market, and I think CMS, we shared last quarter, CMS published a study in June that highlighted that it's still not a fairly weighted scale when you think about the relationships and the abrasion between payers and providers. We've seen a bunch of point solutions come up, and I think they have modest improvement. But when you look at the scale, it's still roughly 80-20 towards the provider with our products performing pretty well, but our large customers have sent us more business, and that business is performing pretty nicely for us. Travis Dalton: Yeah. I'd just add a couple of things there. So yeah, I think Doug kind of hit it, but I'll just reiterate. We actually are significantly better than any of our competition as it relates to the value we bring to clients with that product set. So we view it as a positive and a differentiator for us and an opportunity. We're going to continue to invest in the NSA business and automation and using our AI tools, along with PRI and network and other areas. And Doug mentioned some of the structural elements of that policy that I think many think it should be looked at and that we participate in. So it will be an area of focus and area of investment for us. And as Doug brought up a broader point, I won't parse on it, but I'll just say one of the things I think that makes us unique with our clients is that we're not simply a point solution or a widget that's narrowly focused on a single area. So we actually hold a unique position across the network, analytics, PRI and data science and prediction that we can bring. So I think that, that creates a positive opportunity for us with clients, but also really puts a moat around some of our capability with our core clients as we go forward. So NSA is an important area for us. It matters to our clients. We're going to continue to focus on it as we go forward. Operator: [Operator Instructions] Our next question comes from Jessica Tassan from Piper Sandler. Jessica Tassan: On the NSA business, I want to follow up. So we know you're supporting a large number of payers, obviously, in the IDR process. How does Claritev get paid on these disputes? Is your revenue contingent upon the IDR judge selecting the payers' bid? Do you get a portion of savings? Can you just remind us how the contract economics work for this business? And then what segment you're reporting the revenue in? Doug Garis: Yeah. Sure. Thanks, Jessica, for the question. And I think we spent a little bit of time, and we can do so in post call again walking through the economics, but it's a PSAV business. The IDR dispute process happens, right? There's an IDR fee. We work with our clients. We actually front that fee. We take them through the arbitration process. And as a matter of fact, I think only a small -- less than 20% of the IDR claims get disputed post QPA. And so if you think about the funnel of potential claims that go through Surprise Bill and the ones that get disputed, it actually is a small fraction where we're able to offset any potential abrasion before it gets all the way through the end of the funnel. But to the extent that a claim does get disputed and we're not able to resolve it and we win the claim on behalf of the payer, we capture a percentage of the savings on the negotiated rate or the win rate. So it's very much aligned with our PSAV business. And then the -- I think your second question was where does that fall? That's within our analytics-based services. Surprise Bill is our third largest product behind Data iSight and financial negotiations. Jessica Tassan: Awesome. That's really helpful. And then I wanted to just follow up about the client renewals. I think in your response to Josh's question we can infer that these were conducted at stable levels of 2025. Is there anything else we should be inferring about these renewals or anything that you wanted to share context-wise on that process? And congrats, obviously, on closing all 10 of your top customers. Travis Dalton: Yeah. Just a little color on it. I mean I'll just say that that was a major focus for me, been here over a year now. One of the key focuses was shoring up our key clients. and ensuring that they understood the value that we had, not just in what we're providing today, but ultimately also in new capabilities. So I'm not just focused on renewal activities. I'm actually focused on growth of those clients with our new products, which I think we're getting more and better education and understanding of that. And I also have to note that encompass -- I was asked once, I was asked 100 times about some single client issues that we were able to renew our single client that we've talked about publicly and openly. That's a big deal for us that shows trust and focus going forward collectively. And as noted, we think this underpins the business and creates a nice place for us now to launch forward with a little more predictability and focus and stability. So those would kind of be some additional comments I'd make, Jessica. Operator: We currently have no further questions. I'd like to hand back to Travis for some closing remarks. Travis Dalton: Yeah. Appreciate the time. I'll just close out by saying that I'd be remiss if I didn't have a quick shout-out to the entirety of our team. I'm very proud of the team. We have existing resources that have been here a long time that are understanding what we're trying to do, have worked extraordinarily hard and are embracing change. That's not always an easy thing to do. And then we've tightened up our -- and shored up our management team and talent. So I couldn't be more excited about going into '26, considering this will be the first full year I've been able to have the team that I wanted to put together on the field. And so we're very enthusiastic about it, and we look forward to the next call talking about results, but also talking about our guidance for '26 and beyond. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services Third Quarter 2025 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Scott Melbourn, CEO, Mr. Melbourn, please proceed. [Technical Difficulty] Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services Third Quarter 2025 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Scott Melbourn, CEO, Mr. Melbourn, please proceed. Scott Melbourn: Thank you, operator. Good morning, and welcome to Source Energy Services Third Quarter 2025 Conference Call. My name is Scott Melbourn. I'm the CEO of Source. I'm joined today by Derren Newell, our CFO. This morning, we'll provide a brief overview of the quarter, which will be immediately followed by a question-and-answer period. Before I get started, I'd like to refer everyone to the financial statements and the MD&A that were posted to SEDAR and the company's website last night and remind you of the advisory on forward-looking information found in our MD&A and press release. On this call, Source's numbers are in Canadian dollars and metric tons, and we will refer to adjusted gross margin, adjusted EBITDA and free cash flow, which are non-IFRS measures as described in our MD&A. Except for the items just mentioned, our financial information is prepared in accordance with IFRS. After a couple of record quarters this year and as anticipated, we experienced a slowdown in completions activity in Q3 as weaker commodity prices in both oil and natural gas, along with some economic uncertainty caused our customers to defer some of their completions to the fourth quarter and into 2026. During the quarter, natural gas prices were hit particularly hard due to pipeline maintenance and LNG Canada not ramping up as fast as markets had expected, resulting in depressed AECO pricing. This work has not been lost. It has just been delayed. And as a result, we are expecting a much stronger Q4 than we had last year. And for the second half of 2025, we expect similar volumes as the second half of 2024. During the third quarter, we continued to build our infrastructure to support the development of the Montney play. The expansion of the Peace River mine to 1 million tonnes of processing capacity is nearing completion as is the construction of the Taylor terminal, which became fully operational during the quarter. Source also seized on a unique opportunity to acquire sand processing assets at a very attractive price. These assets, once disassembled and moved will be used for the future expansion of the Peace River facility. The purchase comprises substantially all of the processing assets required to expand the production at the Peace River facility to a total capacity of 3 million tonnes per year. While we have made the decision to purchase these assets in order to move quickly when the time is right, the time line for bringing these assets into operation will be dependent on the next phase of LNG export capacity and how quickly the overall proppant market in the Western Canadian Sedimentary Basin grows. With lower activity levels in Q3, we realized the following results: Sand sales volumes of 665,000 tonnes, a 31% decrease from last year. Sand revenue and well site revenues, which include trucking and Sahara results in Canada were impacted proportionately by the lower sales volume, while realized pricing actually improved. Total gross margin were down due to lower sales volume. Adjusted gross margin per ton of $45.57 is in line with prior years and year-to-date results. Adjusted EBITDA was $20.3 million, a $15.1 million decrease from the third quarter of 2024. On the capital management front, we remain committed to disciplined balance sheet management, reducing outstanding debt by $11.7 million this quarter and a total of $19.9 million for the year. Building on that progress, we move beyond debt reduction and are now allocating a portion of free cash flow to share repurchases through the normal course issuer bid. Since launching the program in May, we have repurchased 392,000 shares, including 167,500 in Q3, further enhancing shareholder value and reinforcing our capital structure. With that, I will now turn it over to Darren. Derren Newell: Thanks, Scott. As Scott mentioned, Source sold 665,000 metric tons of sand in Q3 '25 from which we generated $100.3 million in sand revenue. Sand volumes were 31% lower for the reasons Scott explained, while sand revenue decreased by $42 million. The decrease in revenue was volume driven as the average realized price per metric ton actually increased by $3.15 compared to the prior year. The increase in the realized price was primarily due to a shift in terminal mix, partly offset by an increase in lower-priced finer sand sales. Wellsite Solutions revenue for Q3 '25 was $23.9 million, a decrease of $16 million compared to Q3 '24. Lower sand sales volumes impacted the volumes hauled to and handled at the well site. In Canada, this resulted in lower trucking revenue and Sahara utilization, which came in at 47% for the quarter. The U.S. Sahara fleet, however, was 100% utilized as it is fully contracted. Terminal services revenue was $1.1 million, an increase of $0.2 million compared to Q3 '24 due to higher revenue from chemical elevation volumes realized in the period, including the impact of the addition of hydrochloric transloading at the Chetwynd terminal. Cost of sales, excluding depreciation, decreased by $44.8 million for the quarter compared to the same period in '24 due to the decreased sand volumes sold and lower truck volumes. On a per ton basis, cost of sales was increased by a shift in terminal mix and decreased by fewer third-party sand purchases. The movement of foreign exchange rates on the U.S. dollar-denominated components of cost of sales caused an increase of $0.72 per metric ton compared to the third quarter of last year. Total adjusted gross margins were lower due to lower sales volumes and lower volumes trucked to the well site. On a per ton basis, excluding gross margin from mine gate volumes, adjusted gross margin was $46.56 compared to $45.89 for the third quarter of '24. During the quarter, adjusted gross margin was favorably impacted by a customer performance bonus that was partially offset by the impact of additional costs attributed to the expansion of operations at the Peace River facility compared to third quarter of last year. For the 3 months ended September 30, the weakening of the Canadian dollar favorably impacted adjusted gross margin by approximately $0.52 per metric ton. Operating expenses in Q3 increased by $0.7 million due to higher royalty-related fees, insurance premiums and rail expenses for Source's fleet as well as the incremental costs incurred with the Taylor facility beginning operations. These increases were partially offset by lower people costs, reflecting reduced incentive compensation. General and admin expenses decreased by $0.3 million for Q3 '25, primarily due to lower variable incentive compensation costs. This reduction was partly offset by the amortization of Source's computing system, which we implemented last year. Finance expense for the Q3 was lower by $1.6 million compared to Q3 '24. The decrease was due to $0.9 million in lower interest expense for long-term debt outstanding, including an adjustment to capitalize nonutilization fees on delayed draw facility incurred during this year as well as lower accretion expense. Partly offsetting these was an increase in interest expense for outstanding lease obligations driven by the addition of heavy equipment leases and interest income earned. Interest income realized is attributed to the commencement of the subleases for Sahara units deployed last year as well as cash balances on hand. At quarter end, Source had available liquidity of $65.7 million. Capital expenditures for Q3 net of proceeds on disposals and excluding expenditures related to Taylor were $18.5 million, an increase of $15.3 million compared to Q3 '24. Growth capital expenditures, excluding the construction of Taylor increased by $12.5 million, substantially attributed to the assets acquired for the future expansion of Peace River facility, as Scott discussed. We also acquired some trailers for Source's trucking operations. Maintenance and sustaining capital increased by $2.8 million for Q3 '25, largely due to higher amounts for overburden removal from the mining operations. Lease obligations increased from the prior quarter, largely due to the timing of the addition of heavy equipment for Peace River done in the latter half of '24 and yellow iron leases for the Wisconsin mining operations, which were replaced late in '24 at higher rates. Source is now in a cash taxable position in its U.S. operations and expects it will be cash taxable next year in Canada. And with that, I'll turn it back to you, Scott. Scott Melbourn: Thanks, Derren. As a result of the delays in completion activity experienced in the third quarter, Source anticipates increased activity levels for the remainder of the year, which will result in a solid rebound for the fourth quarter and the full year 2025 proppant demand similar or slightly ahead of 2024. We expect 2026 to be a strong year for Western Canadian Sedimentary Basin completion activity, driven by additional export capability via LNG Canada as it ramps up its production. We are pleased to note positive developments regarding all the proposed and under construction West Coast LNG projects, which will ultimately further expand export capability from the WCSB. Over the long term, we continue to believe increased demand for natural gas driven by LNG exports, increased natural gas pipeline export capabilities and power generation will drive incremental demand for Source's services. Source continues to focus on enhancing our industry-leading frac sand logistics chain, and we have and will continue to execute on a number of opportunities to grow the company and to further our competitive advantage. Thank you for your time this morning. That concludes the formal portion of our call. We'll now ask the operator to open the lines for questions. Operator: The first question comes from Nick Corcoran with Acumen Capital. Nick Corcoran: Just the first question for me. You mentioned that completion activity slowed in the quarter. Can you maybe talk to what you've seen month-to-month through the quarter and maybe into Q4 as well? Scott Melbourn: Yes. We saw sort of the beginning of Q3 as really status quo. And then we start -- we -- as we progressed in Q3, the activity level started to slow. We're kind of seeing the reverse of that as we move into Q4, we've seen activity levels starting to ramp. We expect to continue to ramp throughout the balance of Q4 and then slow down with our normal seasonal slowdown in December for -- as everyone kind of pauses for the holiday period. Scott Morrison: That's helpful. And you mentioned sand volumes expect to be flat to slightly up in 2025. Any indication what you're expecting in 2026 and 2027 based on initial discussions with customers? Scott Melbourn: I think our initial view of 2026 is we will likely see some growth over where we ultimately end in 2025. I would caution, we're really early days with our customers' budget and the budgeting process. So there's certainly going to be some ins and outs. However, we do believe that we're going to see some growth '25 to '26. And as we cycle into '27 and beyond, I would expect that we're going to see additional growth in those years as well. Nick Corcoran: Great. And maybe a question for Darren. Any guidance on what -- where CapEx will land for '25 and '26? Derren Newell: You've seen our capital move up. We're sort of in the 45 to 50-ish range right now with capital for '25. '26 is early days. As we work through kind of where we are with our Peace River expansion and the timing of it, not quite ready to tell the world what the plan is. Nick Corcoran: That's fair. And then maybe a related question. There's been some recent news of another mine expansion in Alberta. I'm just wondering how you expect these to impact the overall market going forward? Derren Newell: Sorry, Nick, I missed the first part of that question. Nick Corcoran: Yes. Just recent news of other mine expansions in Alberta. Scott Melbourn: Yes. Maybe I'll take that one, Nick. I think we're not surprised by other domestic players in Alberta expanding their production capability. I think we've seen a movement in the market generally to a little more domestic in their program. We're very confident in our Peace River asset, and we're very confident in our Northern White offering, especially as it relates to the Montney and the location advantage we have at Peace River and our network throughout the Montney. So we don't anticipate those expansions or those announced expansions to have really much of an impact on our business and our core areas at all. Obviously, we'll be keeping a close eye on it, but I think our location advantage and our network advantage is substantial, and we won't see much of an impact at all. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Scott Melbourn for any closing remarks. Scott Melbourn: Thank you, everyone, for joining our call today. If you have any follow-on questions, please feel free to reach out to myself or Darren. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Hello, and welcome to the Proximus Q3 2025 Results Conference Call. My name is Sergey, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Nancy Goossens, Investor Relations lead, to begin today's conference. Thank you. Nancy Goossens: Thank you, ladies and gentlemen. Welcome to the Proximus Third Quarter Results Webcast. We will begin with our presentation, and it is my pleasure to introduce our new CEO, Stijn Bijnens, who will walk you through today's highlights. Our CFO, Mark Reid, will then present the financial results. A Q&A session will follow with Jim Casteele, the consumer market lead also participating. Handing over now to Stijn for the highlights. Please go ahead. Stijn Bijnens: Also, welcome from my side. I'm honored to present my first round of Proximus results to you today. As you have seen in our published report this morning, Proximus continued its robust domestic performance despite the intense competitive environment. This is reflected in both another strong financial and operational quarter. Network leadership remains at the core of the success with 5G coverage now over 85% and fiber in the street covering more than 47% of the Belgian homes and businesses. We're pleased that the Belgian Competition Authority announced the launch of the market test and our proposed gigabit network collaboration in Flanders, while the negotiations in Wallonia are ongoing. The Proximus Global segment continues to experience challenges related to SMS CPaaS and integration issues, prompting a reassessment of ambitions, which will be addressed later in this presentation. And finally, we concluded the sale of Be-Mobile, keeping us well on track to realize the EUR 600 million asset sales program. Based on the results and current projections, we've updated our outlook, which I'll discuss shortly. Moving to our key financial results now. For the Domestic segment, we closed the third quarter with stable services revenues. Thanks to a favorable revenue mix, driving higher margins and costs turning stable year-on-year, we closed Q3 with a domestic EBITDA growing 1.8%. For the Global segment, the direct margin was down by 12.2% at constant currency, caused by the headwinds previously mentioned. This resulted in an EBITDA decline of 22.3% despite cost synergy realizations. This brings our group EBITDA to EUR 475 million for the third quarter, a decline by 1%. Our CapEx for the first 9 months was EUR 826 million. And the free cash flow, we ended the first 9 months with EUR 428 million in total. Excluding the proceeds from asset sales, our organic free cash flow was EUR 159 million, a strong improvement year-on-year. Let's have a look now at the operational results. Despite the intense competition, the operational performance was very strong with mobile postpaid adding 45,000 cards and our Internet subscriber base growing by 12,000 lines. Our convergent base continued its steady growth, adding 12,000 residential customers in the third quarter. The solid commercial performance was supported by the portfolio changes of the Proximus brands, attractive mobile joint offers and the ongoing convergence strategy. We also continued focusing on innovation and optimizing the customer journey as we launched our new features to help customers onboard via eSIM. Regarding the B2B unit, which closely aligns with my professional background, Proximus holds a robust position in the market today, and we are developing strategies to capture growth opportunities. I'm committed to shape Proximus B2B future and to drive growth, leveraging the strong network assets of Proximus while exploring new layers of innovation. Our focus is on sovereignty and next-generation AI opportunities. To make this happen, we will be collaborating with leading technology partners to validate impactful use cases. We will elaborate on this during the Capital Markets Day in February. As previously mentioned, the high-quality network is an essential contributor to the success of Proximus. Across Belgium, we have now a total of almost 2.5 million fiber homes, meaning a population coverage of over 41% and including fiber in the Street, we are at 47% coverage. The fiber network filling rate progressed to 33%, up from 30% 1 year back. At the end of September, the base of active fiber customers totaled 684,000, including 39,000 added over the third quarter. We are pleased with the announcement of the Belgium regulators on the start of a market test assessing our proposed gigabit network collaboration between wire, Telenet and Proximus in France. The market test will conclude on Friday, November 21. At the same time, fiber negotiations in the South are ongoing. As a last point on the domestic side, I would like to highlight the progress made on the disposal program of noncore assets. As was announced at closing, the sale of Be-Mobile was completed early October and leaves us very much on track for the EUR 600 million ambition that we have set for the end of '27. Turning to the full year guidance. For domestic, we reiterate our outlook given end of July with domestic EBITDA expected to grow up to 2%. This despite the impact of the Be-Mobile divestment and not having renewed the football broadcasting contract with DAZN. Taking into account the ongoing headwinds regarding the Proximus Global segment, we expect the EBITDA of Global to be lower year-on-year by around minus 10%. We have lowered this year's guidance for accrued CapEx to approximately EUR 1.250 billion. This is because the integration of Fiberklaar is leading to more effective and efficient fiber rollout some lower project-related CapEx and less investment needs for Global. This, combined with not having renewed the Belgian football contract leads to organic free cash flow expected to land to around EUR 100 million. And finally, the projected 2025 net debt-to-EBITDA ratio improved to around 2.8. We also confirm our intention to return an interim dividend of EUR 0.30 per share payable on December 5, post final approval of the Board scheduled later this month. For Global specifically, we have reassessed our growth projections for the coming year. While new growth initiatives have been launched and cost synergy delivery is progressing, high exposure to the legacy P2P voice and messaging and as well as SMS CPaaS is expected to continue having a significant impact. Therefore, the '26 Global ambition is being adjusted. The preliminary review for 2026 indicates Proximus Global EBITDA will be in the range of EUR 100 million to EUR 130 million. In collaboration with Seckin Arikan, the new global CEO, a strategic plan is being developed with the objective of resuming growth from 2027 onwards. An update on the plan for Proximus Global will be provided at the Capital Markets Day. I hand over to Mark now for the detailed financial results. Mark Reid: Thank you, Stijn. Let me start by taking you through the financial sections of the domestic business. Starting with our domestic revenue, as illustrated on the chart, services revenue grew slightly. And when including revenue from Terminals and IT hardware, the total revenue remained broadly stable year-over-year. The third quarter growth was mainly driven by continued increase in the Services revenue of the residential unit. This -- thanks to the January 2025 price indexation and ongoing convergent customer growth. Revenue from Terminals was only slightly lower year-on-year in contrast to the previous 2 quarters. The most valuable part of the residential revenue, customer services revenue is growing by 1.8% with convergent revenue up by 4.5 percentage points year-on-year. The ARPC continued to show a positive evolution, growing 1.2%, including the price indexation effect and the benefit of a continued increase in convergent customers and fiber upselling. Turning to the business unit. The B2B, the total revenue declined by negative 0.8%, essentially due to a decrease in service revenue of 1.1%, which resulted from the continued headwinds in fixed voice and moderate decline in mobile services. The decrease is partially offset by a 1.5 percentage increase in products revenue. Taking a closer look at the B2B revenue from services, the third quarter included higher revenue from IT services growing 2.8% year-over-year, driven by growth in recurring services. Fixed data revenue recorded a limited decrease of negative 0.9% year-over-year. This resulted from the decline in traditional data connectivity services, nearly offset by continued strong revenue growth from Internet services. Despite the competitive intensity, the B2B unit maintains a solid mobile base and sees the mobile revenue decline sequentially stabilizing to 2.1% negative year-over-year. Fixed voice continued its steady decline due to a lower customer base, while value managed through price increases resulted in a sustained positive ARPU trend. The wholesale business posted a revenue decline of 11.8% due to the ongoing innovation of Interconnect revenue with no margin impact and a decline in Wholesale services revenue by 4.6% from an exceptionally high comparable base from revenue in the prior year. Moving to Domestic OpEx, which, as you can see, illustrated on the graph, continued its favorable trend and for the first time since several quarters, ended the quarter stable on a year-over-year basis. For the third quarter, inflationary and other cost increases were fully offset by our cost efficiency program. With OpEx stable and direct margin growth, the domestic EBITDA rose by 1.8% in the third quarter. Turning now to Proximus Global, for which we closed the third quarter with direct margin down 12.2% on a constant currency basis. The product group communications and data was impacted by the ongoing decline in the CPaaS SMS market, especially in the onetime password domain. Moreover, the margin from P2P voice messaging was down, reflecting structural trends in the legacy market. Whereas synergy delivery for Go-to-Market is delayed, we have realized cost synergies successfully, improving the OpEx for Global by 8.4%, again on a year-over-year basis. This could only partially offset the pressure on direct margin and led to a decrease in EBITDA for the Global segment by 22.3% on a constant currency basis. Turning to Group CapEx, we closed the first 9 months of the year with EUR 826 million compared to the same period last year. CapEx was lower mainly due to reduced customer-related CapEx as a result of, among other things, higher refurbishment rates, increased self-installation rates and improvements in operational processes. Fiber-related expenditures were slightly up with the rollout in dense areas coming down, while Fiberklaar continued expansion in the mid-dense areas. This brings me to the free cash flow for the first 9 months of the year. As illustrated on the graph, the organic free cash flow for the first 9 months of 2025 was EUR 159 million, strongly improving from 1 year back, thanks to lower cash CapEx and growing EBITDA. Our reported free cash flow of EUR 428 million includes the net proceeds from the sales of our data center business and the Luxembourg Mobile Towers. I'll now turn over to Stijn for the conclusion. Stijn Bijnens: Thanks, Mark. Just five things to conclude. Being just over 2 months in the company, it's clear for me that we have a strongly performing domestic segment, especially the residential unit is in very good shape, considering the changed market structure. Proximus maintains a solid B2B position, but there's still growth potential, and we are developing strategies to capture it. Secondly, Proximus has incredibly well-performing networks and the expanding fiber network provides Proximus a strong head start. Thirdly, we've been successful in realizing CapEx efficiencies for this year, which is supportive for an improved estimated for the Group organic free cash flow. Fourth, in contrast to the successes domestically, it is clear we have challenges with the global segment and with ongoing pressures anticipated, we have reset as a result, our targets for 2026. And as a final point, we will present our new strategic cycle for the Proximus Group together with the full year results on February 27. I'm sure you understand that given this context, I'm unable to share insights regarding the strategy at this time. However, we welcome any other questions you might have and are pleased to address them now. Operator: [Operator Instructions] Our first question is from Ganesha Nagesha from Barclays. Ganesha Nagesha: A couple of questions from my side. The first one on the global division. So following the recent downward revision to the global segment EBITDA guidance, so could you share like what factors give you confidence in the stability of this outlook going forward? And could you also provide some color on what specific integration challenges that still remain, which impacting the realization of the expected margin synergies? And my second question on the CapEx guidance. So your CapEx guidance for the current year implies like EUR 50 million savings achieved in the current year. You earlier indicated that the CapEx would remain stable around EUR 1.3 billion over '25 to '27. So do you still see a potential for further savings in '26, '27 as well? Or is this just one-off CapEx savings in the 2025? Stijn Bijnens: Well, thank you for the question. I'll take the first one and give the CapEx question to Mark. About Global, as an initial outcome for a broader planning process, we have done a new estimate for 2026. That has been a bottom-up exercise on a product line basis. So there are product lines that grow, as you know, and other product lines that declined. And in absolute terms, the growing business lines are still smaller than the declining business lines. So at the moment, we think and believe in 2027, there will be an inflection point of that the current smaller business lines that are growing offset the decline. So the business lines that are declining are A2P SMS, B2B voice, and it's offset by business lines that grow like cloud, omnichannel, IoT, travel SIM and digital identity. So we've done that exercise, and that's currently the best estimate we have on the business. Mark Reid: Ganesha, thank you for your question. And on 2025, look, we're pleased with the ability to have kind of taken those CapEx savings and the effect that had on our '25 free cash flow. I think as you -- as Stijn said in the presentation, we're all in the process of co-creating our strategy, and then we'll come back at the Capital Markets Day with the future outlook on CapEx. So I think unfortunately, we have to answer that today. Stijn, do you want to add to that? Stijn Bijnens: Yes. The second part of the first question, on integration issues, it's at different levels, so we had some churn of executive leadership. We strongly believe we have a strong CEO now who comes from the CPaaS market, Seckin. He knows the business. So integration issues are on the one hand in the Go-to-Market, and we're fixing that. Also in the product portfolio, we do understand the challenges are actively improving the operations and the operating model to handle these challenges. Operator: We will now take our next question from Paul Sidney from Berenberg. Paul Sidney: I also had two, please. Just firstly, on Global, you've chosen to give the Global guidance for full year '26 today. Should we view this decision as in your intention to set a floor for Global profitability ahead of the February strategic update as you sort of think about how the business looks beyond 2026? And then secondly, on domestic and Digi appears to be having a little impact in the Belgian mobile market even at the extremely low price points that they've come in at. What are you seeing in the market in terms of Digi maybe revamping their offers or doing something different? And do you expect the other operators also to do anything different going forward? Mark Reid: Paul, thank you for the question. On Global for 2026, clearly, we've done an estimate. We were conscious of the market consensus was higher than what we disclosed today. And therefore, with Stijn and Seckin arriving, we accelerated that kind of bottom-up planning process for that period of '26 and the start of '27. And so that's our estimation, and we're confident with it. It is a fairly wide range at this point, but that's what we wanted to inform the market today. So that's how we thought about updating that specific number. Jim, do you want to take the question? Jim Casteele: Yes. So indeed, on Digi, they're in the market with quite aggressive offers. For the moment, I would say that the visibility on their market campaigns is rather limited. That said, the Belgium market since the arrival of Digi has been very competitive with the B brands of the competitors also being active with assertive promotions. So in that sense, I'm really happy to see that our multi-brand strategy with Mobile Viking, Scarlet and Proximus addressing the different price points in the market is delivering on our strategy, not only allowing us to realize again very strong commercial results, but at the same time, also keeping value in the way that we do that, as you have seen in the further growth of our service revenues. Paul Sidney: Mark, can I just have a quick follow-up. In terms of when you say growth, returning to growth within Global in 2027, just to clarify, is that revenue, EBITDA, free cash flow or all of the above? Jim Casteele: It's at the level of EBITDA. Operator: We will now move to our next question from Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I've got two questions, please. Maybe just touching on the domestic point. Stijn, you mentioned the good performance that you've had and if we look at the KPIs, coupled with the fact that you announced a price increase for ’26, how should we think about kind of the future evolution of your product revamp, sorry? You've been quite successful over the last, I guess, 2 years on those campaigns. What made you kind of choose the products where you have allocated those price increases to? Is that a case of trying to migrate customers away from the legacy products? Or are you still kind of running with those multi-brand options within the Proximus bundle, so the different packs within Proximus. And as an aside, you've got the Scarlet and Mobile Vikings, as you said? And secondly, we're obviously getting to the end now of the collaboration -- finalization of collaboration in Flanders. Has that given you more confidence or any insights on how the discussions with Orange Belgium in Wallonia is going as well, please? Anything you could say there, very helpful. Jim Casteele: So thank you for the question. So I will start with the price increase. So indeed, we continue to do price increases also in January next year. The way we do that is, on the one hand, trying to understand where are the products where price sensitivity is a bit lower. Next to that, of course, we recently launched our Flex+ new convergent offer in April. And then, of course, when you launch a new offer, you put it at a price point that you think is going to last for a longer period in time. So it's obvious that those tariff plans are not part of a price increase 8 months after launch. I would say, at the same time, what we do is when we do price increases, we also try to do a more-for-more approach, not necessarily always at the same time, but definitely in a short period before or after, depending on market conditions, of course. And so that's how we've been able to manage our price increases over time while keeping our customers satisfied. Of course, also always looking at the level of inflation as a sort of reference point for those price increases. It's true that we also look at management of the back prices and trying to see if we can leverage price evolutions to move people from older products to newer products, which helps them to simplify your IT systems, but also operationally makes life easier for our salespeople. And then in terms of future portfolio evolutions, as always, we look at the market to make sure that we stay competitive. As I mentioned also in my previous answer, we do this from a very value-based perspective. So if you see, for instance, October 1, we updated the midrange of the Proximus mobile offer because by doing that, we also anticipate that we can create additional value for the company. And we always look at how the 3 brands are positioned in terms of segments and price points. So that's a bit the pricing strategy that we've been executing on over the last years. And I'm happy to hear that you think this has been successful. So thank you for that. Stijn Bijnens: About your second question about the fiber rollout in Belgium. So the North and the South. In the North, in a few weeks, we will have the outcome of the market test. We're confident in that and that once the black box gets open, we can make a detailed CapEx plan and rollout. In the South, it's kind of 3 months behind that cycle. It's the same cycle where we need to go through. We first need to finalize the agreement with Orange and then go to the market authorities to do that. But we're fully confident that all these deals are on track at the moment with the different timings that I just mentioned. Operator: We'll now move to our next question from Kris Kippers from Degroof Petercam. Kris Kippers: Firstly, just going back to Global again. I haven't heard the mentioning of the EUR 100 million improvement in synergies that initially was communicated. Is that a number that could alter now that the scale has changed? Or what should we see in that? And then secondly, classical one perhaps, but I'm quite pleased to see indeed that also on the domestic side, the workforce expenses have been declining. Is this something we should continue -- keep continuing in the quarters ahead? How -- could you guide us a bit more on the reduction in FTEs? Mark Reid: Thanks for the question on Global. So first of all, on Global, I think, again, you've seen from our disclosure today, we -- the operating costs continue to kind of deliver probably a bit ahead of plan. So in terms of our operating cost synergies and our direct COG synergies there kind of as we've said before, I think the cross-sell, upsell synergies that are Go-to-Market related are really alluded to in terms of our integration phasing and that taking a bit longer. Look, I think we'll come back in the Capital Markets Day and allude to that as Seckin kind of gets the grip with what the phasing of that looks like. So I think that's where we are today. But as I said, we're very pleased with the cost synergies there fully on track. The Go-to-Market ones will come as part of the strategy update when we get there. Stijn Bijnens: Regarding the second question on workforce. So we're very pleased about this quarter that OpEx stays flat. We have a strategic workforce planning and management is executing well on that plan. We're currently reviewing things, and I'll come back on that in -- on the Capital Markets Day once we have our strategy crystallized and then we will also give more guidance on that part of our business. Kris Kippers: Okay. And then if I just may, just a small follow-up regarding the fiber communication. When the market test would be finished on November 21, do you intend to communicate direct to the market at that day? Or what is the -- what should be the time frame for that? And regarding when, do you provide an update as well? Stijn Bijnens: So when the market test ends on November 21, it's actually the competition authority that has to assess it and analyze it, and they will come with a communication. Once that's done, we can move forward. So it's in their hands regarding communication. And it will be the same process in the South as it are the same people at the authority level. Operator: [Operator Instructions] Our next question is from Michiel Declercq from KBC Securities. Michiel Declercq: My first one would be on the Global business. So you mentioned that, of course, we have the SMS part that is declining and then I assume the OTT and Digital Identity is growing. Can you maybe remind us what the split of revenue is here or in terms of profitability, given that you mentioned an inflection point in 2027? And as a follow-up on this, of course, the non-SMS business is growing. Can you maybe elaborate a bit on how this compares to competition? Because I see that competitors are also growing. But in terms of market share, are you improving here? Or are you losing customers? And then the second one is maybe for Spain specifically. You recently joined, of course, from Cegeka, an IT group, of course. But what experience can you bring? And in the beginning, you also elaborated a bit on the opportunities that you see within the B2B. Can you maybe explain a bit what opportunities there are here for to unlock? Mark Reid: Michiel, thank you for that. So I think if you look at our disclosures, you kind of see a little bit about our kind of split of the overall direct margin revenue split between B2B is kind of our legacy voice and messaging business and then CPaaS and data, which is effectively a mixture of traditional CPaaS A2P, omnichannel where you can think of kind of RCS, WhatsApp, Viber, e-mail type products and then Digital Identity, which is more kind of our fraud prevention products. We don't disclose the mix of that. But clearly, the A2P SMS part of that business is the majority. And as we said, the element that we've been exposed to is we do a lot of international OTP traffic there. The rate of change of that business towards omnichannel was a little quicker than we expected but Proximus Global was always set up to manage that transition. But clearly, the 2 parts of the business are different scales, but we are seeing growth in the omnichannel part, the RCS, WhatsApp, Viber, e-mail part of the business. And so that is really -- as we start to look forward through the end of this year into this first part of '27, that's really where we see the inflection point of that part of the business starting to be contributed and return us to growth from an EBITDA perspective. I hope that helps. We don't disclose the exact detail. In terms of market share, again, we don't talk about the specific market shares. Clearly, at the moment, in the last couple of quarters, it's been a difficult market for us there. But again, as we effectively get these integration problems behind us and the products and Go-to-Market, we clearly believe that we will have a competitive advantage given the structure of Proximus Global, our cost base and our product portfolio to Go-to-Market and be successful in capturing that growth going forward. Stijn, do you want to take that? Stijn Bijnens: Yes, we should. Regarding the second question, Proximus today is a market leader in B2B at the connectivity level. Of course, we intend to stay that, and it's also due to our strong footprint and network superiority. But there are additional services to be offered that Proximus is currently doing, but I do think there is an opportunity to grow further in everything that has to do in cybersecurity, cloud. I strongly believe in hybrid cloud. So a combination of strong partnerships with the hyperscalers, but also having our own sovereign cloud solution, there is an increased interest. And I think Proximus is in a superior position in Belgium to capture the part -- the growth in hybrid cloud. Also, AI will go towards the edge. You see a lot of announcements, if you look at NVIDIA and Nokia. So we kind of own the edge real estate in Belgium from a telco perspective. So we see many opportunities. It will take time to capture those opportunities, of course. But I do think we have the team and we will build the organization to unlock that value that we really leverage our telco infrastructure in those new pockets of growth. Operator: There are no further questions. So I'll hand back to your host to conclude today's conference. Nancy Goossens: Thank you for joining us today, and thank you for your questions. As always, should there be any follow-ups, you can address those to the Investor Relations team. Bye. Operator: Thank you for joining today's call. You may now disconnect.
Operator: Good morning. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pangaea Logistics Solutions Third Quarter 2025 Earnings Teleconference. Today's call is being recorded and will be available for replay beginning at 11:00 a.m. Eastern Standard Time. The recording can be accessed by dialing 800-839-5492 for domestic or 402-220-2551 for international. [Operator Instructions] It is now my pleasure to turn the floor over to Stefan Neely with Vallum Advisors. Stefan Neely: Thank you, operator, and welcome to the Pangaea Logistics Solutions Third Quarter 2025 Results Conference Call. Leading the call with me today is CEO, Mark Filanowski; Chief Financial Officer, Gianni Del Signore; and COO, Mads Petersen. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Mark. Mark Filanowski: Thank you, Stefan, and welcome to those joining us on the call today. We delivered strong third quarter results, reflecting a seasonally active Arctic trading period and continued progress against our strategic priorities. The third quarter is typically our high watermark for the year given Arctic activity, and this year was no exception. We delivered TCE rates that average 10% above the prevailing market for Panamax, Supramax and Handysize indices, supported by our niche ice class capabilities and long-term COAs. This outperformance occurred against the backdrop of a strengthening dry bulk market during the quarter. With the integration of the 15 Handysize vessels we acquired from SSI at the end of last year, shipping days increased by 22% year-over-year, resulting in adjusted EBITDA of $28.9 million, an increase of approximately 20% compared to last year. This underscores the leverage of our integrated model, along with our scale as we maintain our cargo-centric discipline. During the quarter, we further expanded our integrated service platform, which combines specialized shipping with terminal, Stevedoring and Port Services. This platform deepens customer relationships and enhances long-term growth. We commenced operations at the Port of Pascagoula in Mississippi and at the Port of Aransas in Texas. In the fourth quarter, we will begin operations in Lake Charles, Louisiana. Expansion at the port of Tampa, Florida is delayed a bit due to equipment deliveries, but we expect to begin operations early next year. We also continue to advance our fleet renewal strategy. During the quarter, we completed the sale of our strategic endeavor, and last month entered into an agreement to sell the 2005-built Bulk Freedom for $9.6 million. These actions are consistent with our focus on improving fleet efficiency and emissions performance. As announced last quarter, we also completed the purchase of the remaining 49% stake in Seamar management. Our technical operations platform in Athens, giving us more control over technical management and further aligning operational performance with our commercial strategy. Additionally, we closed on the financing for strategic spirit and strategic vision totaling $18 million. These financings and enhanced balance sheet flexibility and provide additional capacity to support growth and working capital needs. On capital allocation, we remain disciplined and continue to prioritize investing in our fleet and organic growth opportunities maintaining a strong balance sheet and returning capital to investors. Through today, we have repurchased approximately 600,000 shares for a total of approximately $3 million. We also declared a $0.05 quarterly dividend, consistent with our prior 2 quarters. We ended the quarter with approximately $94 million in unrestricted cash, supported by strong operating cash flow. Our balance sheet strength allows us to continue executing these priorities while navigating the current dry bulk environment. Broadly, near-term dry bulk fundamentals remain constructive for our mix of minor bulks with normal seasonality expected as our Arctic activity tapers into quarter 4. Resumed agricultural shipments from U.S. to China should support U.S. Gulf markets an important region for us. Expected shipping demand for West Africa to China dry bulk movements on larger ships will trickle down to smaller vessels. Limited effective supply growth has systematic -- regulatory constraints and confusion support a favorable medium-term setup and our differentiated business model positions us well to deliver premium TCE returns through the cycle. Looking ahead to the fourth quarter of 2025, broader dry bulk market pricing remains buoyant. As of today, we've booked 4,210 shipping days for the fourth quarter generating a TCE of $17,107 per day. Before I turn the call over to Gianni, I would like to take a moment on a personal note. As announced in September, I will retire as CEO and step down from the Board effective January 1, 2026. It's been a privilege to serve as the Chief Executive Officer of this company for the past 4 years, and to work alongside our talented and dedicated team. Together, we've grown Pangea into a differentiated cargo-focused logistics platform. We've tripled the size of our own fleet and expanded our port and logistics operations to 10 marine terminals across the U.S. Gulf and Mid-Atlantic. Since the passing of our founder, Ed Coll, we have worked tirelessly to further his vision for the company and to position Pangea for sustainable long-term growth. Ed was a real supply chain guy always looking for solutions for his customers. I think you would be proud of what we've accomplished and the foundation we have built for the future. I have full confidence that Mads Petersen, our current Chief Operating Officer, is the right leader to take Pangea into its next chapter. Mads has over 2 decades of experience in the dry bulk industry has been instrumental in shaping our strategy and operations offers 16-year tenure with Pangea. His deep understanding of our business, his relationships with our employees and our partners in all areas of our business and his commitment to our strategy will serve customers and shareholders well. In closing, I'd like to thank our employees, customers and shareholders for your trust and partnership. I spend an honor to lead Pangea, and I look forward to watching the company continue to thrive under Mads' leadership. With that, I'd like to turn the call over to Gianni to review our third quarter financial results. Gianni DelSignore: Thank you, Mark, and welcome to those joining us on the call today. Our third quarter financial results were highlighted by sustained TCE premiums relative to the prevailing market, supported by our niche ice class fleet during the peak of the Arctic trade season. Third quarter TCE rates were $15,559 per day, a premium of approximately 10% over the average published market rates for Panamax, Supramax and Handysize vessels in the period. Our adjusted EBITDA for the third quarter was $28.9 million, an increase of $4.9 million relative to the prior year period, and adjusted EBITDA margin increased from 15.7% to 17.1%, reflecting a 22% increase in shipping days with a 13% decrease in voyage expenses on a per day basis. Our total charter hire expenses decreased by 7%, primarily due to a 13% decrease in charter in days, somewhat offset by higher market rates. Our charter-in cost on a per day basis was $15,387 in the third quarter of 2025, an increase of approximately 6% year-over-year. Through today, we've booked approximately 1,710 days at $16,537 per day for the fourth quarter of 2025. Vessel operating expenses increased by approximately 57% year-over-year, primarily due to the acquisition of the SSI fleet which increased total loan days by 61%. On a per day basis, vessel operating expenses, net of technical management fees was $5,634 per day. Total general and administrative expenses increased by 64% from $6 million to approximately $9.8 million. The increase was primarily due to the consolidation of our technical management operations, timing of recognition of incentive compensation year-over-year as well as growth related to the SSI fleet acquisition. In total, our reported GAAP net income for the third quarter was $12.2 million or $0.19 per diluted share. When excluding the impact of the unrealized losses from derivative instruments as well as other non-GAAP adjustments, our reported adjusted net income attributable to Pangea during the quarter was $11.2 million or $0.17 per diluted share. Moving on to cash flows, total cash from operations was approximately flat year-over-year at $28.6 million, driven by strong operating performance and cash generated from working capital. At quarter end, we had approximately $94 million in unrestricted cash in total debt, including finance lease obligations of approximately $386 million. During the quarter, our overall interest expense was $5.6 million, an increase of $1.7 million due to new debt facilities entered into during the third quarter as well as the assumed debt and finance leases associated with the SSI acquisition. As Mark mentioned, during the third quarter, we completed financing of the strategic spirit for $9 million payable over 7 years at an interest rate of SOFR plus 1.95% and the strategic vision for $9 million payable over 5 years an interest rate of SOFR plus 1.95%. The financings closed in July and September, respectively, and provided $18 million in cash that we intend to utilize for working capital and strategic investments. In addition, we continue to execute on our share repurchase program, buying back approximately 200,000 shares during the third quarter at an average price of $4.96 per share. Since quarter end, we've bought back an additional 200,000 shares, bringing our total to approximately 600,000 shares. Our buyback program complements our quarterly dividend policy reinforcing our focus on delivering shareholder returns through a disciplined and balanced approach to capital allocation. Going forward, we will maintain the same disciplined approach to capital allocation. Our priorities remain clear, preserve financial flexibility, deliver consistent returns to shareholders and invest selectively in opportunities that strengthen our integrated shipping and logistics platform. This includes advancing our terminal and stevedoring operations and continuing our fleet renewal strategy with a focus on capital-efficient initiatives. With that, we will now open the line for questions. Operator: [Operator Instructions] We'll go first to Poe Fratt with AGP. Charles Fratt: Mark, fair winds and following -- or fair season following winds. So congratulations on your retirement... Mark Filanowski: It was Richard Nixon, who said, Paul, you're going to miss me. You won't have me to kick around anymore. Charles Fratt: Well, I'm not sure he's been kicking you, but -- so congratulations. And then, Mads, just if you could -- you're not in the seat yet, but can you just highlight a couple of your priorities, any changes that we might see maybe give us their top 3 priorities going forward? Mads Petersen: Thanks, Poe, great question. I mean, we are definitely not looking at anything revolutionary here. Mark and I and Gianni and Dan as well and the rest of the team here, we have worked on our strategy together. It is never a one-person project. So we just wanted to essentially more the same, grow the platform the way it is now. So that is about the customers, growing the customer base, growing our logistics and ports and terminals offering and then also, over time, of course, when the opportunities present themselves, we want to grow the number of ships in our fleet as well. So it's simply about execution for me. There will be, of course, tweaks along the way as there always is, but for sure, nothing revolutionary. So it's about running the company efficiently and then growing the platform as we go. Charles Fratt: Great. And then when you look at your forward cover I think it's over 4,000 days at $17,000. Can you -- what do you think the premium to the index does in the fourth quarter? It compressed a little bit in the third quarter, I think probably just because of the Arctic trade, Fed rates and then also the market improved over the course of the quarter. So would you expect the premium to expand in the fourth quarter? And then also, typically, the third quarter is your highest -- high watermark for the year, but it doesn't look like that's going to be the case this year, and it looks like fourth quarter is going to be higher than the third quarter. Can you just talk about the rate environment for the fourth quarter? Mads Petersen: Yes. So I think in terms of the Arctic business, some of that actually extends a little bit into Q4 for us. But it was -- Q3 is sort of developed in a way that is not uncommon for us when you are at the backdrop of a rising market, right? The ships are all performing voyages that have to be completed before they are repriced. And additional, we do have some short-term cargo commitments that our margin contracts on. So that's not a normal in a rising market. I think Q4 is not done yet. We haven't fixed all our exposure there. However, I do think that over time, the premiums will probably for sure, the expectation is that they go towards some that you normally see in our business in Q4. Charles Fratt: Great. And then you sold another older Supra. Can you talk about your fleet renewal program in the context of asset values even for older assets are holding up pretty well. Is 2026 going to be as active as 2025 as far as fleet renewal on the sales side? Mads Petersen: We'll have to see what opportunities present themselves. We have a pretty pragmatic approach to decisions around sales, right? Where we're looking at, as is the case for the Bulk Freedom when ship is approaching 20 years old and the investments you have to do versus what we can replace that ship with. So we're always looking at that. I think in terms of fleet renewal, we're always looking. I don't think we are necessarily deterred by the current market conditions in terms of values or stock market really. So I still think that, especially in the Ultramax segment, there are opportunities. It's all about finding the right ones. We're a little bit picky when it comes to the ships that we want to bring into the fleet, but we, for sure, long term don't want to have a shrinking fleet, that's for sure. So fleet renewal should keep us a kind of status quo is must. And then the question after that is whether expansion is in the cards. Operator: [Operator Instructions] We have no further questions at this time. I'd like to turn the floor back over to Mark Filanowski for any additional or closing comments. Mark Filanowski: Once again, thank you for joining our call. Should you have any questions, please feel free to contact us at investors at pangeals.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect. Operator: Thank you. Once again, ladies and gentlemen, that will conclude today's event. Thank you for your participation. You may disconnect at this time, and have a wonderful rest of your day.
Operator: Greetings. Welcome to the Celanese Corporation Third Quarter 2025 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to Bill Cunningham. Thank you. You may begin. William Cunningham: Thanks, Darryl. Welcome to the Celanese Corporation Third Quarter 2025 Earnings Conference Call. My name is Bill Cunningham, Vice President of Investor Relations. With me on the call today are Scott Richardson, President and Chief Executive Officer; and Chuck Kyrish, Chief Financial Officer. Celanese distributed its third quarter earnings release via Business Wire and posted prepared comments as well as a presentation on our Investor Relations website yesterday afternoon. As a reminder, we'll discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of both the press release and the prepared comments. Form 8-K reports containing all of these materials have also been submitted to the SEC. With that, Darryl, let's go ahead and open it up for questions. Operator: [Operator Instructions] Our first questions come from the line of David Begleiter with Deutsche Bank. David Begleiter: Nice quarter for Q3. Scott, looking at '26, can you give us an early look at what you can -- your control for '26 and what's not in your control for '26 relative to earnings? Scott Richardson: Yes. Thank you, David. Let me just start by saying how we have focused on 2025, continues into 2026. The priorities of increasing cash flow, intensifying our cost improvements and then driving top line growth. And that third piece, I think, is going to continue to be more important as we're seeing progress from our EM pipeline. Those are going to be our priorities going into '26, and we've laid a really nice foundation here in 2025. And so that foundation, even if we're in an environment where we see flattish demand, and I kind of look at flattish demand on what we've seen, say, Q2 through Q4 here in 2025, if we're in that type of demand environment, just to make it easy, I believe we're going to be able to grow EPS by $1 to $2 next year. And that's going to come from the cost actions that we've already put in place and that yielding increments next year. And then the second big piece is going to come from EM pipeline and the success we're seeing driving that, including the high-impact program growth, which is starting to yield results. And certainly, we won't have the Micromax EBITDA, but I think that's going to be offset by the fact that we don't expect to have the significant auto destocking that we saw in Europe in Q1 of this year. So I think when you put it all together, we feel confident in about $1 to $2 even if the world around us isn't growing. David Begleiter: Very good. And just on EM pricing, the best in 8 quarters. Can you discuss how much more there is to go in EM on the pricing front? Scott Richardson: There's always more that can be done here, David. We have gotten price in some of the standard grade materials in the Western Hemisphere, not as much across the board as we want to see. So I think there's still going to be opportunities there. In addition, where we're seeing nice benefit is on the price for the new elements from the pipeline that are being launched. So this is going to continue to be a very critical area of focus for us as we go into 2026. Operator: Our next questions come from the line of Vincent Andrews with Morgan Stanley. Vincent Andrews: Could you speak a little bit about the operating rates and the acetyl chain? I know there was the comments in the prepared remarks about sort of flexing Singapore based on demand and Frankfurt is going to be, I guess, offline for the balance of the year. But what do you anticipate or maybe just back up and how -- what rates did you run at in the second half of this year? And then what do you anticipate in the first half of next year? Scott Richardson: Yes. Thanks, Vincent. Not to be flippant, but every day is different in this business. And I don't say that as hyperbole, it's true. When you look at our lowest cost assets, our lowest cost assets are running at 100%. And then the balance of the network, which is really our asset base outside of the United States is being flexed to meet demand, flexed to meet industry conditions and we're going to continue to operate that way. We've block operated Singapore as well as Frankfurt. We would expect that to continue going into next year. And part of that is our manufacturing team has done an excellent job of being able to continue to operate with high degrees of reliability as well as find ways to no capital debottleneck our assets to where we have more capacity at those lower-cost assets. So we're going to continue to flex that to meet demand, but I'd really look at lowest cost asset base running full and then the rest of the network operating as needed. Operator: Our next questions come from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: In the acetyl chain, when you look at sequential pricing through the year, it's gotten tougher. And prices had come down a lot in China earlier in the year. Where is the sequential price pressure coming from in the acetyl chain, either by product line or geography? Scott Richardson: Yes. Thanks, Jeff. I think we've seen a little bit of pressure in Europe in kind of what I would say more of the downstream. So getting into the vinyls chain, VAM and emulsions as we've worked our way through the year, and that was really demand driven. As demand has come off, we've seen a little bit of pricing pressure there. We've seen a stabilization of pricing in China now over the course of the quarter or so. And in fact, pricing went up a little bit here at the beginning of this quarter, not significantly, but we did see a price lift as we got into October really across all product lines in China in acetyl. So the U.S. has been relatively stable. So that's kind of how I would look at it. It has been more around a function of demand where demand has been weaker, and we've seen a little bit of softening of price in Europe. Jeffrey Zekauskas: Okay. And in Engineered Materials, year-over-year, your consolidated volumes were down 8%. Which product lines are, I guess, falling more than that and which product lines are falling less than that? Can you help us -- I mean, it might be that there are particular pockets of weakness? Or is it across the board? Can you talk about that? Scott Richardson: Yes. It's mainly the product lines, Jeff, that we have higher levels of volume and have just generally more market exposure in the standard grade materials. And so that tends to be more of your engineered thermoplastics. So that's your POM, your nylon and then into GUR and polyesters. Our thermoplastic elastomers have held up extremely well, and the team has actually found nice pockets of growth there. It's just -- that's not where we have as much volumetric exposure. So it tends to be more on the engineered thermoplastic side of things. Operator: Our next questions come from the line of Michael Sison with Wells Fargo. Michael Sison: Nice third quarter as well. For 2026, if I take a look at Slide 11, it looks like cost savings could represent somewhere between $0.40 to $0.50. How much -- in terms of the rest of the $1 to $2, how much comes from potentially lower interest expense? And just trying to gauge how much could come from volume growth and new products. Scott Richardson: Yes. I mean, given kind of the $1 to $2 that I talked about earlier, Mike, I would look at that's really split largely in 2 areas. One, about half of that is cost. And we didn't put all of the cost actions on that slide. We have kind of an ambiguous bucket there on that last line of that graph. And I think I would look at -- there's more to come. We had the announcement last week about the Lanaken closure. We're continuing to work the cost side of the equation extremely hard, and we'll talk more specifically about those as we complete those actions. So about half of it is cost. And the majority of the rest of it is really coming from the pipeline. And that's kind of how we're thinking about things right now. I mean there's definitely going to be some things around the edges like interest, et cetera, but those are the 2 big buckets that we're looking at currently. Chuck Kyrish: And Mike, this is Chuck. The interest expense, I would pencil in $30 million to $40 million reduction year-over-year. Michael Sison: Okay. And then a quick follow-up in EM in terms of the volume growth potential, how much is that coming from sort of the legacy, if you can think about it that way, the Celanese businesses and then how much comes from some of the DuPont? Scott Richardson: I'll be honest with you, Mike. Right now, we're looking at that portfolio as all Celanese. And we're not breaking it out. We're not operating the business or the company that way anymore. It really is about Celanese and products. What I would say is that engineered thermoplastics piece and the portfolio we have there has proven to be a really nice add for us. Part of that came from M&M, part of that came with Santoprene, and that's a really nice area of growth going into next year. It's a really important area for us to be differentiating the offerings that we have. And then the -- so that's been a really nice driver for us. And then we are seeing really as we look at this high-impact program area, I mean, there's end uses there that are extremely attractive where we're bringing both the engineered thermoplastics. So that's both historical Celanese and M&M as well as the elastomer portfolio to bear in really high-performance type applications, whether that's data centers or in high specification EV opportunities, medical opportunities. So there's -- across these spaces, we're really seeing as we've gotten extremely focused from a commercial team perspective on these areas, we think we're going to have nice pockets of growth in '26. Operator: Our next questions come from the line of Ghansham Panjabi with Baird. Ghansham Panjabi: Scott, just given the evolution of the macro throughout the course of the year end markets such as building and construction and autos and so on sequentially weakening, are you starting to see more accelerated inventory destocking at the customer level throughout the year-end? Or are inventory is already pretty low. So what you're mirroring is just basically the end markets themselves at this point? Scott Richardson: Yes. Thanks, Ghansham. As I look at where demand is, it's certainly on a lower base than what we've seen historically. But if we look at what we called out for seasonality from Q3 into Q4 on a volumetric and percentage basis, it's very similar to what we've seen in the past from Q3 to Q4. So we're not necessarily seeing accelerated destocking. There's a few pockets. For example, our channel partners here in North America came to us at the beginning of the quarter and talked very openly about wanting to bring inventories down a little bit by year-end. And so that was great that we're able to partner with them. We can take rates down at our asset base and do it really in a thoughtful way over the course of the quarter and not just get to the end and have this big slug down. So I think there is -- there's definitely, I would say, pockets, but I wouldn't say it's something we're seeing extensively across the board because we've been seeing this kind of work its way through the value chain in various areas now for about 6 months. Ghansham Panjabi: Okay. Got it. And then maybe a question for Chuck on free cash flow. What's the expectation for working capital contribution for this year in 2025? And then how would you have us think about some of the parameters for 2026 free cash flow? I think you said at the low end of your guidance for this year. Chuck Kyrish: Right, right. Yes. So working capital so far this year has been a source of cash of $250 million as we've really focused on cash generation. I really don't expect much change in working capital, either source or use of cash in fourth quarter. So I would just -- I would model in 0 at this point for working capital. As you look ahead for 2026, with that, we don't expect with similar demand levels that we would repeat that $250 million of working capital source of cash, but we are continuing our inventory actions in Engineered Materials. So there will be some level of free cash flow source there. At this point, Ghansham, our cash outlay of restructuring, which is adjusted out of EBITDA is looking to be lower in 2026 as we have some projects that have rolled off from prior footprint. So adding to that, the EBITDA improvement that Scott's talked about on the cost and commercial side, that gives us confidence next year in free cash flow, at least at the low end of that $700 million to $800 million range. And I think it's important to understand, as we look ahead in the next few years, we think this level of free cash flow is sustainable. Operator: Our next questions come from the line of Patrick Cunningham with Citi. Patrick Cunningham: The decision for the Lanaken closure, you cited evaluation of longer-term end market trends. I guess did anything change in terms of your forward view on either the demand or supply side? And then as you look to evaluate other more targeted measures in AC, should we be looking to the Frankfurt facility? Or do you expect more of a smaller collection of savings across the asset footprint? Scott Richardson: Thanks, Patrick. First of all, I think it's important. Look, we don't take any of these types of decisions lightly. We look at where things are in the near term, long term, and we study them. And we also look at our ability to continue to supply our customers. And acetate tow has faced challenges, including declining demand over a period of time. Lanaken is our highest cost asset. And so as we looked at where things are, we're able to meet all of our customer needs from our network and subsequently drive productivity savings with this move, both in the short term and long term, no matter what may materialize from a demand perspective. And so this closure will yield probably in the neighborhood of $20 million to $30 million of productivity savings in 2027. We get a little bit at the end of next year, probably on that, but certainly for the full year of '27, that's the types of savings we're looking at. And we're going to continue to look across our whole footprint in both businesses for similar types of examples. And so there's no specific asset, I would say, that we're looking at right now. It continues to be kind of crosschecking where industry demand is, where is our capacity, where do we maybe have excess capacity in the network that will allow us to drive that productivity, but still be able to meet customer demand even if we were to see a big increase down the road in a recovery period. Patrick Cunningham: Understood. Very helpful. And then maybe one for Chuck. Just in terms of progress on inventory reduction, they're still tracking well towards that goal. And then just in the context of some of your comments in the prepared remarks, what percentage of SKUs are made to order today versus made to stock? And what goal are you working towards there? Chuck Kyrish: Patrick, look, it's an ongoing effort to be more efficient with inventory. I don't have that percentage right in front of me of the number of make-to-stock SKUs, but it's one of the several levers that EM is working on to reduce inventory. It also includes logistics and warehousing and testing lead times, et cetera. Operator: Our next questions come from the line of Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: I think you identified $30 million to $50 million of additional savings that you're targeting in Engineered Materials. Can you elaborate on the sources of those and the flow-through timing? And remind us if those figures are gross or net of inflation? Scott Richardson: Yes. Let me hit the last part of your question, Kevin, I would look at those as net of inflation because we will work inflation through our productivity pipeline to offset that. So look at these as definitely being net. And it is really looking across the board. There is continued SG&A and R&D savings there as we optimize that side of the business on a global basis. Footprint continues to be an area of focus that will be in there. And then the last area is really things that we kind of call complexity reduction. So streamlining of our supply chain and our logistics network and really getting that optimize. I mean, Chuck just talked about the benefits we get from that on an inventory reduction. We also get cost reduction from that. And so a good chunk of that, we're going to get for full year 2026. Some of it will phase in through the year, but we definitely are confident that we'll be able to get to those levels next year. Kevin McCarthy: Great. And then a second question for you on divestitures, if I may. Congrats, first of all, on the Micromax deal. It looks like you got a nice multiple for that relative to your own trading multiple. Can you talk about the after-tax cash proceeds from that $500 million deal? And then more broadly, if we remain in the current environment of, I'll call it, industrial malaise globally, what additional portfolio actions or at least the magnitude thereof are you thinking about over the next several years? I think you said in your prepared remarks, you are actively pursuing additional. So any color on that would be appreciated. Scott Richardson: Yes. Kevin, let me start, and then I'll turn it to Chuck to answer the tax question. Our principles really around divestitures have not changed. We have what we believe are 2 leading franchises here at Celanese. And in acetyls, it's about leveraging kind of this integrated up and downstream operating model that starts with methanol and acetic acid and goes downstream and it is really uniquely globally positioned to kind of operate to drive value on a daily basis. And in Engineered Materials, it's about driving unique customer solutions and leveraging the globe's leading portfolio around engineered thermoplastics and thermoplastic elastomers. So if we have things in the portfolio that are not part of that acetyl value chain or not a differentiated thermoplastic or thermoplastic elastomer, then we are going to look to see if it's worth more to someone else than what it's worth to us. And that has been the principle that we've been operating on now for a number of years around divestitures. And that's what led to the food ingredients transaction. That's what's led now to the Micromax transaction because they didn't fit in the Engineered Materials business in that thermoplastic or elastomer bucket. JVs is another area that -- where we don't have as much control and that value that they create to the enterprise is not what the rest of the portfolio creates. And so that's the principles that we're operating under, and that's the principles that we'll continue to look at being able to monetize different assets around. And we committed to $1 billion of divestitures by the end of 2027. And this Micromax transaction gets us around halfway there. And so we are very much in line with achieving that target, and we're going to continue to focus on that here as we finish this year and get into 2026. Chuck Kyrish: Yes. On the tax leakage, Kevin, that's expected to be 5% of the final gross sales price. Operator: Our next questions come from the line of Salvator Tiano with Bank of America. Salvator Tiano: Firstly, I want to continue on Kevin's question on divestitures, and you mentioned JVs as a specific area of focus. I'm wondering, though, how are you thinking about the methanol JV? Because on one hand, it is one where you are a partner with someone else. On the other hand, it is, I guess, your main way of being integrated into methanol in the U.S. So how strategic is that business to you? Scott Richardson: Look, I'm not going to comment on specific joint ventures. What I have said around methanol in the past is it really is about leveraging methanol and acetic acid. And so as we look at all of our joint ventures, we have a partner that is in those JVs. And so JVs can be harder to monetize across the board, and we'll continue to look at the partners. We'll continue to look at other potential counterparties who are interested in having ownerships of our joint ventures. But our focus really is around value creation. And so if value is there to be created and it is higher than what we believe is inherent in the current and potentially future stock price, then we will definitely look at it. Salvator Tiano: Great. And I also wanted to ask about your nylon chain. I know you've been deemphasizing nylon polymerization instead doing compounds. So at this point, how much of your nylon volumes and sales, perhaps profit comes from actual nylon standard grades versus the compounded value-add products? Scott Richardson: Yes, Sal, almost all of our profit in that business is really created by compounds. And so now to make a compound, you need polymer. And so whether we make that polymer or buy that polymer, the key is getting that polymer at the most optimized economics possible because we create our value really through that compounding step. Operator: Our next questions come from the line of Aleksey Yefremov with KeyBanc Capital Markets. Aleksey Yefremov: I just wanted to continue down this line of questioning. I think you just earlier said, Scott, that you don't foresee any major capacity closures. But I recall earlier, there was a discussion about maybe buy versus make in polymers and potentially some rationalization there. So should we take it that the rationalization of polymer capacity is off the table for now or that's still being considered? Scott Richardson: No. Let me be very clear, Aleksey. We are taking bold actions across the board. And we have continued to be I think through this year, every single quarter, we have had another cost reduction announcement. We are looking at all elements of our business in both acetyls as well as in Engineered Materials, and we will take action around cost, including footprint, if there's value creation opportunities there. Aleksey Yefremov: Okay. Makes sense. And then as a follow-up on your EM pricing, I realize it was relatively modest, but do you see any signs of more rational competition sort of improvement in competitive environment maybe across any of the end markets or types of polymers? Scott Richardson: Look, we can't control what others are doing. What I will say about our EM commercial team is they are energized by the opportunity that's in front of them, not just around making sure that we're getting full value for the materials that we sell, but on partnering with our customers, about being connected to our customers, being current about what's happening in the marketplace and being able to respond to customer needs and leverage and drive new solutions. And I think we believe that, that team is going to continue the trajectory that they have been on this year despite the fact that through the year, the volume side of the equation has been difficult, but to be able to drive price, drive mix improvement through the year, I think, is a great accomplishment and is a really good starting point for us going into 2026. And we think we will be able to drive volumes through the pipeline next year. Operator: Our next questions come from the line of Frank Mitsch with Fermium Research. Frank Mitsch: Congrats again on the Micromax sale. To that end, Chuck, I believe you indicated that with the $3 billion plus debt due '26, '27, you were fairly comfortable being able to pay that -- or you indicated that you -- given the free cash flow and expected divestitures that you would not need to tap a revolver and that you felt like you would -- or issue more debt, you'd be able to cover that. Do you still feel that way today? Chuck Kyrish: Yes, Frank. I mean, if you look at ahead at our 2026 maturities, we've got about $900 million due. So we look at between the Micromax proceeds, the cash -- the excess cash we have on hand, Q4 cash generation, those are spoken for. We've already been looking ahead at the '27s and we made several payments to our '27 term loan over the last few quarters. We're confident in the cash generation and ability to pay off the '27s. We do know that sometimes that cash is back-end loaded in any given calendar year. So as we've done a few times, we'll continue to be prudent and opportunistic in the debt markets, refinancing a small portion of our maturities to align the maturities 1, 2 years out with our free cash flow generation. And that's just to bridge the timing of those repayments. But we're confident that we can generate the cash to pay those off and continue to deleverage. Frank Mitsch: Helpful. And then, Chuck, if I could ask you a more esoteric question. very sizable write-down this quarter. I'm reading the press release, and it's tied to Zytel and nylon. And then in the prepared remarks, it's talking about your stock price and so forth. I'm sure others understand what's going on there, but I don't. Can you please expand on that? Chuck Kyrish: Sure, Frank. Look, the third quarter is our annual quarter to test our goodwill and certain intangibles like trade names. We did this using the same third parties that we always do, and we did record an impairment. I think what's important, Frank, is there was not a reduction in the projected cash flows of Engineered Materials since the last time we did this test. This impairment was really driven by a reduction in our market cap, created by a reduction in the stock price because part of the test is sort of a market-to-book analysis this year. So no change, no decline in the cash flow projections, but it was really driven by the market cap of Celanese. Operator: Our next questions come from the line of Hassan Ahmed with Alembic Global. Hassan Ahmed: Just wanted to get a bit more granular about the sort of near-term guidance. I know in the past, you guys have talked about trying to get to a quarterly EPS run rate of $2 per share imminently, right? So I know the guidance, obviously, for Q4, $0.85 to $1 bakes in seasonality. It's not really in an otherwise abnormal environment, it's not really sort of the right starting point. So maybe if we could start with like the $1.34 you guys reported in Q3, right, where in the near term, you see that going on a quarterly run rate basis via self-help via obviously now with Micromax almost about to close, reduced interest expense there and the like. And again, I understand that you guys are talking about an incremental $1 to $2 from self-help, which is $0.25 to $0.50, but would love some more granularity around that. Scott Richardson: Yes. Thanks for the question, Hassan. We continue to be focused around driving controllable actions that will, as a first step, get us back to that $2 a quarter run rate. That hasn't changed even with where demand is at from a seasonality perspective, and we will get there. If demand stays lower, it may take us a little bit longer to get there. But if you look at where we were performing in the middle part of the year, Q2, Q3 from an EPS perspective and you just take the actions that I've talked about that we have going to next year, it starts to really get to a point where you're approaching kind of that level as you're getting up into the $1.75 to $2 range. And that's where continuing to stack wins, as we called them in our prepared comments, additional costs continuing to drive the pipeline. And then if we get any inkling of a demand improvement and even if you were just at the demand levels we saw in the second quarter, you're effectively there. And so the multiplying effect of the actions that we're taking are significant. We look at our enterprise right now as a coiled spring that when released is going to really drive very substantial and increased earnings levels as we go forward. It's tough right now. The demand environment is not tough, but I'm extremely proud of the resilience and the actions that the team here at Celanese has taken this year to position us going into next year and beyond. Hassan Ahmed: Very helpful, Scott. And as a follow-up, I would love to hear your views about Anti-involution as it affects the acetyls chain and you guys. And more specifically, why I asked this is that it seems a bit -- just yesterday, PetroChina, it seems came out and announced that they're studying 19 sort of different refining and petrochemical assets to potentially retire. And those include methanol assets as well, right? So it seems it's moving away from the pipe dream phase and actually becoming real. So how do you see Anti-involution impacting you guys? Scott Richardson: It's hard to say exactly how it will materialize, Hassan. But look, the dialogue on the ground in China, and I was there in the quarter and was talking with the team, it's palpable, more so than I would have expected. I don't know that it's had a really direct impact thus far. I mentioned we've seen some price movement, albeit small, but some price movement in the quarter. I don't know how much of that is Anti-involution or just kind of normal market changes and some of the inventory getting absorbed after some new plants started up. But the reality of it is that people are talking about it there. And I don't know how it comes in fruition to the business, but I do expect that we're definitely going to see this be an important step going forward because I do think the profitability of assets in China need to be higher than where they are today. Operator: Our next questions come from the line of Josh Spector with UBS. Joshua Spector: I wanted to follow up just on the Acetyls utilization rates. I think my understanding prior was maybe you had rates lower in some of the Western markets, so some of your low-cost regions like the U.S. to basically react to some of the weaker demand. I guess your earlier comment was that it's your low-cost assets running full out. So specifically, can you comment on that and maybe your U.S. asset base utilization rate where that is today? And then related with that, if we think about what gets utilization rates higher, if you're running at a high rate in the U.S. today, does U.S. demand improvement help you? Or do you really need Europe or other regions to improve to get your utilization rates up? Scott Richardson: Yes. I mean, look, Josh, we've always run our U.S. assets at pretty high rates. That really hasn't changed dramatically. And I'm not saying we don't have room there. We probably have a little bit of room, but you definitely see the uplift. And when you see Western Hemisphere improvement, the netback is significantly higher than moving that product around to different regions where it's better than running other assets, but certainly, U.S. demand flows directly to the bottom line in that case. So we do think the assets are extremely well positioned. We've done debottlenecks of the U.S. asset base over the last 5 years. And so we have the ability to move those up. And when I said full rates, I was really particularly on acetic acid in the U.S., really referring to we kind of operate that at kind of the capacity that we've historically had, not necessarily operating both acetic acid plants at full rate. So we kind of look at those as still operating kind of at the levels they historically did on a combined basis with the ability to ramp up going forward. Joshua Spector: Okay. No, that makes sense. And just a quick follow-up on the cost savings side. Just I mean... Operator: Apologies. It looks like we lost Josh. Our next questions come from the line of Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: So if I just go back to that $1 to $2 of uplift, maybe can you just frame that out? I think in the past, you had said maybe $0.35 from some of your cost actions. Is that accurate? And then maybe what would be kind of a restocking amount? Is that also included in there? Or maybe -- could you maybe frame it as what the destocking amount was for '25? Scott Richardson: Yes. Arun, as I said earlier on the call, we look at that $1 to $2 really as a rule of thumb if we're not seeing the market really change at all off of where we've been over the last several quarters. So there's no kind of restock element in there. And what I said earlier is make the assumption about half of that is coming from cost actions and then the balance coming from the EM pipeline and then some other things, as Chuck mentioned, maybe interest expense. Arun Viswanathan: And then could you just also provide an update on maybe some of your recent actions to maybe change the commercial strategy or extend your legacy commercial strategy within EM, maybe on the project pipeline or anything else that we would find relevant to track your progress there? Scott Richardson: The EM team has been modernizing its strategic orientation. That's the best way I can put it. We're evolving. And just where our world is, where we have the ability to really win is in the differentiated spaces where we can leverage our widespread unique portfolio. We have more engineered thermoplastics, more thermoplastics elastomers in our portfolio than anyone else has in the world, bringing that full portfolio to customers to meet unique challenges that they have around solution sets. And it is about partnering and really getting focus around where we spend our time and then leveraging innovation that we've had. We've launched publicly our grade selection tool for customers called Chemille, where it's an AI-driven tool, which is allowing grade selection around our materials for the customers as well as our commercial organization to very quickly meet the needs and streamline that commercialization cycle. And so it's investments we've made in areas like that, that are really bringing the EM team to the leading edge as it comes to creating new opportunities and partnering with our customers. William Cunningham: Darryl, we'll make the next question our last one, please. Operator: Our last questions will come from the line of John Roberts with Mizuho. John Ezekiel Roberts: Will the European acetate tow closure have any ripple effects across the rest of the acetyls network, either upstream or even downstream, maybe some of your JVs? Scott Richardson: No. I would not look at it that way, John. William Cunningham: Thank you. We'd like to thank everyone for listening in today. As always, we're available after the call for any follow-up questions. Darryl, please go ahead and close out the call. Operator: Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Third Quarter 2025 Conference Call and Webcast. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Suess, you may begin. Jennifer Suess: Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. In discussing our financial and operating performance, and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures, GAAP under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan's management uses these measures to aid in assessing the trust's underlying core performance and provides these additional measures so that investors may do the same. Additional information on the material risks that could impact our actual results and the estimates and assumptions we apply in making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements filed yesterday and management's discussion and analysis related thereto as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com. I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin. Jonathan Gitlin: Thank you, Jennifer, and good morning to everyone joining us today. We're pleased to share our Q3 2025 results. RioCan's operating momentum accelerated this quarter. Our trio of high retention rates, strong leasing spreads and quality tenants represent the sustainable long-term outcome we've strategically built toward. Key performance indicators reflect consistent sustainable growth, underscoring the strength and resilience of our platform. Committed occupancy of 97.8%, retail occupancy of 98.4% and our Q3 retention ratio of 92.7% highlights the value tenants place on space in RioCan assets. This demand translated into strong performance with commercial same-property NOI, up 4.6%. RioCan is operating from a position of strength. Our performance is driven by a number of factors, but relies heavily on our focus on tenant quality and disciplined asset management. Premium retail space remains scarce and exceptionally high barriers to entry make meaningful new supply unlikely. At the same time, demand continues to be strong from top-tier necessity-based retailers. These retailers are not just getting by. They're focusing on growth. They're proving out their strength and ability to thrive in any economic backdrop. These tenants exemplify the caliber of retailers that comprise RioCan's portfolio. This supply-demand imbalance is most acute where RioCan's assets are concentrated. Our properties are in Canada's major markets with an average of 277,000 people and a $155,000 household income within 5 kilometers. Our strategy is straightforward. We optimize our portfolio by selling assets that don't align with our strategic vision. On the flip side, we invest in those that do. Over the past decade, we've diligently executed this approach and it's yielding measurable success. We are keeping our centers full and generating strong leasing spreads, and we're doing so with high-quality tenants. We're in a third quarter of operating under the current tariff environment, and we're pleased though not at all surprised to see our portfolio and tenants performing exceptionally well. This is the benefit of a tenant mix that features necessity-based retailers with strong balance sheets that provide everyday needs. Canada remains an attractive market for our tenants and our centers are ideally located to support their growth. RioCan's leasing spreads remain at record highs. We captured market rent growth across the portfolio, achieving blended leasing spreads of 20.8% this quarter, including 44.1% on new leases. Year-to-date, the average net rent for new leases was $29.58 per square foot, nearly 30% above the average for occupied space. Renewal spreads were also strong at 15.2%. This is especially noteworthy given that an outsized proportion, 48% were fixed at lower growth rates this quarter. Same-property NOI will continue to benefit from this mark-to-market gap. Specifically, there are 10.7 million square feet of leases coming up for renewal at a relatively consistent pace over the next 3 years. Combined with our success in embedding annual growth in new leases and unlocking fixed options in existing leases, this trajectory is sustainable. We are striking an extremely healthy balance between replacement and retention. We're enhancing tenant quality and rental rates by replacing certain transitional tenants. At the same time, we are retaining strong established tenants to reduce downtime and capital requirements. When opportunities emerge, we secure high-quality tenants for our properties. Alternatively, we also like to help our reliable established tenants expand their existing footprints within our assets. We put our platform to work and we help those tenants by seeking out opportunities in adjacent and surrounding space and help them execute on the enhancement and expansion of existing space. We're excited to share a number of examples to demonstrate this strategy at work later this month at our Investor Day. Our strong quarterly performance goes beyond the numbers. It reflects the quality of our portfolio and the discipline behind our strategy. We previously indicated our plan to repatriate $1.3 billion to $1.4 billion of capital which will be infused back into the business over 2025 and 2026, and we remain firmly on track. Progress continues on monetizing our residential rental portfolio. We've sold our interest in 6 RioCan Living properties, 5 of which closed in 2025. These 5 transactions have contributed to the almost $500 million of capital repatriated since the start of this year. Based on the quality and desirability of our RioCan Living assets, we're highly confident in our ability to continue to monetize these assets and to put the capital to work accretively in the numerous capital allocation opportunities we have at our disposal. Our business is rooted in a strong portfolio, a favorable retail environment and strong operators. This lends itself to the simplification of our business around our retail core, leveraging our decades of experience to deliver reliable, durable income and growth, focusing our resources, human and capital on this core is a logical conclusion that will serve our unitholders well into the future. I'll wrap up in a moment, but before I do, I'd be remiss if I didn't mention that our commitment to excellence was further validated by our impressive performance in the 2025 GRESB assessment. Among other recognitions, we maintain regional sector leader status in the Americas under the retail sector and the first rank among North American retail peers in the standing investment assessment. So as we look ahead, our outlook remains aligned with the guidance we provided in the first quarter. FFO per unit of $1.85 to $1.88. FFO payout ratio of approximately 62%, and commercial same-property NOI growth of approximately 3.5%. We continue to see strong demand for high-quality, necessity-based retail space in Canada's major markets. Our leasing strategies are fueling organic growth and our disciplined capital management is amplifying that growth now and for the future. We are excited to share more at our Investor Day on November 18. Our team is energized, our strategy is clear and our portfolio is positioned for continued success. Thank you for your time today. I look forward to your questions and to sharing more about our progress in the coming weeks. Dennis Blasutti: Thank you, Jonathan, and good morning to everyone on the call. Our core real estate portfolio continues to deliver strong results, and we continue to simplify our business to focus on this core. FFO excluding condo gains and excluding HPC-related income, was $0.39 per unit, compared with $0.38 in the prior year. This increase was driven by a 4.6% growth in same-property income in our core commercial portfolio and the benefit of unit buybacks, partially offset by higher interest expense. Total FFO was also impacted by the following items that are noncore to our business. FFO for the quarter contained $17.5 million of gains related to residential inventory, an increase of $4.8 million or approximately $0.02 per unit compared with Q3 2024. Lower fee and interest income due to residential inventory completions had an impact of $0.01, reduced NOI and fee income related to the former HPC locations had a combined FFO impact of $0.02 per unit when compared with Q3 2024. Net income for the quarter was impacted by valuation losses of $242.8 million, driven by factors that are not reflective of our core retail portfolio. This amount includes $148 million of net fair value losses on investment properties comprised predominantly of 3 categories. The largest component was $95 million related to excess density driven by properties that have been reprioritized. We have a significant amount of long-term density potential in our portfolio. However, given the stagnant land and development market, it is important to ensure that we are maximizing income from the existing retail on our properties. As such, we determined that the redevelopment of properties such as Colossus, Scarborough Center and RioCan Hall will not proceed for a number of years. This determination and commitment to focus on the core retail aspect of these properties removes any ambiguity related to these sites freeing up our leasing team to maximize retail rents by offering longer lease terms to our tenants. The second category totaling $25 million relates to assets that are high quality but with lower growth potential attributable to a significant proportion of fixed renewals associated with anchor tenants such as Walmart. These are similar to assets that we have sold over the last couple of years and represent a minimal proportion of our portfolio. The final category totaling $28 million relates to 3 large Toronto-based residential rental buildings. We have seen weakness in rent growth and occupancy in submarkets where there is high competition from condo delivery. So we have reduced the stabilized NOI assumption for these buildings. As noted, the valuation losses relate to 3 categories that are not reflective of our core commercial real estate portfolio. Our NAV per unit at the end of the quarter was $24.9 which is approximately 29% above the current unit price. Going forward, we will focus on compounding NAV by growing income from our core portfolio, along with the accretive allocation of the substantial capital we expect to repatriate over the next couple of years. We are rapidly advancing toward a conclusion for the forward HBC locations with asset plans for 12 of the 13 locations. As previously stated, we will only participate in assets where we would expect strong return on capital, and we will not participate in mixed-use redevelopments. The impairment in the quarter writes off our remaining equity in the HBC-JV. We have also taken provisions related to our loan and guarantee exposures. We have taken a conservative approach to the accounting of these assets while continuing to pursue all avenues to recover value. With the asset plans in place and the financial provisions recorded, this chapter is substantially behind us. As we focus on our core business, we are winding down our mixed-use construction. Year-to-date, the spending on mixed-use IPP construction was $40 million with 186,000 square feet delivered. With approximately $70 million remaining to be spent for the balance of the year and our committed capital for development construction in 2026 of only $15 million we will have significant flexibility going forward to invest capital where it's most accretive. In addition, we have delivered 61,000 square feet of retail infill development. This is an area where we invest in our core portfolio to drive attractive returns through growth in NOI and NAV growth and will be a continued area of focus. We are repatriating a significant amount of capital to our balance sheet. We expect approximately $1.3 billion to $1.4 billion of capital from the sales of residential rental buildings and pre-sold condos over the course of 2025 and 2026. So far this year, we have brought in nearly $500 million of capital. $314 million in total asset sales, of which $250 million has been from the sale of 5 residential assets sold so far this year, bringing the total sold to 6 buildings with the sale of a number of others in process. $163 million is from condo closings, resulting in a repayment of $128 million of construction loans and the removal of $323 million of guarantees. We expect the remaining condo units at the end of the year to be valued at approximately $130 million, which is an insignificant amount in the context of RioCan's balance sheet, putting this program materially behind us. As a result of this and other initiatives, our credit metrics have continued to improve. Our adjusted spot debt to adjusted EBITDA improved to 8.8x solidly within our target range of 8x to 9x. Our unencumbered asset pool grew to $9.3 billion. Our ratio of unsecured debt to total debt was 64%, and our liquidity was $1.1 billion. Our balance sheet provides us with financial flexibility to take advantage of opportunities as they arise. As I conclude my remarks, it is important to mention that our results are driven by our best-in-class platform. This includes our team of very talented and hard-working people. Our team has always utilized data that we collect from our vast portfolio to make decisions. Over the past few years, we have been upgrading our ability to leverage this data through the implementation of a new ERP system, migrating our systems to the cloud and employing analytical reporting and tools. This ensures that our teams have the best information and analysis available as they execute our strategy, whether it be negotiating a lease, investing in a retail infill project, or buying and selling assets, we ensure that the relevant data is available and the collective knowledge of our organization is brought to bear. We apply a continuous improvement mindset to ensure that we optimize the tools available to our people driving efficient processes and effective decision-making. With that, I will turn the call over to the moderator for questions. Operator: [Operator Instructions] Our first question comes from the line of Sam Damiani with TD Securities. Sam Damiani: Lots going on here at RioCan, and it's exciting to see in the next couple of years. I just wanted to start off. I think Jonathan or Dennis, one of you mentioned sort of numerous capital allocation opportunities in front of you right now. I wonder if you could be a little bit more specific in terms of what you're seeing and I guess, how much capital could be allocated? Jonathan Gitlin: Thanks, Sam. Good morning to you and thanks for joining the call. We are going to elaborate quite a bit more on that at our Investor Day. So I don't want to put too much emphasis on it today, just leaving something to talk about when we see you next -- in 2 weeks from now. But I'll give you the most obvious ones. Right now, the opportunities that are highly accretive and also beneficial, our infill development in our retail scope. So really looking at properties that we own where there is existing retail and we can make it better through the creation of additional retail pads and strips, and we're now in a position where the rents justify the expense of building out those additional square footage. And then the other is obviously NCIB, which we participated in the past. Given where our stock or where our units are trading relative to NAV and what we feel is an immediate FFO, return on FFO, we feel it's a pretty obvious place to place money. In addition, of course, there's paying down debt. Those are the 3 pillars, I'd say that we're focused on most, but there are many ancillary ones that we're also focused on, and we're going to elaborate on at the Investor Day. Dennis, do you have anything to add to that? Dennis Blasutti: No, I think that's right. And I think what's also important is to just note what Jonathan didn't mention, which is we're winding up our mixed-use development program. That's just not a priority for us right now in terms of any large construction at scale. So yes, I would agree, putting money back into our own portfolio, retail portfolio is a great use of capital right now, and it's hard to ignore the stock price. Sam Damiani: Okay. Great. And I look forward to November 18. Next -- my second question is on, I guess, the fair valuing -- the fair value changes you detailed on the quarter. I just want to be clear, the $90-odd million taken on the density assets, like what does that leave on the balance sheet for sort of excess density value recognized in your fair value? Dennis Blasutti: Yes. So I'm just trying to look at the number here. There is still value on a -- for some of the zoned square footage. I'm just kind of go into it here. We have -- our value in [indiscernible] is about $700 million, about $180 million of that is under construction site. So if I kind of do the math quick here, it's just, call it, a little over $500 million of total density value still on the balance sheet. When you kind of put that against almost 20 million square feet of zone density, it's a pretty low value on a per square foot basis. Operator: Our next question comes from the line of Brad Sturges with Raymond James. Bradley Sturges: Just focused on the core commercial portfolio, obviously, pretty strong results you continue to see there. Just curious, the renewal rent spreads continue to improve even with a higher proportion of fixed rate options. Do you think you've kind of hit a peak at that point? Or how do you expect your rent spreads to trend over the next few quarters? Jonathan Gitlin: We preached in the prepared remarks about the sustainability of the conditions. I can't predict precisely where our renewal spreads will be, but we do think it's going to be a strong market for landlords like RioCan, given the strength of our portfolio going forward. I don't see a catalyst to change these conditions in the near or medium term simply because there is no new supply, and we recognize that the tenancies that we're dealing with are typically very much in growth mode. So we really do see the ability to continue achieving solid rent spreads. We're not providing specific guidance at this point, but we have said in the past mid-teens, and that's, again, a pretty comfortable spot. And so I think it's -- if you look at also the opportunity set, as I mentioned in my prepared remarks, we've got over 10 million square feet that will be up for renewal over the next 3 years on a pretty consistent basis. And there's a significant mark-to-market. I mean if you look at the rents that we wrote in Q3, they were over $29 and that compares favorably to the average rents we have across our portfolio, which is in the $22.50 range. So that's about a 30% range that we feel very capable of bringing in through a strong renewal process. Bradley Sturges: Sounds good. And just a follow-up to that. Just with respect to next year's expiries, is there anything that stands out in terms of anomalous or would be unique or would be pretty similar to what you experienced in 2025 and you kind of see that consistent results going forward for next year? Jonathan Gitlin: Yes. I mean the beauty of scale, Brad, is that we really -- we have so many properties with so many tenancies. And even if there is 1 or 2 larger renewals coming up that might be like a Walmart renewal with a flat provision, it's offset by so many other renewals that don't have flat provisions or they go to market. So there might be 1 or 2 larger or 3 or 4 larger tenants that will come up for renewal that might be a little bit flat. But again, in the scheme of things, they won't change our guidance or outlook. I'll look to John Ballantyne just to see if I've missed anything there. John Ballantyne: No, you haven't, Jonathan. And I would also add, again, we're going to sound like a broken record, but we are going to unpack this a little more in our Investor Day in 2 weeks, namely where we think the market -- what the actual mark-to-market spread is in our existing leases and how that's going to unfold in the same-property revenue over the next 3 years. Operator: Our next question comes from the line of Mario Saric with Scotiabank. Mario Saric: Just a really quick one on HBC and specifically the Ottawa location. It seems like it's the one asset where plans are still forthcoming. Do you have a sense of the timing of clarity on that asset? Jonathan Gitlin: Thanks, Mario. There is no defined time line at this point. We've got a few different options that we are exploring, and we endeavor to keep everyone apprised of how those unfold. But again, as we've always committed, we're not going to put any significant capital into these assets unless there is a logical return that competes with our other capital allocation opportunities. Mario Saric: Okay. And then shifting gears just again, real quickly to RioCan Living. Any notable quarter-over-quarter change in terms of asset buyer sentiment? We've heard from some peers in terms of the beginning of some institutional interest coming into the multifamily space. So as it pertains to RioCan Living, are you sensing any incremental demand? And how does that change the time line in terms of selling off the asset? Jonathan Gitlin: Time line is still intact. I would say that the demand for our new builds, no rent control, limited CapEx residential portfolio has been consistent throughout. I don't think there's been significant ebbs and flows in the demand for them. In terms of the profile of buyers, again, we haven't really seen much of a change. We've had a pretty wide spectrum of buyers or interested parties thus far, and that hasn't changed. So the time line hasn't changed nor has the outlook, which is favorable and positive for the disposition of the remaining assets. Andrew, anything to add there? Andrew Duncan: No, John, I think you captured it. As you said, we've got bid depth in both institutional and private and we remain confident in our goal. Mario Saric: And just last question. As it pertains to the Investor Day, I'm not asking what you may disclose, but is the retail environment today and your confidence level in the portfolio today such that you feel comfortable disclosing 1-year, 3-year targets on some of the key metrics such as FFO, same-store NOI, et cetera? Jonathan Gitlin: Yes. We're going to give some pretty thorough outlooks. I think it would be a letdown at Investor Day if we didn't. So we will certainly leave you with a good outlook on the next few years. Operator: Our next question comes from the line of Michael Markidis with BMO. Michael Markidis: Congrats on the strong core portfolio results. Just wondering if you'd help us think about property management and other service fees and interest income have been a fairly significant contributor to your business on the earnings side over the last couple of years, and it is starting to moderate. How should we think about the trajectory of those 2 line items going forward? Will it continue to moderate as development winds down, the interest income, I imagine there's a bit of a rate component there, probably a little bit less capital invested. Just anything you can do to help us with those line items would be helpful. Jonathan Gitlin: Sure. I'll start, and I'll turn it over to maybe Dennis. . I think they will continue to moderate just in the sense that we have slowed down development and a large component of those fees came from development and management on behalf of others. In terms of property management fees, we have a set of properties that are co-owned and we are always the manager for those. Whether the number of co-owned properties increases or decreases, I think it will be a marginal component of those fees going up or down. So I don't think there will be much to add there. But we are an entrepreneurial organization. We are always looking at ways to continue to use the strength that we have one of those strengths is a very strong platform at RioCan. And so we look to -- at opportunities to utilize that to create fee income. But it's hard to predict at this point what exactly those will be and how much they will be for. So I think you would be appropriately suited just to keep things sort of on a level trajectory going forward. Dennis, I don't know if you have any further comments on that? Dennis Blasutti: Yes. No, I would agree with that. I think -- and I mentioned, I think, in my prepared remarks, there was a decline related to development management fees and interest income associated with some VTBs on condo properties. So I think that is going to moderate and sort of level out. The property management fee should be pretty level on that one. Michael Markidis: Okay. And one of the other fee components, I guess, has been a strong contributor over the past couple of years has been the financing arrangement fees. Like how do we think about that going forward? Is that similar to the development pipeline? Or is that related to other activities? Dennis Blasutti: I would say it would level off a little bit as well because it was related somewhat to development. We do occasionally do mortgages on behalf of properties that are co-owned, which will add a bit of fees here and there, but not -- I don't see that as a meaningful contributor going forward. Operator: Our next question comes from the line of Matt Kornack with National Bank of Canada. Matt Kornack: I was wondering if you could just help a little bit on bridging kind of the current quarter to future quarters in terms of HBC more in line with kind of any incremental capital deployment related to the, I guess, 3 assets that you own and the NOI generation. What would maybe be in this quarter versus what will be in future quarters considering more of those income-producing assets? Jonathan Gitlin: Dennis? Dennis Blasutti: Yes, sure. So on the 3 assets that we're backfilling, we had given a guidance range of about $100 to $125 per square foot, equates to approximately $25 million in total for capital outlay on those. So that's the number there. We had messaged that we would see -- we had about $0.08 of FFO coming in from HBC -- in total, that was going to go away. We'll claw back some of that with the acquisition of Georgian and Oakville and the backfills, probably about $0.01 in 2026 and then about $0.02 in 2027 as the tenancies ramp up. Matt Kornack: Okay. That's helpful. And then just on the nonrecoverable operating costs, they've been a little elevated this year starting in, I guess, Q4 of '24. Is that onetime in nature? Or is that a change in kind of the portfolio composition? Just trying to understand where those should head over the next year. Jonathan Gitlin: John, do you have a thought on that? John Ballantyne: Yes, I actually don't, Matt. We'll take a better look at that and get back to you with an answer. Operator: There are no questions registered at this time. [Operator Instructions] All right, I am showing no further questions at this time. I would now like to pass the conference back to President and CEO, Jonathan Gitlin. Jonathan Gitlin: Thank you, everyone, for dialing in. We will look forward to seeing you at our Investor Day coming up in 2 weeks. Operator: Thank you for your participation. You may now disconnect your lines.
Operator: Good day, and welcome to the Fidus Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jody Burfening. Please, go ahead. Jody Burfening: Thank you, Bailey, and good morning, everyone, and thank you for joining us for Fidus Investment Corporation's Third Quarter 2025 Earnings Conference Call. With me this morning are Ed Ross, Fidus Investment Corporation's Chairman and Chief Executive Officer; and Shelby Sherard, Chief Financial Officer. Fidus Investment Corporation issued a press release yesterday afternoon with the details of the company's quarterly financial results. A copy of the press release is available on the Investor Relations page of the company's website at fdus.com. I'd also like to call your attention to the customary safe harbor disclosure regarding forward-looking information included on today's call. Conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential, operating results and cash flows of Fidus Investment Corporation. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, November 7, 2025. These statements are not guarantees of future performance. time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to, the factors set forth in the company's filings with the Securities and Exchange Commission. Fidus undertakes no obligation to update or revise any of these forward-looking statements. With that, I would now like to turn the call over to Ed. Good morning, ed. Edward Ross: Good morning, Jody. And good morning, everyone. Welcome to our third quarter 2025 earnings conference call. In today's call, I'll start with a review of our third quarter performance and our portfolio at quarter end and then share with you our outlook for the last quarter of 2025. Shelby will cover the third quarter financial results and our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. . For the third quarter, Fidus' debt portfolio continued to perform well, and we extended our track record of generating adjusted NII well in excess of the base dividend. Overall, the portfolio remains healthy from a credit quality perspective reflecting our strategy of investing in high-quality, lower middle market companies with resilient business models that generate recurring revenue and cash flow and have attractive prospects for growth. Our portfolio also remains well diversified by industry and structure to produce both high levels of recurring income and capital gains from monetizing equity investments. In terms of market conditions, M&A activity did pick up in the third quarter relative to the first half of the year as expected. Although deal closings were back-end loaded, and some deals were pushed into October, we continued to build our portfolio primarily by supporting our portfolio companies with growth capital, leveraging our long-standing relationships with deal sponsors. On a per share basis, adjusted NII was $0.50 compared to $0.61 for Q3 2024, covering our base dividend of $0.43 with ample cushion. Total dividends paid for the quarter amounted to $0.57 per share, including a supplemental dividend of $0.14 per share. For the fourth quarter of 2025, the Board of Directors declared a total dividend of $0.50 per share, which consists of a base dividend of $0.43 per share and a supplemental dividend of $0.07 per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter which will be payable on December 29, 2025, to stockholders of record as of December 19, 2025. Net asset value grew 2.7% to $711 million at quarter end compared to $692.3 million as of June 30, 2025. Reflecting modest portfolio appreciation and accretive share issuances under the ATM program. On a per share basis, net asset value was $19.56 per share as of September 30, 2025 compared to $19.57 per share as of June 30, 2025. Originations consisted of $69.7 million in first lien securities and $4.7 million in equity investments for a total of $74.5 million for the third quarter. Investments were heavily weighted toward add-on investments, primarily in support of M&A transactions, we also invested $12.8 million in 1 new portfolio company. Subsequent to quarter end, we have invested an additional $40.2 million in 2 new portfolio companies plus numerous add-on investments in existing companies. Proceeds from repayments and realizations totaled $36.7 million for the third quarter resulting from a mix of M&A and refinancing activity. With net originations of $37.8 million, our portfolio grew to $1.2 billion on a fair value basis as of September 30, 2025, equal to 102% of cost. First lien investments comprised 82% of our debt portfolio as the migration of our debt portfolio toward first lien securities continued, and our equity portfolio stood at $143.4 million or 12% of the total portfolio at quarter end. Portfolio credit quality remains sound with companies on nonaccrual, unchanged and less than 1% of the total portfolio on a fair value basis and 2.8% of the total portfolio on a cost basis. As we enter the home stretch for 2025, market activity is shaping up to be relatively decent in the fourth quarter, and we are working hard to convert opportunities from our pipeline of potential investments in both new and existing portfolio companies, while continuing to add to our overall investment pipeline. As Shelby will detail, we have enhanced our flexibility from a capitalization and liquidity perspective, continuing to position Fidus for the future as we execute our proven investment strategy, methodically building the portfolio and growing net asset value over time. In doing so, we will stay focused on our goals of preserving capital and generating attractive risk-adjusted returns for our shareholders. Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby? Shelby Sherard: Thank you, Ed, and good morning, everyone. I'll review our third quarter results in more detail and close with comments on our liquidity position. Please note, I will be providing comparative commentary versus the prior quarter, Q2 2025. Total investment income was $37.3 million for the 3 months ended September 30, a $2.7 million decrease from Q2 driven by a $0.7 million decrease in interest income primarily due to approximately $0.6 million of accelerated income from unamortized fees on debt repayments in Q2, a $2.6 million decrease in fee income given a $1.3 million decrease in prepayment fees, a $0.8 million decrease in origination fees and a $0.5 million decrease in amendment and management fees. Dividend income from equity investments increased by $0.4 million in Q3. Total expenses, including income tax provision, were $19.9 million for the third quarter, a $1.5 million decrease over Q2 driven primarily by a $1 million decrease in capital gains incentive fee accrual, a $0.4 million decrease in base management and income incentive fees, a $0.3 million decrease in professional and other G&A fees primarily related to proxy solicitation expenses for the 2025 Annual Shareholder Meeting held in Q2, partially offset by increased legal fees in Q3, a $0.3 million increase in taxes related to distributions from our equity investments in Medsurant Holdings. Net investment income or NII for the 3 months ended September 30 was $0.49 per share in Q3 versus $0.53 per share in Q2. Adjusted NII, which excludes any capital gains, incentive fee accruals or reversals attributable to realized and unrealized gains and losses on investments, was $0.50 per share in Q3 versus $0.57 per share in Q2. We ended Q3 with $543.8 million of debt outstanding, comprised of $191 million of SBA debentures, $325 million of unsecured notes, $15 million outstanding on the line of credit and $12.8 million of secured borrowings. Our net debt-to-equity ratio as of September 30 was 0.7x. Our statutory leverage, excluding exempt SBA debentures, was 0.5x. The weighted average interest rate on our outstanding debt was 4.9% as of September 30. Turning now to portfolio statistics. As of September 30, our total investment portfolio had a fair value $1.2 billion. Our average portfolio company investment on a cost basis was $12.6 million, which excludes investments in 6 portfolio companies that sold their operations and are in the process of winding down. We have equity investments in approximately 87.8% of our portfolio companies with an average fully diluted equity ownership of 2%. Weighted average effective yield on debt investments was 13% as of September 30 versus 13.1% at the end of Q2. The weighted average yield is computed using effective interest rates for debt investments at cost, including the accretion of original issue discount and loan origination fees, but excluding investments on nonaccrual, if any. Now I'd like to briefly discuss our available liquidity. Subsequent to quarter end, we completed a $100 million debt add-on to our 6.75% notes due in March 2030. The net proceeds were used to fully deem the 4.75% notes due in January 2026. In addition, we refinanced our line of credit, which included an upsize to $175 million of availability and a new maturity date of October 16, 2030. As of September 30, our liquidity and capital resources included cash of $62.3 million, $125 million of availability on our line of credit, and $16.5 million of available SBA debentures, resulting in total liquidity of approximately $203.8 million. Taking into account our subsequent events, our liquidity remains approximately $204 million. Now I will turn the call back to Ed for concluding comments. Edward Ross: Thanks, Shelby. As always, I'd like to thank our team and the Board of Directors at Fidus for their dedication and hard work and our shareholders for their continued support. I will now turn the call over to Bailey for Q&A. Bailey? Operator: [Operator Instructions] Our first question comes from Robert Dodd with Raymond James. Robert Dodd: Congratulations on another good quarter. I was going to ask about your coming about market activity outlook for 4Q. I think you call it -- it looks relatively decent. I think it was the first time you used those words. I mean, the earlier comments have been the deal activity picking up, you've already done $40 million in October. I mean, can you give us any more -- do you think it's going to slow any? Or do you think it's just going to continue to ramp? And is there -- given some of the Q3 ramp slipped into October, like you said, is there a risk that there's a lot of activity, but some of it ends up in January? Edward Ross: It's a great question, Robert. I think from a deal flow perspective, things starting to pick up a little in Q2, latter half. That trend continued, which isn't always the case in the summertime. But in Q3, fair number of things pushed out. We lost a couple of -- didn't lose deals, a couple of deals fell apart at the end, things like that, which accounted for a little slower quarter than we were expecting, but from an investment perspective. But having said that, deal flow was pretty good. And deal flow continues to be pretty good as we sit here today and this week. And so I think that bodes well for the overall current environment. I wouldn't call it robust, but it's healthy. And so that's a good thing. So what does that mean for us? I think originations in Q4, it's our belief it will be pronged, both from an incremental new investment perspective and from add-on investment perspective. And we've also had several add-on investments so far this quarter as well. So it's a busy quarter at the moment. And our expectation as we sit here today is for that kind of trend to continue. Hopefully, that's helpful. Robert Dodd: Yes, that is very helpful. And just kind of following on from that. I mean, how are you seeing deal terms and pricing stack up? Obviously, the terms are good enough or you wouldn't be doing them. But has there been any evolution in terms of how structures are being proposed as you go into this build of pipeline? Edward Ross: Good question. In the lower middle market, I think things are pretty stable from my perspective. Clearly, pricing has come down over the last couple of years. I think that -- and I'm talking about spreads there. But that trend has kind of stabilized over the last 6 to 9 months. So we're not really seeing changes from a pricing standpoint. Obviously, we're pricing risk. And so some deals may be in the spreads in the low 5s, and some may be actually in the 6s. So it's -- you can't normalized, if you will. But pricing has stabilized, which is a good thing. And I think one of the other positives of the lower middle market is structures. I mean we have 2 covenants in almost all of our deals, typically a leverage covenant and a fixed charge covenant. And so the structures are the same. I think leverage levels have stayed pretty close to the same. So there haven't been increased risk, if you will, that we're taking to generate the yields that we're getting. So I think all of that's positive and gives us the ability to generate attractive risk-adjusted returns. Robert Dodd: Congrats again on the quarter. Edward Ross: Thank you. Good talking to you, Robert. Operator: Our next question comes from Mickey Schleien with Clear Street. Mickey Schleien: Ed, this quarter, we've seen in the space, more impact from tariff policy, particularly in relation to China. We've been talking about this for a while, but these things develop slowly. Can you remind us, do you have companies that are relatively exposed to importation from China? And is pressure developing on those companies? Edward Ross: Great question, Mickey. We have exposure, but what I would say is quite limited. Really, we have 2 portfolio companies that have meaningful direct exposure from an import perspective. We have others that I'd put it in the moderate category. And the moderate ones, to be honest, the moderate ones and the -- obviously, the high-risk ones and so we call them -- we have 2 that are in the high-risk category. Both of those companies are performing well as we sit here today and are managing the risk. And so we -- from just an overall magnitude perspective, I think it's quite limited. It's between 5% and 6% of our total portfolio. And then what I would say is it's not meaningfully impacting the profitability of the businesses as we sit here today. Obviously, there's been a various actions taken by these portfolio companies, whether it's price increases, whether it's negotiations, what have you. But we feel good about kind of the outlook of both of those companies and quite frankly, the rest of the portfolio. Mickey Schleien: And a follow-up question. It may be transient, but the government shutdown is now longer than we would like. Is that going to impact any of your portfolio companies? I know it may be a short-term sort of event, but it could take a while to get things back to normal as the government reopens. Edward Ross: No, good point and great question. And from our -- we do have a couple of companies that have some, what I would call, limited direct exposure to government contracts but in both those cases, we are not experiencing or seeing problems with regard to those contracts or at those portfolio companies. So I think our exposure is quite limited there. And at the moment, we're not seeing concerns or problems. Clearly, obviously, things can change, but it's not expected in either one of those cases. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Ed Ross for any closing remarks. Edward Ross: Thank you, Bailey, and thank you, everyone, for joining us this morning. We look forward to speaking with you on our fourth quarter call in early March 2026. Have a great day and a great weekend. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to the Victory Capital Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Matthew Dennis. Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis. Matthew Dennis: Thank you. Before I turn the call over to David Brown, I would like to remind you that during today's conference call, we may make a number of forward-looking statements. Victory Capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements. Our press release, which was issued after the market closed yesterday, disclose both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slides accompanying this call, both of which are available on the Investor Relations section of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David? David Brown: Thanks, Matt. Good morning, and welcome to Victory Capital's Third Quarter 2025 Earnings Call. I'm joined today by Michael Policarpo, our President, Chief Financial and Administrative Officer; as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I'll start today with an overview of the quarter, after which I will expand on our distribution opportunity outside of the U.S., update you on Victory shares, our fast-growing ETF business, then I will provide some perspective on the depth of the M&A opportunities that we have before us. After that, I will turn the call over to Mike to review the financial results in greater detail. Following our prepared remarks, Mike, Matt and I will be available to answer your questions. The quarterly business overview begins on Slide 5. We had an excellent third quarter. We achieved record high gross flows, and our net flows continue to improve and finished just under flat for the quarter. We ended the quarter with total assets of $313 billion. Long-term gross flows rose 10% quarter-over-quarter to $17 billion, reflecting our expanded U.S. distribution team that is continuing to coalesce and gain traction. And we also had strong sales outside of the U.S. at an annualized rate of $68 billion or 23% of long-term AUM. We are in the best position we have ever been into execute on consistent long-term organic growth. Adjusted EBITDA set a new all-time quarterly high at $191 million, resulting in an adjusted EBITDA margin of 52.7%. Adjusted earnings per diluted share rose to a record $1.63, up 4% from the second quarter and 20% higher than the quarter immediately preceding the Amundi transaction. We've already exceeded our low double-digit accretion guidance for this transaction, achieving these results even before capturing the complete benefit of our targeted net expense synergies. During the third quarter, we repurchased 1.8 million shares. At quarter end, we still have $355 million of capacity on our existing repurchase authorization. We will remain opportunistic and flexible with future repurchases, factoring in the current facts and circumstances. Turning to our integration process of Pioneer Investments. We are slightly ahead of plan on the timing of achieving our net expense synergy goals. At the end of the third quarter, we achieved approximately $86 million of net expense synergies on a run rate basis. There is a clear line of sight for the remaining $24 million of net expense synergies to reach the previously disclosed total of $110 million. Our U.S. distribution teams have been integrated and cross-trained with the territories being reconfigured to optimize coverage. As with all our previous acquisitions, the investment team remained uninterrupted, and there has been little to no impact on the client experience during the integration process. Turning to Slide 6. As we look at the distribution opportunity outside of the U.S., we are very encouraged by our position as essentially Amundi's U.S. manufacturing arm for traditional active asset management products. We currently have $52 billion of AUM from clients outside the U.S. from 60 countries where net flows remain positive. The Pioneer Investment's U.S. sales infrastructure that was present before we closed the transaction remains intact and is operating well and coordinating with Amundi's distribution teams in their local geographies throughout the world. We are investing in this area to increase capacity for more sales outside of the U.S., which will include legacy Victory products going forward. We currently manage 19 UCITS and are working on several new ones that we will be launching in the next quarter or so. These new UCITS will be a mix of Pioneer Investments and legacy Victory franchise strategies. Priorities for the launch of new products outside of the U.S. were established through a bottom-up approach with Amundi's distribution teams, advising on which products have the greatest demand. Another immediate opportunity identified relates to the current demand from their clients in Asia for U.S. exchange-listed ETF products. The investment performance of our existing UCITS is excellent. The average performance ranking is in the top quartile for all periods and year-to-date average ranking is in the 11th percentile per Morningstar rankings. What makes this partnership unique is its structural design compared to historical and typical industry cross-border distribution agreements. When Amundi contributed its U.S. business to Victory, it was their in-house U.S. investment manufacturing arm, which they sought to expand to better satisfy demand from their clients across the globe. Victory Capital now serves as Amundi's U.S. manufacturing platform, which includes the legacy Pioneer Investments product set, but also includes the legacy Victory product set. Most of the other cross-border distribution deals are not set up this way. Essentially, we took over an efficient and highly productive U.S. investment manufacturing arm that was deeply ingrained in the Amundi distribution system, and we are now adding legacy Victory products to it. Think of a freight train moving forward on the tracks, and we are just adding the Victory freight cars to an already fast-moving and fully operational train. This is why we are so excited about the opportunity over the long term. The economic alignment is there for the organizations as well, in addition to Amundi's 26.1% economic ownership. There is a sharing of the fees by both organizations at the point of sale. Amundi earns fees if they sell Victory products and Victory earns fees for being the investment manager. In a lot of cases, the Amundi point-of-sale fee exceeds the stand-alone fee if they were selling an Amundi manufactured product, given the active nature of our product set, and that is all before factoring in the 26.1% economic ownership. As far as the opportunity set goes, we are very excited about the entire Asia region where there is a high demand for U.S. dollar-denominated products. The Middle East is another market that has caught our attention. Amundi has a great distribution network in both regions. In Europe, Amundi enjoys a dominant position in many distribution channels and geographies that are very difficult to penetrate. I also want to make a point here with some of the recent news reported from Amundi around their UniCredit distribution relationship that this is not a material part of our business and we don't expect this to impact the momentum outside of the U.S. Through Amundi's international networks, joint ventures and third-party distributors, they have one of the industry's most effective and deep global distribution engines. The combination of our expanded U.S. product set, Amundi's existing infrastructure, aligned incentives at the point of sale and Amundi's global competitive positioning creates a transformational opportunity for Victory. We look forward to reporting on our progress in these markets as sales begin to ramp up in 2026. Slide 7 showcases VictoryShares, our rapidly expanding ETF platform. The beginning of 2023, we saw a market opportunity and evaluated our ETF product mix and positioning. We began investing more in marketing and distribution resources, specifically dedicated to growing sales of our ETFs. Since then, we have launched several new active and rules-based ETFs and rationalize others to optimize our offerings. We also began hiring dedicated ETF sales professionals and entered into several strategic distribution partnerships. The result has been an acceleration of growth with year-to-date positive net flows of $5.4 billion, which represents a 53% organic growth rate through the first 9 months of this year. On an annualized basis, this is tracking at a greater than 70% organic rate of growth. We currently have a suite of 26 ETFs, spanning from active to rules-based with an average fee rate of 35 basis points. We entered this business 10 years ago when we acquired CEMP, which had less than $200 billion of ETF AUM. Since that time, we have grown this part of our business at a 29% compound annual growth rate with AUM currently approaching $18 billion. Moreover, our operating platform enhances the benefits of scale and reduces the cost of manufacturing ETFs, which results in margins that meet our firm requirements. Our expectation is that this strong sales momentum will continue to accelerate in the U.S. and that it will be compounded by the non-U.S. sales of our ETF products that I just covered. Turning to Slide 9. Our investment performance remains excellent. Nearly half of our mutual fund and ETF AUM ranks in the top quartile based on Morningstar's 3-year rankings. Nearly 2/3 of our mutual fund and ETF AUM, which is rated by Morningstar, earned a 4- or 5-star overall rating. This encompasses a diversified set of 56 different products. Majority of our AUM continues to outpace respective benchmarks over all measurement periods. On Slide 10, we highlight our capital allocation strategy. Our deployment of capital is primarily targeted at both organic and inorganic growth opportunities. As a growth company, reinvesting in the business and pursuing strategic acquisitions represents our most compelling use of shareholder capital. Given our growing earnings and cash flow, we can also return capital to shareholders. This flywheel effect has resulted in returns to shareholders of more than $1 billion since we went public, which is particularly noteworthy when you consider that the company received just $156 million in net proceeds from the initial public offering. This demonstrates our ability to create substantial shareholder value through disciplined capital allocation, coupled with consistently excellent execution. Our presentation deck includes a chart showing our industry-leading earnings growth on Slide 21 and which highlights our quarterly fully diluted EPS growing from $0.40 to $1.63 for a compound annual growth rate of 21% since our initial public offering in 2018. When we discussed our acquisition strategy, we are often asked about industry fragmentation and our ability to continue executing on our strategy, given we have grown so quickly as we are a much larger company now. On Slide 11, we highlight the opportunity set that we see before us. It is important to note that our core strategy has not changed since the management buyout in 2013. We built a unique platform that is ideally suited to thrive given the secular trends challenging the industry. It is also especially conducive to creating value and growing earnings from acquisitions. Considering that every deal starts with a strategic foundation to it, our company has become much better positioned over the years from a competitive perspective. Each of the acquisitions listed on the left-hand side of the slide was highly strategic. We diversified our investment and product capabilities, enhanced expanded and globalized our distribution capabilities, gained firm-wide size and scale and added leadership talent with each of these transactions. The financial benefits were a positive outcome, allowing us to generate growing cash flow, increase earnings and perpetuate our strategy for creating shareholder value. Our runway is very long. We intend to increase further in size and scale, not for growth's sake alone, but to enhance our competitive position in our distribution channels by investment and adding complementary investment capabilities to optimally position us at the point of sale with our diverse set of clients. As the industry remains very fragmented, the reason for joining forces with a larger partner have only intensified over the years, increasing complexity, regulatory burdens, technology requirements and access to distribution are all becoming more difficult for asset managers that are not mega-sized. Even with the large acquisition universe, we will always remain selective, disciplined and strategic. As you can see from the graphic on this slide, the opportunity set is vast. According to Simfund data, there are currently more than 450 asset managers in the U.S. with more than $10 billion of assets under management. Our focus area has increased in size that we have grown over the years, and we are focused on evaluating firms with between $50 billion and $200 billion of assets under management, where there are more than 110 prospective targets, managing $11.1 trillion. In the event we execute on a transaction on the smaller side, it would necessitate being something highly strategic in the areas of investment capabilities or distribution access. We are also routinely asked about our views on adding alternative investments to our product range. While we do not aspire to become a full-on alternatives manager, we do want to have a curated alternatives product set as we are projecting that some of our clients will increase allocations to alternative investments. Over the years, we have actively evaluated opportunities to acquire, partner or organically add alternatives. We have been disciplined and avoided rushing into this space. However, we do remain attracted to the principles associated with alternative investments around diversification for clients' portfolios. We've never tried to offer every product in every asset class and instead centered around where we have expertise. For alternatives, we will center around specific investment themes, such as income, for example. Our strategy here is consistent with our broader approach of selective expansion, and we will continue to maintain focus on our core strengths as a firm. With that, I will turn the call over to Mike, who will go through the financial results in more detail. Mike? Michael Policarpo: Thanks, Dave, and good morning, everyone. The financial results review begins on Slide 13. Revenue increased 3% from the second quarter to $361.2 million. Average assets for the quarter rose 7% quarter-over-quarter, and our fee rate was 47.2 basis points. GAAP results include approximately $21 million of transaction-related compensation, restructuring and integration costs, which was down from $54 million in the prior quarter. As a result, GAAP operating income was $138 million, a 47% increase from the second quarter. On an adjusted basis, we delivered adjusted EBITDA of $190.5 million, which yields an adjusted EBITDA margin of 52.7%. Adjusted net income with tax benefit grew to $141.3 million or $1.63 per diluted share, up 6% and 4%, respectively, from the prior quarter. Our weighted average shares rose in the period due to having a full quarter of the shares issued to Amundi from the acquisition outstanding. If you recall, we delivered the share consideration to Amundi in multiple tranches during the second quarter. Our capital allocation strategy remains active and disciplined. We opportunistically repurchased 1.8 million shares during the quarter as we took advantage of market conditions to return capital to shareholders. The Board also declared the regular quarterly cash dividend of $0.49 that will be payable on December 23 to shareholders of record on December 10. Combined with our regular quarterly dividend, we returned a total of $163 million to shareholders in the quarter, which was an all-time high. Our balance sheet remains strong with $116 million of cash and a net leverage ratio of 1.1x, providing us with financial flexibility to continue pursuing our inorganic growth objectives. On Slide 14, you can see the diversification in our $313.4 billion in total client assets. In addition to diversification in the U.S. across channels, client types and asset classes, our mix of business continues to benefit from meaningful diversification into non-U.S. geographies. As of quarter end, 17% of our AUM was from investors outside the United States. Our long-term asset flows continued to improve on all metrics, as you can see on Slide 15. We've now achieved our fourth consecutive quarter of improving net long-term flows with net outflows of $244 million. Annualized, this is just 33 basis points of our AUM. Gross sales of $17 billion represent a 10% increase from Q2, displaying the growing traction of our expanded distribution platform. Particularly encouraging is the breadth of positive contributors during the quarter. Multiple investment franchises generated positive net long-term flows, including Victory Income Investors, Pioneer Investments, RS Global, Trivalent and our VictoryShares ETF platform. This diversification across franchises demonstrates the strength of our platform and successful distribution across all channels. Our revenue performance on Slide 16 reflects the enhanced scale of our platform and higher average AUM in the quarter. We expect the fee rate to remain in the 46 to 47 basis point range moving forward, reflecting the current mix of our business. On Slide 17, you can see our expense details for the quarter. Overall, expenses declined from the second quarter. Recall that we incurred several onetime expenses associated with the Amundi transaction in the previous quarter. Compensation expense on a cash basis was 22.8% of revenue. To date, we have achieved $86 million of net expense synergies on a run rate basis and should have $100 million of net expenses removed by the end of the first quarter of 2026, the first full year of ownership. After which, the final $10 million in net expense reduction will be realized over the course of the next 12 months. Turning to Slide 18, we cover our non-GAAP metrics. Our adjusted metrics highlight the underlying strength of our business platform. Adjusted net income with tax benefit increased 6% quarter-over-quarter to a record $141.3 million. Earnings per share grew 4% to $1.63, also a new record high. It is worth highlighting the power of our unique and successful inorganic growth strategy to deliver significant earnings growth. Adjusted EBITDA has grown 57% when comparing Q3 2025 to Q3 2024. Similarly, adjusted net income with tax benefit grew 59% over the same period. These metrics demonstrate our ability to generate strong cash flow and maintain strong, consistent margins even while we are integrating a new business. Wrapping up on Slide 19, the balance sheet continues to strengthen and provides us with enhanced financial flexibility. We successfully refinanced our term loans during the quarter. We combined them into a single loan, lowered our interest rate by 35 basis points and extended the maturity out 7 years to 2032. Our net leverage ratio is at our lowest level since our initial public offering. This deleveraging, combined with our strong cash generation, positions us with significant financial flexibility to execute on inorganic growth opportunities. Our capital allocation strategy remained active during the quarter. We opportunistically repurchased 1.8 million shares as we see tremendous value in our stock at current prices. Combined with our regular quarterly dividend, we have now returned over $272 million to shareholders year-to-date. And during the quarter, we surpassed a total of $1 billion returned to shareholders since becoming a public company in 2018, which is a gratifying milestone. We ended September with $160 million in cash on the balance sheet and our $100 million revolver remains undrawn. When we refinanced our term loan, we also extended the maturity on our revolver by 5 years to 2030. Looking ahead, we expect to continue to return capital via buybacks and dividends while simultaneously pursuing growth initiatives and investing in the business. Our ability to generate robust cash flow puts us in the enviable position to effectively balance investments, pursue strategic and transformational inorganic opportunities and deliver ever-increasing shareholder returns without compromising our financial strength. With that, I will turn the call back to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Craig Siegenthaler with Bank of America. Craig Siegenthaler: Congrats on the 21% annual EPS growth since the IPO. David Brown: Thank you. Craig Siegenthaler: So we wanted to start with an open-end question on M&A. And I heard some of your commentary on the different size ranges of targets and how the larger focus today is in the $50 billion to $200 billion AUM range. But can you refresh us on your views on pursuing more cheap consolidation transactions that are highly earnings accretive versus strategic and organic growth synergistic deals? It sounds like maybe you might be leaning towards larger deals today. David Brown: Well, let me start off and say that, as an organization, we aspire to be a $1 trillion firm. That is our internal goal from a size perspective. And we think eventually, that you will need to be that size to effectively be able to compete over the long term. So our goal is to be a $1 trillion under management. We're $313 billion today at the end of the quarter. And to get there, we'll do a number of different things. The first will be everything we'll do will be strategic. So we are not interested in just doing financial transactions where you're buying businesses, consolidating and there's no strategic element to it. So everything starts for us, does it make our company better? Does it satisfy one of the strategic elements that we're trying to satisfy? And so a lot of that will come with the size and scale of transactions. So we will move up. If you think about that triangle, we'll be at the top of that triangle. And we could do something larger than the $200 billion focus area. Anything on the smaller side would be highly strategic. It could be a product perspective. It could be a distribution or something else. But for us, it starts off with strategy. And then what comes from it because of our platform are really the ability to create shareholder value through earnings growth, through margin expansion and through organic growth. And I think we can satisfy all of those things with our acquisition strategy. And lastly, I'd say is we really believe that the industry is going to go through an even more intense consolidation phase as we look forward. All of the reasons firms want to partner to get larger, to deal with issues such as technology, regulatory access for distribution, those things are intensifying. So we're going to go through a phase where there's going to be lots of consolidation. And we think we have an unbelievable platform to be a really good partner to those firms. And I think we have a great track record and history of executing on them. Craig Siegenthaler: Our follow-up question is on the Pioneer acquisition. You're running ahead of even the more recently revised synergy target. So we're curious, what is driving that? Is it conservatism? Is it use of AI and other technologies that have improved operating efficiencies? Did you find more redundancies in certain functions? And I heard your commentary that it's not from the investment team. So just curious on that. Michael Policarpo: Craig, it's Mike. Yes, I think as we approach every acquisition and evaluate the opportunity to consolidate operations and administrative functions onto our platform, as you said, it does not impact the investment teams. And so that's our #1 goal. It doesn't impact the investment teams, their process, leave them alone, let them have all the tools that they need to manage money and continue down the path that they're on from a strong investment performance perspective, and we've accomplished that with the Pioneer Investment integration. Of course, as we look at planning, we go through the exercise and spend time, figuring out where the opportunities lie. We probably tend to be conservative as we go through that because there's always unknowns as you're going through an integration. But as we've gone through the Pioneer integration, I think we found opportunities around technology, we found opportunities in kind of investment operational areas to provide technology to alleviate some additional costs that we anticipated. So I think it's really just the opportunity set to go through an integration. We've got highly skilled people that have done this for a number of years, and we're able to find opportunities as we go through the process. So I think, again, conservatism and then execution has allowed us to kind of achieve quicker and then higher than we had originally anticipated from a net expense synergy. But we are making investments. I just want to reiterate that, that these expense synergies are net of investments that we're making in areas of the business. Dave's comments on the non-U.S. distribution in the prepared remarks, I think, is an area we're making investments because we see a tremendous opportunity there, product development, data, technology, distribution partnerships. So as we think about all of that bundled together, I think we've just been in a position where we've been able to accelerate some of the recognition and be a little bit higher than we anticipated as well. David Brown: Yes. And I'd like to add to that. I think the other perspective is we are in the investment management business, but we're also in the acquisition business. And I think unlike many other investment managers, who are in the investment management business that have decided to do acquisitions because they need to grow, we are in the investment management business. But we've also developed a skill over a long period of time on doing acquisitions. And so part of the success we've had in synergies, the ability to invest while we do acquisitions on our platform and the ability to exceed some of the goals we put out there maybe from a numbers perspective and from a timing perspective, really comes down to is we have a second part of our business, which is doing acquisitions. Operator: Your next question comes from the line of Michael Cho with JPMorgan. Y. Cho: I just want to start on the non-U.S. business. You walked through some commentary there. You said positive net sales in third quarter since the close. Wondering if you could give some color on the magnitude of the flows and maybe the strategy that help drive those inflows. And Dave, you talked through about sales ramp in this segment into '26. And so maybe some more color on your expectations on the magnitude of uplift for Victory in this segment. David Brown: Sure. Thank you for the question. So a lot of the sales because of the infrastructure that has been set up has come through really the Pioneer franchise. The Pioneer franchise is well distributed within the Amundi distribution network. So since acquisition -- since we've closed the acquisition, most of the sales have come through the Pioneer side. That will change going into '26. We'll still have strong sales within the Pioneer side. And we did note on our prepared remarks how good the investment performance is within the UCITS platform. But what will happen in '26 is as we launch kind of the legacy Victory products into the platform through UCITS, through the U.S.-listed ETFs, you'll start to see flows into the legacy Victory products. We've also invested in the infrastructure around selling RFPs and marketing and servicing for the non-U.S. side. As far as sizing, we don't really disclose what the size of the flows are. But I think we did put in our prepared remarks that we do think it's a transformational opportunity, which would lead you to believe that over '26 and forward, we think it's going to be an important sizable part of our growth. It's white space for legacy Victory. We have some distribution outside the U.S. pre the close, but nothing to the scale and nothing to the depth that we have with Amundi. Y. Cho: Great. And if I could just ask a follow-up on the acquisition opportunity set discussion. I mean on the slide and your comments, I mean, it's a pretty wide set of opportunity out there. And I guess that's not -- hasn't changed in years, and it's an attractive segment and strategy. But you have a $100 billion integration going on with Pioneer at the moment. I don't want to rule out mega deals. But are there segments that maybe you're more focused on near term when you look at that triangle chart? And as it relates to all, you called out income, and I don't know if you meant it to call that out in a specific way, but are there classes or themes that you think would maybe fit better with Victory's current platform? David Brown: On the first part, as far as in the middle of the integration, we're well through the integration and you can kind of see that the way the numbers, the net expense synergies have progressed and what our projection is. And so we're really doing well with the integration. And we're getting close to being at a point where we'll be wrapped up. And so we are fully kind of open for business from an acquisition side. I would not rule out a mega size deal. We have the $50 billion to $200 billion as the focused area, but that doesn't preclude us from going above $200 billion, and that doesn't preclude us from going below $50 billion either. And I'd say as far as areas of focus, as I said, we really do start off with the strategic side. We're interested in high-performing products. We're interested in products that have demand today and that we think we'll have demand in the future. We know we have to offer a larger set of products for our distribution partners. And so we'll be focused on all of those things. From an alternative perspective or private markets perspective, the themes that we're interested in income is an example, but not the only one. There are other areas that we think fit nicely with us. And they really do span across different asset classes. And I'd say, I don't want to focus on one of them. But income is an important one. I think income is something that has lasted over time. We have income products today. They're selling well. We know how to sell them. There's lots of demand for them. And so income is one of the themes. But for us, around the private markets and alternatives, we don't want to be all things to all people. We want to do certain things really well, and we want to matter for those certain things, and that's how we'll approach the private market/alternative side. Operator: Next question comes from the line of Alex Blostein with Goldman Sachs. Alexander Blostein: Dave, just building on that last thread, thinking about the private markets and the alt opportunity, in what form do you guys see yourself partnering with somebody in the alt space? We've seen various structures out there, so just curious to think about how. Whether it's explicit M&A or potentially equity stake in you guys by some of the old managers or some form of like investment outsourcing agreements that could be coming up in the next several quarters? Kind of how do you see that volume because clearly, that's -- it's a big part of the market, and it's important part of the sort of toolkit for the wealth advisers that you guys don't penetrate fully? David Brown: Alex, thanks for the question. I would start off saying that we probably are not interested in investment outsourcing. I think that's challenging. I think all of the other scenarios you laid out around ownership, investment, acquisition are within our universe. And I think we're exploring all of them. In our prepared remarks, we have talked about how we have not done a transaction. But over the years, we have been very involved in discussions, analyzing and so we feel really good about our understanding of the space. We feel really good about what we think our clients are desiring and what they will desire down the road. When alts and private markets opens up, especially on the RIA side, on the intermediary side on the retirement side, I think we have a really good understanding. And I'd say from different versions of M&A is how we will approach it. Alexander Blostein: All right. And just to clean up modeling. Fee rate, so I remember there was a bit of an outsized. I think performance fee benefit last quarter. So you kind of saw that step down a bit this quarter. How are you thinking about sort of the go forward on the fee rate relative to the kind of mid- to high 40s where you guys have been? And ultimately, given the mix shift in the business, anything notable you would think about over the next sort of 12 months as the fee rate evolves? Michael Policarpo: Yes. Thanks, Alex. It's Mike. Yes, I think we have kind of said our fee rate should be in the 46 to 47 basis point range long term. We don't anticipate any significant fee pressures. Clearly, the mix of business will impact that. But as we look out for the next 12 months, we feel pretty confident of the 46 to 47 basis points from an ongoing perspective from a fee rate. Operator: Your next question comes from the line of Ben Budish with Barclays. Benjamin Budish: Maybe just following up on that last question from Alex. I think he mentioned the performance fees, which we saw in your Q were quite outsized in Q2. I'm just curious, when we look at the maybe quarterly run rate over the last few years, it's kind of been like the low single digit amount. Is there anything different about the Pioneer assets that you acquired where performance fees might be higher on a run rate basis or should be structurally higher? Anything like that to call out? And I guess what a lot of investors are trying to figure out. Michael Policarpo: Yes. I think the fee rates, again, the 46 to 47 kind of includes how we think about any kind of annualized or annual performance-related fees. The Pioneer funds do have a couple of mutual funds that have fulcrum fees, much like the legacy USA mutual fund business that we acquired. There's a couple of fulcrum fees there that are classified as performance fees. But nothing that I would say is unique or specific. I think as you mentioned, they've been in the 1 to 2 basis point range on an annualized basis for us, and that's probably the same level going forward. It will vary based on business mix again. If we see opportunities to risk share pricing with institutional clients, there could be a component of those fees that are more based on performance. But I think as we look at the business, it's a pretty small amount overall. And again, the way we've built the business, while we are very -- when we look at fee rate, we're very focused on the margin. And so as you think about the way we've structured the expense base of the business with being greater than 2/3 variable, we expect to kind of continue to hold our margins with respect to all the fee rates that we have. Dave mentioned in the prepared remarks, our ETF business, those are, on average, 35 basis points, so a little bit below our fee rate. But again, the margins on that business are strong and contribute to our overall margin base. So that's how we think about it. The performance fees are pretty immaterial from a business perspective. But we focus really on the bottom line, the margin components. Benjamin Budish: Okay. Understood. Maybe just another follow-up too on the M&A and alts discussion. When we listen to a lot of the large cap alt managers, we kind of hear this theme of GP consolidation of more LPs wanting to do more with less. In the credit space, we kind of hear that you need to have really massive sourcing capabilities in order to be effective. Just curious your response to that early. How do you think about what makes sense given the magnitude of what you might be able to acquire in that space? David Brown: Yes. I think for us, we are -- always have been focused on areas where we can win and compete. I think a lot of the large cap alt managers are focused on very large areas, and we're not looking to really compete exactly with them in a lot of those different areas. I also think there is a new kind of area in the market that they're trying to penetrate. And I think traditional managers are there today, which is a lot of the intermediary market, the retirement market, a lot of parts of the RIA market. And I think to win there, there will be different selling strategies that we have used on the traditional side that we'll use on the private side. From an acquisition standpoint, we will approach if we do an acquisition on the alternative side. We'll approach it as we've always approached traditional acquisitions. I think we've been very value conscious. We focus on shareholder value. We focused on acquiring excellent products. And we focus on products that we think we can help grow. And we'll do the same thing there. And I think we have a really good track record. And I think we are an excellent partner for private market investors and also traditional market investors. Operator: Next question comes from the line of Michael Cyprus with Morgan Stanley. Michael Cyprys: Maybe just continuing along the themes on the inorganic topic. I was hoping maybe you could elaborate a bit on the inorganic pipeline, how that composition looks today? How would you just sort of characterize that size, quantity types of properties? How that's evolving now versus 3 or even 6 months ago? And anything you would mention in terms of how close you might be on any of those? David Brown: Our pipeline is full. We're very active in discussions. I don't think that there's anything that we want to talk about today on timing or different types of acquisitions that we would do. But we're having lots of discussions. I think the environment has gotten progressively better over the last couple of quarters from an acquisition standpoint. I think there's a lot of things happening in the industry. The industry is going through a lot of change very quickly because of technology, because of regulatory changes, because of the ability to access distribution is getting harder by the day. And so we've had a lot of discussions, and we're really active. And as I said earlier, we are well through the Pioneer-Amundi integration. So that sets us up to -- when the opportunity presents itself, we'll be able to execute on it. Michael Cyprys: Great. And then just a follow-up on that. As you think about executing on this M&A pipeline over the next 12, 18 months, maybe you could elaborate on what sort of risks that you see that might result in not much getting done there over the next 12, 18 months? And when you're speaking with prospective targets, what is it that may hold them back from looking to transact? David Brown: I think the risks become very unique to the acquisition. So I don't think there's a general thing that I'm concerned about. I think the risks are very focused on the exact target the type of transaction, the structure of the transaction. Most of the risks could be mitigated restructuring and especially with the way we approach acquisitions where it's really around partnering and growing forward as opposed to succession-type planning acquisitions. But as we look at it today, we think the environment is really conducive. And like I said, we're coming to the end of our integration with the Pioneer-Amundi. So we're ready to go. Operator: Your next question comes from the line of Kenneth Lee with RBC Capital Markets. Kenneth Lee: Just following up on the theme of inorganic opportunities, specifically on alternatives, how do you think about the challenge integrating potentially very different cultures or mindsets between traditional and alternative as you look at some of these opportunities, that's usually a point of potential friction there. David Brown: Yes. Thanks for the question. We think about it a lot, and we think about it very carefully. It's probably one of the driving factors why we have decided over the years to just sit back and watch and observe and learn. I think there are different strategies that you can employ to mitigate some of those challenges. You can do that through structuring, you can do that through the types of product sets you talk about. But private market and alternative businesses are different than traditional. And I think that's the challenge. And I think it's why we have sat back and kind of studied and learned and been very patient. And so anything that we do going forward in this space, we will address that issue. We recognize it, and we're glad that we have been able to observe what others have done in the space. Kenneth Lee: Got you. Very helpful there. And just one follow-up if I may, a little bit more housekeeping. Global non-U.S. equity net inflows pretty positive there. Anything to call out either outsized mandates or things of that nature? David Brown: Not specifically in the global asset class, we are seeing a lot of demand for that asset class inside the U.S. and outside the U.S. We have 2 excellent products with 2 different franchises there. So we have good performance, and we also have really, really good distribution around this asset class inside and outside the U.S. So it's just in demand by clients wanting to get access to a global portfolio. Operator: And that is all for the Q&A session for today. This concludes today's conference call. You may now disconnect your lines. Have a pleasant day, everyone.
Operator: Welcome to the IBEX First Quarter FY 2026 Earnings Conference Call. [Operator Instructions] To note, there is an accompanying earnings presentation available on the ibex Investor Relations website at investors.ibex.co. I will now turn this conference over to Mr. Michael Darwal, Head of Investor Relations for ibex. Michael Darwal: Good afternoon, and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments, which may occur. Forward-looking statements are subject to various risks, uncertainties and other factors, which could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on September 11, 2025, and any other risk factors we include in subsequent filings with the SEC. With that, I will now turn the call over to IBEX CEO, Bob Dechant. Robert Dechant: Thanks, Mike. Good afternoon, and thank you all for joining us today as we share our first quarter fiscal year 2026 results. Before I speak to our first quarter results, I want to start by saying that our thoughts and prayers are with the people of Jamaica who are dealing with the devastation left behind by Hurricane Melissa. I would also like to say how proud I am of our ibex Jamaica team who has shown enormous courage and resilience through this tragedy and have worked tirelessly to care for our employees while getting us operational within 24 hours of the hurricane in our Portmore and Kingston sites and as of Monday this week in our Ocho Rios site. I would also like to highlight the great support we have received from our clients who have offered assistance alongside our ibex Cares initiatives to help those who are significantly impacted. Lastly, the BPO community in Jamaica is a tight knit community, and our thoughts and prayers go out to our Jamaican BPO peers and their people. I am pleased to report that ibex carried the momentum we built throughout fiscal 2025 into 2026, delivering an outstanding first quarter with revenue growth of 16.5% and adjusted EPS growth of 74% as we continue to separate ourselves from the pack in the BPO market. Our sustained double-digit revenue growth highlights our competitive differentiation in the CX space. We continue to drive exceptional operational delivery for our existing clients, enabling us to win significant market share from our competition. I am equally proud of our new logo engine that continues to win trophy clients, positioning us well for continued growth and margin expansion. And I'm excited on the progress we have made in our AI automate and translation deployments for our clients. Collectively, this continues to validate our position as a leader in the CX space. Q1 was a very strong quarter. Even more impressive is the performance we continue to stack quarter-over-quarter, leading to powerful momentum into the balance of FY '26. Over the last 12 months, our results have shown explosive double-digit organic revenue growth, which is well above market growth, consistent margin expansion and significant growth in EPS and free cash flow. For the last 12 months, we delivered organic revenue growth of 13% fueled in large part by revenue growth approaching 20% in our high-margin offshore regions and digital-first services. We delivered record adjusted EBITDA of nearly $76 million for the trailing 12 months, up more than 13% from the prior 12-month period, while making key investments for future growth and differentiation. We achieved record [Audio Gap] adjusted EPS of $3.17 on $31 million, up from $25 million in the prior 12 months while investing meaningful CapEx in support of our growth. These results are an output of our sizable and distinct competitive differentiation that we have built and the strength of this leadership team to consistently execute quarter-over-quarter. Paramount to this differentiation is our best-in-class blend of culture, engagement and branding. Our purpose-built Wave iX technology and integrated AI solution suite, connecting seamlessly AI to human agents. And our deep analytics and business insights capabilities. The ibex’ leadership team is able to consistently execute against these points, outperforming the competition, setting ibex’ apart, trusted partner. This playbook was key to us delivering one of the most impressive starts to a fiscal year in our history and has us well positioned to perform throughout FY '26. The ibex’ brand is stronger than it has ever been. Highlighting this is our most recent employee Net Promoter Score of 77, an all-time high and our client Net Promoter Score of 71, up impressively from 68. It is important to note that anything above 70 is considered world-class. These metrics play a critical part in our outstanding client revenue retention of over 98% and validate that our competitive moat is deep and wide. These metrics are also viewed by prospective clients as best-in-class, giving them confidence in choosing ibex as their go-forward partner during the RFP process. We are very excited with the wins we have had in the last 2 quarters, where over this time frame, we have won seven high-profile new opportunities, facing off against our much larger multibillion-dollar competitors. At the core of ibex is our new logo engine that continues to win trophy new clients and our ability to land and expand with these clients. As compared to 2 years ago, our number of clients making up more than $1 million per annum in revenue is up nearly 24%. Clients representing $1 million to $10 million per annum are up over 21% during the same time frame. And the number of clients generating $10 million to $20 million per annum is up nearly 67%. And the average revenue generated by clients with annual spend over $20 million during these periods is up approximately 14%. This powerful combination of winning blue-chip trophy clients and growing significant market share with them, parlayed with our outstanding client retention rates has us on an amazing trajectory of double-digit growth. Q4 of fiscal 2025 marked the shift from proof of concept for our AI solutions to full-scale deployments for several of our key clients. We continue to invest in bolstering our team supporting this critical vector for growth, most recently with the addition of Michael Ringman as CTO. We are in an exciting time in the industry with the intersection of AI and CX. Mike brings an enormous amount of experience in both areas and will help accelerate our leadership position. I am confident that under Mike's direction, our AI technology road map will help further separate ibex from the pack. Coming off a statement year in fiscal 2025, I am proud of our start to fiscal 2026, and I am confident that ibex is very well positioned for success this year and beyond. With that, I will now turn the call over to Taylor to go into more details on our first quarter results and FY '26 guidance. Taylor? Taylor Greenwald: Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our first quarter fiscal year 2026 financial results, references to revenue, net income and net cash generated from operations are on a U.S. GAAP basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA and free cash flow are on a non-GAAP basis. Reconciliations of our U.S. GAAP to non-GAAP measures are included in the tables attached to our earnings press release. Turning to our results. Our first quarter results marked our strongest start to a fiscal year. We achieved record first quarter revenue, adjusted EBITDA, EPS, adjusted EPS and free cash flow. First quarter revenue was $151.2 million, an increase of 16.5% from $129.7 million in the prior year quarter. Revenue growth was driven by vertical growth in retail and e-commerce of 25%, HealthTech of 19.5% and travel, transportation and logistics of 15.4% and was partially offset by an expected decline in telecommunications, our smallest vertical of 22.5%. Importantly, our fintech vertical reached an inflection point in the first quarter and grew 3.4%. And with recent wins, we are confident in the positive trajectory of fintech going forward. Our focused efforts to grow our higher-margin delivery locations and services continues to have a favorable impact on bottom line results. We are really excited that we're winning in all markets and as a result, growing revenue in all geographies. Our highest margin offshore revenues grew 20% in the quarter. Our nearshore locations grew 7% and our onshore region grew 21%, driven by growth of our high-margin digital acquisition services. Revenue mix in our higher-margin digital and omnichannel services continues to strengthen, growing 25% to 82% of our total revenue versus prior year quarter. We expect that we will continue to be successful driving growth in these higher-margin services and regions as we continue to land and expand new clients from our strong pipeline as well as win further share with our embedded base clients. First quarter net income increased to $12 million compared to $7.5 million in the prior year quarter. The increase was primarily driven by the meaningful growth of work in higher-margin offshore regions of 19.5% and operating leverage gained from SG&A expenses as they went from 20.2% to 17.5% of revenue. Fully diluted EPS was $0.82, up from $0.43 in the prior year quarter. Contributing to the EPS growth was the impact from fewer diluted shares outstanding as a result of our ongoing share repurchase program and a lower tax rate. Diluted shares for the quarter were $14.6 million versus $17.5 million 1 year ago. Our tax rate was 11% versus 21% in the prior year due to a discrete tax benefit related to stock-based compensation. We expect our effective tax rate before discrete items to remain consistent at 20% to 22% for the remaining quarters. Moving to non-GAAP measures. Adjusted EBITDA increased 24.9% to $19.5 million or 12.9% of revenue from $15.6 million or 12.0% of revenue for the same period last year. The 90 basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher-margin offshore locations during recent years and stronger operating results. Adjusted net income increased to $13.1 million from $9 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased 74.1% to $0.90 from $0.52 in the prior year quarter. As a company, we are pleased with the client diversification we have established over the last several years. For the first quarter of fiscal year 2026, our largest client accounted for 10% of revenue and our top 5, top 10 and top 25 client concentrations represented 37%, 55% and 79% of overall revenue, respectively, as compared to 36%, 51% and 77% of overall revenue in the prior year, representative of a well-diversified client portfolio. Switching to our verticals. Retail & E-commerce increased to 26.3% versus 24.5% in the prior year quarter. HealthTech increased to 14.5% of first quarter revenue versus 14.1% in the prior year quarter, and travel, transportation and logistics remained relatively flat at 14.1% in the quarter. These results were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the telecommunications vertical decreased to 10.2% of revenue for the quarter versus 15.4% in the prior year quarter as we see lower volume from legacy carriers. Revenues from the fintech vertical represented 11% versus 12.4% of the prior year quarter, though, as I mentioned earlier, grew 3.4% year-over-year and 6.8% sequentially, marking a return to growth and the lapping of prior impacts we had noted at fiscal year-end. Moving to cash flow. Net cash generated from operating activities increased to $15.7 million for the first quarter of fiscal 2026 compared to $7.8 million for the prior year quarter. The increase in net cash inflow from operating activities was primarily due to higher revenues, which drove increased profitability as well as a lower use of working capital. We have seen a notable improvement in our days sales outstanding with DSOs for the quarter at 71 days, down from 75 days a year ago and 72 days as of June 30. We expect our DSOs to remain relatively stable on a go-forward basis. Capital expenditures were $7.6 million or 5.1% of revenue for the first quarter of fiscal year 2026 versus $3.6 million or 2.8% of revenue in the prior year quarter. This increase was primarily driven by expansion in our offshore regions to support growth in these higher-margin geographies. Free cash flow was a first quarter record of $8 million compared to $4.1 million in the prior year quarter. The increase was driven by increased revenues during the current quarter and the aforementioned shorter DSOs. During the quarter, we repurchased 92,000 shares for $2.7 million. We have $10.6 million remaining on our current share repurchase program. We ended the first quarter with cash and net cash balances of $22.7 million and $21.1 million, respectively, an increase from $15.3 million and $13.7 million as of June 30, 2025. To summarize our first quarter of fiscal 2026, we achieved outstanding revenue growth and profitability and once again, allowing us to build on our existing momentum entering the fiscal year. Our revenue growth drove increased operating leverage and positioned us to post record first quarter adjusted EBITDA margin of 12.9%, adjusted EPS of $0.90 and free cash flow of $8 million. Our continued strong financial results and healthy balance sheet are enabling strategic investments in our growing AI capabilities and sales resources as well as further expansion in strategic markets and in our top-performing geographies. Importantly, with our outstanding start to the fiscal year, we have the confidence in our business to raise our revenue and adjusted EBITDA guidance for fiscal year 2026. For fiscal year 2026, revenue is expected to be in the range of $605 million to $620 million, up from $590 million to $610 million. Adjusted EBITDA is expected to be in the range of $78 million to $81 million, up from $75 million to $79 million, and capital expenditures are expected to be in the range of $20 million to $25 million. Our business is well positioned for today and the years ahead, and we are excited about the future ibex as we head into the second quarter of fiscal year 2026 and beyond. With that, Bob and I will now take questions. Operator, please open the line. Operator: [Operator Instructions] Our first question comes from David Koning with Baird. David Koning: Great job again, and you're doing exactly what you said, winning share with some of the new offerings. So congrats on all that. Robert Dechant: Thanks, Dave. Yes, we're really proud of the quarter, proud of the role we're on. David Koning: Yes. Yes. Great. Well, maybe first off, what have you seen -- we've had this Gen AI kind of swirling around for really a few years now. And is it becoming a catalyst both for the industry and for you guys or more for you than the industry? Or maybe talk a little bit -- maybe also just add in how much of revenue is it now? And maybe where is it going in a few years? Robert Dechant: Sure. So let me kind of break those up into two parts, Dave, if that's okay. When I look at through the ibex lens, the whole AI, the excitement and also the risks that people have talked about this relative to this industry. I think for ibex, it's been all positive. And let me explain on that a little bit. We have leaned in harder, faster, I believe, than anybody in the industry on AI. And that's -- I would say, there's two dimensions to that. One where we are deploying AI internally to help us execute better, to provide tools and capabilities for our agents to deliver better for our teams to run the business more effectively, efficiently and drive better performance on our client KPIs. We're further along than anybody. And that's why I think one of the reasons we continue to outperform and then take significant market share. So that is a boom for ibex because of what we are doing above and beyond anybody else. On the other side, the second dimension I look is the -- more around using AI for customer experiences, right, where you automate experiences, AI for language translation, et cetera. Again, I think that we have leaned further into that than anybody else. We're not afraid of what that might do to our business. I feel like much of the market is very cautious and hesitant about leaning in. We're leaning in and our clients are seeing that we have a unique end-to-end model that really goes from AI all the way through to a human agent to provide an integrated and seamless solution for them. To me, I think that puts us in a really ideal position. And when clients are making decisions, they look at that and they say, this is the type of partner that we want because not only can they execute today on the BPO side, but they're looking forward and they're future-proofed basically in their model. They can -- we can grow and evolve with them as AI gets deployed more. So it's a real competitive advantage for us, Dave. And I believe that, that's something that is when you look at what our results are, when you look at the growth rates that we're doing, the margin expansion, et cetera, I think that's an output of that. Now to your question about how much of that is? We're still real early in the game. So it's not moving the needle on a whole lot of revenue and margin expansion yet, but we're positioned well. And we expect probably by the end of fourth quarter of this year and into FY '27, you'll start seeing that being another vector of growth and margin expansion that will move the needle for us. David Koning: Yes. Got you. And maybe just a follow-up. Gross margins were a little down in Q1, and I think you're holding full year margin about intact. You're raising revenue, raising EBITDA, but margin about intact. Is that -- is some of this a function of just all the investment going into AI? And I know your benefits from offshoring and AI ultimately is better margin, but maybe right now, it's a little lower as you invest? Robert Dechant: Yes, Taylor, I'll throw that over to you. Taylor Greenwald: Yes. No, absolutely. So you're right. Our margins are -- for the year, we're projecting our EBITDA margin to be about 13%. So that's up a bit from the prior year. And what you're seeing and what we're seeing is we're getting a lot of operating leverage out of our SG&A costs because we're able to hold our SG&A costs relatively flat while our revenue is growing at a much faster pace. So seeing good leverage on the SG&A line. Gross margins are down a bit, particularly in Q1 and a bit in Q2, and you saw it in Q1. And really, a couple of impacts there. One, where as you know, we're ramping in India, so still making investments and aren't at the long-term margins we anticipate that we'll get to in India. And then probably more impactful in Q1 and Q2, it's a good problem to have. We have more wins, which mean more training revenue. And as you know, we defer the train revenue, but experience the costs upfront. So we are seeing a little bit of headwind on the gross margin line on that as well. But long term, we feel very good about gross margin, as Bob said, the vectors of growth in terms of the offshore geographies and then once we start getting a more meaningful impact from AI should certainly have a positive long-term trend on gross margins. Operator: I would now like to turn the call back over to Bob Dechant for any closing remarks. Robert Dechant: Josh, thanks. And everybody, I appreciate you listening. I'm really proud of this team, proud of the consistent performance quarter-over-quarter that we continue to deliver as we separate ourselves from this industry, from our competitors. I'm also proud of what they've been doing in responding to emergencies and issues like we incurred in Jamaica with Hurricane Melissa. And even in markets like the Philippines, there's been a whole lot going on there with typhoons as well as earthquakes, and that team has -- my team has delivered and kept us amazingly resilient for that. I want to thank them all for that because they are the best in the industry. And with that, thank you all for listening, and we look forward to talking to you next quarter. Good night. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the TruBridge 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, Dru Anderson. Thank you. You may begin. Dru Anderson: Thank you. Good morning, and welcome to the TruBridge Third Quarter 2025 Earnings Conference Call. Leading today's call are Chris Fowler, President and Chief Executive Officer; and Vinay Bassi, Chief Financial Officer. This call may include statements regarding future operating plans, expectations and performance that constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company cautions you that any such forward-looking statements only reflect management expectations and predictions based upon currently available information and are not guarantees of future results or performance. Actual results might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties and other factors, including those described in public releases and reports filed with the Securities and Exchange Commission, including, but not limited to, the most recent annual report on Form 10-K. The company also cautions investors that the forward-looking information provided in this call represents their outlook only as of this date, and they undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. At this time, I will turn the call over to Mr. Chris Fowler, President and Chief Executive Officer. Please go ahead, sir. Christopher Fowler: Thank you, Dru, and thank you to everyone for joining us today to discuss our Q3 results. To start the discussion, I want to take a moment to reflect on the meaningful progress we've made to improve the quality of our earnings and our financial performance over the past 7 quarters through our continuous focus on streamlining and improving our operations. Specifically, we have expanded margins, accelerated free cash flow generation and delevered the balance sheet, all while continuing to support our customers with mission-critical solutions that improved financial and operational performance across rural and community hospitals. Vinay will provide a much deeper dive into the details of the success these initiatives have yielded, but I'm very proud of the work we've done and believe we can replicate these efforts in other areas of the business. Turning to the specifics of the quarter. Our bookings came in at $15.5 million on a TCV basis compared to $25.6 million sequentially and $21 million year-over-year. While light from an absolute dollar basis, our focus is on continually improving the quality of bookings, which is more evident when you look at the numbers on a year-to-date basis. As we've mentioned in the past, investments we've made to improve our products, specifically within our Encoder business, have allowed us to win higher-margin deals. Along with positive traction within Encoder, we've seen our percentage of financial health bookings in the 100- to 400-bed space increase from less than 20% in 2024 to more than 30% in 2025. As we continue to succeed in RCM tech and in the 100- to 400-bed space, we create more paths to improve bookings performance quarter-over-quarter and year-over-year. While the bookings performance of Q3 was underwhelming, our fourth quarter sales efforts are off to a strong start. Historically, bookings have been weighted towards the end of the quarter, but October meaningfully outpaced what we typically expect to book in the first month of a given quarter. Broadly speaking, our bookings still remain chunky, so we're not claiming victory just yet, but we are pleased with the signs that whatever was restricting pipeline conversion in Q3 seems to have alleviated. In today's operating environment, not all factors are within our control, so we continue to focus on addressing the challenges that are within our control, like ensuring that we have the highest quality talent on board. In early October, we officially welcomed Mike Daughton to the TruBridge team as our Chief Business Officer. In this role, Mike will be leading sales and marketing and our client success teams. He is focused on building high-performing teams, holding key team members accountable for exceptional client management and consistently delivering enterprise value and measurable impact. Our expectation of Mike is that he will raise our sales efforts to the next level in terms of order and efficiency, providing more visibility into tracking bookings and revenue growth and focusing on those high-quality opportunities I spoke about earlier. He brings a skill set that will empower our team to go after the larger market, which we know is obtainable with the right discipline and focus. To further enhance our performance initiatives, I'm pleased to report that our offshore transition is progressing as we start to operationalize the strategic plan we spoke about last quarter. We continue to fill out our leadership team, including a Head of India to ensure we have the right leaders in place to execute on the plan. The team has made the foundational improvements necessary to ensure success and put in place a thorough metrics-driven approach we believe was imperative to allow us to turn the transition machine back on. As of October 1, we have begun at a measured pace. Currently, we have 2 transitions in the works with more coming in the fourth quarter. As we restart our transitions, we are working in close coordination with each customer to provide a clear understanding of the expectations of how the process will unfold. We have also put in place structural support to ensure continuity of staff from our domestic workforce on each transition to guarantee a stable handoff. As we look ahead to 2026, we plan for transitions to accelerate gradually, but we'll only do so when we are confident it will not cause disruption. As we move carefully through the customers to be transitioned, we will track performance metrics with a hyper focus on stability, communication and each customer's comfort with the process. We stated all along that this process is key to continued margin expansion in 2026 and beyond, but we will not sacrifice the quality of our service to get there. Our commitment to the strategic transition process would not receive a great grade if improved client retention wasn't an intended outcome. While the absolute number of client losses increased a little in Q3, our net retention -- our net revenue retention for our core CBO business has shown a couple of points of improvement from the first half of the year. Renewals were stronger in Q3 than in Q2, and that trend continues into October. As we've shared previously, we initiated a multi-quarter process earlier this year to enhance client success quality, drive operational efficiency and strengthen the capabilities of our India team. I believe this, along with the careful and strategic approach we've taken to restart our transition process will give us the opportunity to improve our long-term client retention. Looking ahead to the end of 2025 and into 2026, the keys to sustainable and durable performance for TruBridge are clear. First, implementing the rigor that has led to success in improving our financial health into more areas of the business; two, deliver higher-quality bookings; and three, carefully and thoughtfully executing on our strategic transition process and in turn, improving customer satisfaction with the goal of increasing our retention. During the third quarter, we made strategic and effective changes to drive sustainable long-term performance. We know we have the right foundation in place to progress in these areas and look forward to providing updates in the coming quarters. With that, I'll turn the call over to Vinay to review the financials. Vinay? Vinay Bassi: Thanks, Chris, and good morning, everyone. Let me take a few minutes to highlight some of our financial achievements over the past 2 years, review our third quarter results and then provide additional color on our outlook for the remainder of the year. We have come a long way since I joined in January 2024 with significant improvement on adjusted EBITDA margins, free cash flow and leverage. Specifically, adjusted EBITDA margins are expected to expand approximately 600 basis points from 2023 to year-end. Year-to-date, free cash flow has improved dramatically by $20 million, and we have paid down debt by approximately $35 million, reducing our net leverage position by more than 2 turns, all amidst a complex operational backdrop. As Chris mentioned, since the end of 2023, we have meaningfully improved the quality of our earnings, and we believe we are in significantly better positioned today than just 2 years ago. One of our top priorities was to drive efficiency and cost optimization across the organization. We put in place many process improvements, including an ROI-driven assessment of our spend, clear accountability to the business units and the monthly forecast reviews of the business. Throughout 2024, we implemented cost optimization decisions along with the change in mindset throughout the organization, resulting in an adjusted EBITDA margin of 16.5% for the year, a 340 basis point improvement compared to 13.1% in 2023. In 2025, based on the midpoint of our guidance, we are on track to reach 19% margin for the full year, yielding another 260 basis points increase. Continuing with the same mindset, we have identified and are in process of actioning additional cost optimization opportunities in combination with incremental net savings expected from the global workforce transition. I'm confident that as these actions compound, we will be able to deliver continued improvement in our margin profile in 2026 and beyond. Further, disciplined ROI-driven cost management and investment decisions have significantly optimized our product development spend. As a result, capitalized software spend has decreased by 30% from approximately $18 million in the first 3 quarters of 2023 to approximately $12.5 million in the first 3 quarters of this year. Additionally, year-to-date capitalized software spending as a percent of revenue has come down to 4.8% from 7.2% in the corresponding period. These efforts, along with the working capital improvement have resulted in growth in our cash balance from $3.8 million at the end of 2023 to approximately $20 million today. In addition, free cash flow, which we define as operating cash flow less CapEx, was $15 million year-to-date in 2025 compared to a cash outflow of $5 million in the corresponding period in 2023. Further, we have also continued to strengthen our balance sheet through disciplined debt reduction, paying down debt by approximately $35 million since January 2024 and improving our net leverage ratio from 4.4x in Q4 2023 to approximately 2.2x by Q3 2025. This also marks the third consecutive quarter with net leverage below 2.5x, highlighting our consistent focus on balance sheet improvement and capital efficiency. As cash generation continues to accelerate, we are well positioned to conclude the year with a meaningfully stronger financial foundation. Turning now to our Q3 2025 financial performance. Total revenue for the third quarter was $86.1 million, an increase of approximately 2% compared to a year ago. However, I'd like to point out the year-over-year growth included approximately $1 million impact from the sunset of our Centriq product in the Patient Care unit. Normalizing for this, revenue would have been up 2.8% versus the prior year. Further, recurring revenue continued to be high around 94% of our total revenue. Financial Health revenue of $54.5 million in the quarter represented approximately 63% of the total company revenue and was essentially flat year-over-year. Mid-single-digit growth in our CBO business and strong growth in Encoder revenue were offset by slower performance in other products. Financial Health gross margin of 46.2% were almost flat compared to the prior year as labor efficiencies were offset by incremental investments in the stabilization of CBO business. Patient Care revenue was $31.6 million, reflecting 5.3% year-over-year growth, primarily driven by growth in SaaS and some nonrecurring revenues offset by the sun setting of Centriq. Excluding Centriq, growth in Patient Care revenue would have been 8.9% in the third quarter. Patient Care gross margin expanded meaningfully to approximately 60%, an increase of nearly 370 basis points versus last year, driven by continued operational efficiencies in vendor spend and labor costs. Operating expenses of $40 million represented 46% of revenue and were roughly flat to the prior year as a slight increase in investments in product development for Encoder and Financial Health and in support functions were offset by lower nonrecurring costs. All of this resulted in third quarter adjusted EBITDA of $16.3 million with an 18.9% margin, representing a 155 basis point improvement compared to 17.3% in the third quarter of 2024. This margin expansion is primarily driven by gross profit improvement and our disciplined approach to cost management. We ended the quarter with $19.9 million in cash, an increase of $11.3 million, 132% year-over-year and an increase of $7.6 million sequentially, primarily driven by improved profitability, lower interest expense and disciplined working capital management. Net debt was approximately $144 million, and our net leverage ratio improved to 2.2x, marking our strongest leverage position in several years. In Q3, we repaid approximately $2 million on our debt, including normal amortization payments, bringing our total payments to approximately $35 million since January 2024. Finally, turning to guidance for the fourth quarter and the rest of the year. For the fourth quarter of 2025, we expect revenue of $86 million to $89 million and adjusted EBITDA of $16.5 million to $19.5 million. And for the full year 2025, we expect revenue of $345 million to $348 million and adjusted EBITDA of $65 million to $68 million. Once again, we will be increasing the adjusted EBITDA guidance for the full year despite lowering the midpoint of revenue. At the revised midpoint, margins expand approximately 260 basis points compared to the prior year, driven by a continued focus on prudent cost management and ROI-driven cost rationalization. As communicated in the past quarters, we expect the adjusted EBITDA margin in Q4 2025 to be around 20% at the guidance midpoint. While we will not provide formal 2026 guidance until early next year as usual, we do want to take this opportunity to share that we believe we will deliver further adjusted EBITDA expansion -- margin expansion of around 200 basis points from the midpoint of our full year 2025 guidance. This is primarily driven by the next level of cost optimization actions we have identified and are in process of realizing along with the net savings from the next phase of global offshore transitions. Through the first 3 quarters of the year, I'm pleased with the meaningful progress in improving the quality of our earnings and looking forward to end the year on a strong financial footing. There is still more work to be done and will continue to be laser focused on continuous improvement. Thank you. And I will now turn the call over to Christine for questions. Operator: [Operator Instructions] Thank you. Our first question comes from the line of Sarah James with Cantor Fitzgerald. Gabrielle Ingoglia: This is Gabie on for Sarah. I had a quick question about bookings coming in at $15.5 million, and I appreciate the fact that they're higher quality bookings. But can you talk about where this landed in terms of your internal initial expectations for bookings in the quarter? And if we should expect the cadence of bookings to be with higher EBITDA margin from here? Christopher Fowler: Yes. So first of all, Gabie, and please share our congratulations to Sarah as well. Obviously, not the number that we were looking for. I would say we're probably 20% off the number of what we were expecting for the quarter. And again, it wasn't like we saw a negative decision influence on this. It was more of a delayed decision. And I think that, that's showing through in the early success of Q4 and what we're seeing in October. I will say we are being very intentional on the bookings that we're going after on the Patient Care side focused on our conversion to the SaaS model, which is a larger overall booking and does have some more complexity. So it has expanded the buying decision at the customer level. On the Financial Health side, we continue to be optimistic about the opportunity that's out there. We've just got to continue to get these hospitals to see the value and the need for the additional services to come in. As the regulatory landscape settles down a little bit, I do think that the focus on improvement for the RCM side of the house for the hospitals will continue to be a priority and will lead to increased bookings efforts going forward. Vinay Bassi: And on the margin question that you asked on -- sorry, on the bookings, Gabie, we are seeing an improved quality from a margin also like for example, bookings for our Encoder business, which is like a very high 70%, 80% margin. Year-to-date 2025, the bookings percent for Encoder in the last year to this year has almost doubled. The more we get, the better margin we have. But obviously, the mix of the bookings, obviously, have a bearing, but I think we have seen a trend to be positive. Gabrielle Ingoglia: Okay. Great. And then just one more follow-up on that, if I could. In the conversations where the hospitals are choosing to delay implementation, are you seeing that any commonality and if it's referenced to Medicaid funding cuts coming through One Big Beautiful Bill? Or is the $50 billion rural hospital fund and net benefit coming up at all in your conversations? And could that be a tailwind in '26? Christopher Fowler: Yes. I think it will be a tailwind. Again, I think the uncertainty is, again, not changing people's decision. It's just delaying them for just a beat. We are seeing that pickup. I think there's also the impact of the vast majority of our hospitals are on a calendar year budget cycle. So you take the impact of the budget process and what they're doing or what they're trying to figure out relative to what the OBBB may have an impact on their next year is creating some delay. But again, as they're shoring up what their spending needs are for '26, we're starting to see those decisions accelerate. Operator: [Operator Instructions] Our next question comes from the line of Jeff Garro with Stephens. Jeffrey Garro: Maybe we'll follow up a little bit on the bookings front and great to hear the mention of October bookings success. It sounds like that kind of reflects timing, maybe some decisions pushing out of Q3. So with that, I was hoping you could discuss kind of the broader pipeline, the state of the pipeline. And then kind of help us level set bookings growth expectations for the year. Just more specifically, if some decisions pushed out from Q3 into Q4, is there enough in the pipeline that kind of pro forma back half of the year could deliver in line with maybe what you were intending or could compare to last year as well if there should be an expectation for overall growth or not? Christopher Fowler: Yes. First of all, Jeff, thanks for being on the call. Yes. The short answer is I would say, I wouldn't draw a straight line to the second half of the year based on the early success of October kind of covering up the shortfall in Q3 at the very top of it. With that being said, obviously, we are focused on driving as much performance from a bookings perspective into this year as we can. Obviously, Mike has stepped in with guns blazing at the first of October. And while a leadership change can also lead to a little bit of disruption, we're pleased with the continuity and the smooth transition that we've seen from Dawn to Mike and how the team has rallied behind him. So with that said, we're off to a good start. We've got the bookings. We've got the pipeline coverage to cover what we expect for Q4. However, what we could see is a very similar outcome to Q3, which is those bookings continue or those pipeline decisions continue to delay. We try to balance the optimism that we're seeing with making sure that we're setting the right expectations, obviously. So with that said, we're very focused on making sure that we convert on those opportunities to close this year. I think the balance of the rest of this year will also set up how we're looking into going into next year. What is positive as we see the pipeline build is that there is coverage on a lot of fronts. You heard Vinay talk about the Encoder and the success we're seeing there. We're seeing that same optimism build on the Patient Care side with the SaaS bundled opportunities and again, in the Financial Health, both from a cross-sell standpoint and into that net new space. So now it's just a matter of seeing that pipeline convert to those bookings opportunities. Jeffrey Garro: Excellent. I appreciate that. And I want to follow-up on one thing there. On the new sales leadership, just kind of hoping to get a little bit more detail on kind of what's needed. What's the path from here? What's the process for improvement? I want to recognize there have been efforts over the last couple of years to increase quality and consistency of bookings. And I think for the most part, you've had positive returns there. So curious how -- or whether new leadership will need to bring in new tenants and rebuild from the ground up? Or is there a case to be made that Mike can just be an immediate difference maker as you try to convert more of that pipeline to close bookings? Christopher Fowler: Yes. That's a very fair question. I would say it's probably a mix of both, right? I mean if you look at how we've gone through the other areas where we brought new leadership, I think we want to make sure that we're taking advantage of the talent and the continuity that we have, but also make sure that we're finding the resources and the talent that have been down the road that we're trying to go down. I think the Financial Health organization is a great example of that, where we brought in additional talent and leadership under Merideth that have been a part of a transition to India or operating a successful global environment. So I think that Mike will do the same thing. I think that we're going to make sure that we have the right infrastructure in place for him. I'm excited about also tying together the sales, marketing and the client success function together under him so that we do have that holistic view of a customer, both in the pipeline and all the way through as we onboard them and that we've got single ownership there and accountability to deliver on the fronts that are most important to us, which is the retention and the growth. So a long-winded way of saying. I think that we're going to give Mike the latitude to bring in the team and support him to make sure that we're able to achieve the bookings goals that we've got set for ourselves over the coming years. Jeffrey Garro: Excellent. That helps. One more for me. I want to make sure to hit the retention front. And I'll ask it in part as a housekeeping question, whether you have the recurring backlog number that usually shows up in the 10-Q on hand. And then from a fundamental perspective, I wanted to recognize that that's a bit of a legacy metric, but given the focus on renewals and retention and recurring revenue, I think there's a case to be made that it's as important as ever. So I would appreciate any color on whether you guys are managing to that backlog, I guess, most specifically the recurring backlog metric internally. Vinay Bassi: Yes. So we do look at the backlog because we run it this way. And that number, obviously, will be in the 10-Q coming up in the next few hours. So on how we do it, just to give you a little color more is on backlog for that number is contracted and noncontracted. Contracted revenue is at a client level, monitored with ins and out to it. And like we said, in like in Financial Health, it's like 95%, 96% is generally how we start the year. Like if you look at our recurring numbers that I see right now, it's 94%, Financial Health is like 95%, 96%. So we have a huge contracted revenue there. But obviously, the ins and out of that is attrition that happens and how the bookings fill in, that gives the impact on the growth rate. But I think the backlog number should be coming out in the 10-Q in the next few hours. Operator: Our next question comes from the line of Gene Mannheimer with Freedom Capital. Eugene Mannheimer: Let's see. I just had 2 quick ones. The Patient Care revenue was the best growth we've seen in some time. You called out a combination of SaaS build and nonrecurring. I mean, since that SaaS build is pretty gradual, I'm thinking you recognize some good nonrecurring business in the quarter. Can you tell us what specifically customers are buying in those cases? Vinay Bassi: Yes. So you're right. There are 2 parts to that. Obviously, SaaS based on a few wins of the past shows up as a double-digit growth. But the nonrecurring part -- and nonrecurring part is the mix of implementation revenues when it gets recognized because sometimes it gets recognized at the time. Then there are other nonrecurring revenues for some regulatory related consulting work and regularly related stuff that we do. So we do see an uptick and some of compared to last year, we saw in this quarter a little bit more. But if you see that swings happen by Q4 of '24 was a much higher number because of these. So the swings on -- other than SaaS continued build on our partner ecosystem that we see on products like Multiview and all implementation, sometimes we do have some hardware sales requested by the customers and some ancillary products. Eugene Mannheimer: Okay. Great. That's helpful, Vinay. And my follow-up would be, your comment earlier was encouraging to hear, if I heard it right, 200 bps of EBITDA margin expansion expected next year. I'm thinking that, that's going to be due primarily to continued cost efficiencies? Or should we infer that there could be an acceleration of revenue growth next year? Vinay Bassi: That's a great question. That's a great question, and I think you guys know me well by now. For me, 200 bps is primarily from the cost optimization first. And that's not just a hope part of it. As you saw last year, it's a continued effort, and it will continue. We did the lowest level last year, which was all that Chris and I and the leadership team could see. And then over the years, we built our next level of optimization with help from internal teams and our adviser, external advisers. And this momentum that we started more in the second half of this year is targeting a little more complex solutions like Patient Care support, tech support, cloud ops and ROI driven on some other products. So that line of sight and the potential that I see next year and at least that DNA, I can say, we have built in there, we are maniacally going to make sure it falls to the bottom line. So that's one of the big drivers for that number along with the benefits that we would see from the global workforce optimization should be there. Now obviously, some implicit scenarios on revenue growth has been built. But as Chris said, it's a little early for us to give that guidance. But from a various scenario analysis we did, we felt getting that 200 bps from our midpoint of our guidance was very achievable. And that is what we felt to share with you because 4 quarters back, we shared that we will be touching 20% in Q4 '25, and that was a good goal for us. So it helped us be laser focused. So at this point, we felt 200 bps over and above was -- we could see a few paths to get there. Christopher Fowler: Yes. And I think, Gene, I think there's also a trend that we're trying to create here. So if you go back 2 years ago, as Vinay came in, and you're seeing the stability and the financial improvement in the company, that's the first layer of the cake. The second layer is Merideth and her team coming in and stabilizing the Financial Health business and accelerating and delivering on that opportunity for the global transitions, which is going to be the big driver in the margin expansion next year. And then now we brought in Mike to really kind of focus on that upsized opportunity from a sales growth and quality of bookings going forward. So it's the 3 layers of the cake that we've built. We've shown that we can bring that right talent and deliver on the financial excellence. We're delivering on the performance from the financial health and the stabilization of that business. And now we look forward to success on the sales front going forward. So just continuing to replicate a model that seems to work in each of the areas to put it all together to extract the value we think is still ready to unlock in the organization. Operator: Mr. Fowler, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments. Christopher Fowler: Thank you, and thank you to all for your continued interest in TruBridge, and thanks to all of our team members for their continued efforts at the company and all that they do. And lastly, a very early Happy Veterans Day. We express our gratitude to all those that have served our great country, and hope everyone has a wonderful weekend, and thanks again. Goodbye. 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.
Operator: Good morning. My name is Joanna, and I will be your conference operator today. I would like to welcome you to Canopy Growth's Second Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] I will now turn the call over to Tyler Burns, Director, Investor Relations. Tyler, you may begin the conference call. Tyler Burns: Good morning, and thank you for joining us. On our call today, we have Canopy Growth's Chief Executive Officer, Luc Mongeau; and Chief Financial Officer, Tom Stewart. Before financial markets opened today, Canopy Growth issued a news release announcing the financial results for our second quarter fiscal 2026 ended September 30, 2025. The news release and financial statements have been filed on EDGAR and SEDAR and will be available on our website under the Investors tab. Before we begin, I would like to remind you that our discussion during the call will include forward-looking statements that are based on management's current views and assumptions and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements included at the end of the news release issued today. Please review today's earnings release and Canopy's reports filed with the SEC and SEDAR for various factors that could cause actual results to differ materially from projections. In addition, reconciliations between any non-GAAP measures to their closest reported and GAAP measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated. Following remarks by Luc and Tom, we will conduct a question-and-answer session where we will take questions from analysts. With that, I'll turn the call over to Luc. Luc Mongeau: Good morning, everyone, and thank you for joining us today. It's great to be with you again to share the continued progress we're making in building a competitive, profitable and trusted leader in the global cannabis market. The second quarter was one of our strongest to date, reflecting real measurable progress driven by our continued disciplined focus on fundamentals. Q2 highlights included continued momentum in our Canadian adult-use cannabis business, consistent growth in our Canadian medical cannabis business and a stronger and significantly healthier balance sheet. Together, these actions give me confidence in our ability to sustain progress and deliver results for quarters to come. Turning to our Canadian adult-use cannabis business. Net revenue increased 30% year-over-year in Q2, driven by demand for our Claybourne infused pre-rolls and our new All-In-One vapes from Tweed and 7ACRES. Stronger relationships with Canadian boards, large accounts and independent retailers drove continued distribution gains, including a 20% year-over-year distribution increase amongst Alberta independent retailers. We also improved our service levels with on-time, in-full rates across key accounts, reinforcing our reliability with retail partners. For the 6 months period ending September 30, 2025, revenue is up 37% compared to the same period last year. This growth reflects the renewed momentum of our adult-use cannabis business following the actions taken earlier this year to tighten our product portfolio, streamline execution with boards and retailers and refine our sales model. Looking ahead, we're building on this momentum with additional Claybourne innovation, new genetics across our core flower portfolio and PRJ brands and plans to reach a broader group of consumers later this year. We're also elevating our cultivation standards, including manual and refined post-ARBT processes to deliver superior flower, ensuring consumers experience the very best of what Canopy has to offer. In our Canadian medical cannabis business, net revenue grew 17% year-over-year, marking another consecutive quarter of growth. We're staying true to our medical strategy, offering the right products at the right price, consistently in stock and for the right patient segments. During the quarter, our BC Georgia site became an exclusive medical cultivation facility, producing craft and small batch cannabis dedicated to Spectrum patients. DOJA is also exclusively end bucking and hand trimming all product, which is a deliberate investment to drive quality and consistency in the Spectrum patient experience. We're also seeing continued growth among insured patients with registration up 20% year-over-year and almost tripling since 2021. This continued growth speaks to the reliability and care within our medical business. Looking ahead, delivering a superior patient experience remains central to how we will continue growing this business despite proposed government changes to medical reimbursement. In international markets, frankly, I'm disappointed with our performance during the quarter, where net revenues declined $3 million. Performance in Europe was primarily the result of supply constraint and internal process challenges. Flower sourced from sales in Europe did not meet required quality standards and internal process gaps limited our ability to deliver supply to Germany from our Canadian GMP facilities. I want to be clear, Canopy Growth is fully committed to the European market. We have already mobilized a dedicated effort to improve supply chain execution, which includes daily management oversight of logistics, product road maps and licensing. We expect operations to stabilize and begin improving as we exit the fiscal year with international markets remaining a key part of our path to profitability. At Storz & Bickel, the launch of the new VEAZY Vaporizer was received with great enthusiasm by consumers globally and generated early sales momentum, helping contribute to sequential quarter-over-quarter revenue growth. While the VEAZY only contributed to 3 weeks of performance during the quarter, we're seeing positive signals into Q3 and together with holiday seasonality, expect continued growth through the remainder of the year. Looking ahead, I'm encouraged by the momentum at Storz & Bickel. The team's commitment to precision engineering, medical grade quality and design excellence continues to set the brand apart, and that's what will drive performance in the long run. On operating expenses, our SG&A savings program launched earlier this fiscal has delivered over $21 million in annualized savings, surpassing our $20 million target ahead of schedule. As we build a culture of fiscal responsibility, the team continues to identify additional savings opportunities while delivering top line growth. On profitability, we made strong progress this quarter with margin expansion and disciplined cost management that's moving us closer to positive adjusted EBITDA. We're also taking further steps to meaningfully lower our cost of goods sold through streamlining processes, smart investment to deliver improved yield and quality as well as tighter supplier management. Before I close, I'd like to touch on the Canadian federal government's recent proposal to reduce reimbursement for veterans who use prescribed medical cannabis. These proposed changes have the potential to seriously impact access and quality of the care and services that veterans have come to rely on. As one of Canada's leading medical cannabis providers, we believe consistency and fairness in access to care is critical. We're continuing to assess the proposed changes and are engaging across the country to ensure the needs of patients remain front and center. In closing, Q2 demonstrated continued progress across our core businesses, including positive momentum in our Canadian medical and adult-use businesses and expanded product lineup at Storz & Bickel and a clear action plan underway to improve execution in our international markets to drive future success. As we further sharpen our focus on quality, patient and consumer experiences and disciplined execution, I'm confident we have the right strategy, focus and team to become a trusted global provider of elevated cannabis experiences. Thank you. I will now turn the call over to Tom to walk through the financial results in more detail. Thomas Stewart: Thank you, Luc, and good morning, everyone. I am proud of our disciplined execution, including stronger financial performance, rigorous cost-saving initiatives, a significantly deleveraged balance sheet and sustained cash flow improvements. Our adjusted EBITDA loss narrowed significantly year-over-year, driven by growth in the Canadian cannabis business, along with lower SG&A expenses and efficiency gains. As a result of the progress made, we have eliminated the conditions that once raised substantial doubt about the company's ability to continue as a going concern. This is a significant accomplishment for Canopy Growth. We had $298 million of cash and cash equivalents as of September 30, 2025, which exceeded debt balances by $70 million. During Q2, we prepaid USD 50 million on our senior secured term loan, capturing roughly USD 6.5 million in annualized interest savings. As a reminder, the company has no significant debt maturities prior to September 2027. Moving to our detailed segment results and starting with cannabis. Q2 cannabis net revenue was $51 million, up 12% compared to a year ago. This growth was led by the Canadian adult-use business, up 30% year-over-year, primarily driven by strong consumer demand for our Claybourne infused pre-rolls and our new Tweed All-In-One vape offerings. Canada Medical also continued to perform well, up 17% from the prior year, supported by growth in patient registrations, larger order volumes and a broader assortment of products on our Spectrum Therapeutics store. International cannabis sales underperformed during Q2, decreasing 39% from the prior year, which was driven by supply challenges. While we expect this decline in sales to improve in the back half of the year, we are proactively identifying opportunities to mitigate the near-term impact on revenue and preserve our focus on consolidated profitability. Cannabis gross margin in Q2 was 31%, down year-over-year, but up sequentially from 24% in Q1. The sequential improvement in cannabis gross margin primarily reflects the impact of price increases on select Canadian products, improved sales mix within Canada and improvements to flower and fulfillment costs. These improvements were partially offset by the previously discussed European underperformance and inventory provisions. I will now speak about the performance of our Storz & Bickel segment. Storz & Bickel net revenue in Q2 was $16 million, up 5% sequentially, driven by strong consumer demand for the new VEAZY vaporizer. Year-over-year, revenue declined 10% as the prior year period benefited from strong Venty and Mighty sales as well as strong performance on the back of favorable German regulatory reforms. Storz & Bickel gross margins increased to 38% in Q2 compared to 32% in the prior year period. Gross margins in the prior year were adversely impacted by discounts provided to clear out the remaining Mighty stock, which was retired in favor of the Mighty+ device. Moving on to operating expenses. SG&A expenses in Q2 declined 13% year-over-year, reflecting disciplined cost management and the benefits of our ongoing restructuring program. The decline in SG&A expenses year-over-year was primarily driven by reductions in headcount and professional fees, partially offset by higher investments in advertising and promotions made in support of new product launches that occurred during the quarter. Since launching our cost-saving initiatives in March, we have achieved $21 million in annualized savings, exceeding our initial $20 million target. We are continuing to identify and implement additional cost reductions to further improve our structure while ensuring no disruption to our core capabilities and ability to execute in key markets. Turning to adjusted EBITDA. Our Q2 loss was $3 million compared to a loss of $6 million a year ago. The year-over-year improvement was driven in part by the positive impact of our lower cost base and improved margins, partially offset by the negative impact of lower international cannabis revenues and inventory provisions. I'd like to now review our cash flow. Free cash flow was an outflow of $19 million in Q2 fiscal '26, down from an outflow of $56 million in the same period last year. The year-over-year decrease in free cash flow is primarily driven by a reduction in cash interest payments as a result of our debt paydowns as well as year-over-year improvements in working capital. For fiscal '26, we expect to achieve significant improvement in free cash flow, driven primarily by a reduction in cash interest costs due to lower debt balances, tighter management of working capital and improved financial performance. I'd like to now provide our outlook and priorities for the remainder of fiscal '26. In our cannabis business, we expect improved performance in our Canada adult-use channel over the remainder of fiscal '26, driven by a robust innovation pipeline of focused product formats and tight alignment with cannabis boards and retailers. We will continue to monitor developments around the Canadian federal government's proposed changes to the medical cannabis reimbursement program for veteran and RCMP patients. As more information becomes available and should the budget pass, we will assess its impact on our business and what our next steps may be. Excluding any impact of these potential changes, we would expect Canada medical cannabis top line to continue to grow in the back half of fiscal '26. In international markets cannabis, we are focused on stabilizing and realigning operations in Europe. For the remainder of fiscal '26, we expect revenue in the region to remain generally consistent with the second quarter levels with growth expected as we exit the fiscal year. In Australia, we anticipate that our recently launched flower products, along with upcoming new format introductions will support continued sequential growth in the second half of the fiscal year. For Storz & Bickel, we expect stronger performance over the remainder of fiscal '26, driven by the successful launch of the VEAZY at the end of our second quarter as well as strength coming from the holiday selling season. However, the year-over-year comparison comparisons are likely to be challenged due to the ongoing economic uncertainty that exists, particularly in the U.S. and the negative impact this is having on consumer sentiment. While U.S. tariffs have created pressure on Storz & Bickel's profitability, we remain focused on mitigating their impact through disciplined cost management and operational efficiencies. Turning to cannabis gross margins. Excluding the potential impact to Canadian medical reimbursement levels, we expect sequential improvement in cannabis gross margins over the remainder of fiscal '26, driven by top line growth and additional production efficiencies and cost savings. In our outlook for Storz & Bickel gross margins, we expect sequential improvement over the remainder of fiscal '26, driven primarily by top line growth and cost-saving initiatives. As we move into the second half of the year, our priorities remain firmly grounded in execution, efficiency and disciplined financial stewardship. The deliberate actions we have taken to improve our operations, launch exciting new products in core categories, strengthen the balance sheet and reduce costs have materially reinforced Canopy's foundation for long-term stability and growth. This concludes my prepared remarks. We will now take questions. Operator: [Operator Instructions] The first question comes from Bill Kirk at ROTH Capital Partners. William Kirk: Luc, you talked about the supply chain challenges impacting international. I know you mentioned quality standards. But what specifically do you have to change to reopen that pipeline? And is the solution going to be more costly than the prior product pass into the German market? Luc Mongeau: Thank you for the question. Let me just give you a bit more context on this. So I've been in the business with 9 months. We pretty much started the transformation on the organization on day 1. I'm thrilled overwhelmingly with everything that's happening in the business, and we see it in the results today. So we're driving growth in Canadian medical and adult-use business. Margin is improving sequentially. Cost control, we're well ahead of objective, of targets and chasing for more of supply chain, is improving. As I said, Europe, sadly, I'm disappointed, and I thought we would be ahead in the transformation. That being said, we're on it. We've moved to, as I mentioned, a daily management oversight of the situation. We're retooling the route to market end-to-end, and we're making significant progress. Let me get now to the specific of your question. So we're retooling to a place where we will be able to satisfy European demand for the foreseeable future from our Canadian GMP facilities. So Tom, please feel free to jump in while I'm done. But I do not see any increases in the cost of the flower that we will be providing to Europe. So we should be able to achieve superior margin there in the quarters to come. And as we -- I see us -- the outlook for me is a much stronger position as we exit the fiscal year. So Tom, anything to add? Thomas Stewart: No, I think the only other thing I would say, Bill, is there's not a lot of additional investment. This is about execution with the assets that we have today. So we also need to make sure we're -- we have a proper supply coming out of kickern. But overall, this is a story of execution, and Luc and I are managing this quite closely. Luc Mongeau: Absolutely. And if I may add, as you can see by the amount of time we're spending on this, this is extremely important to us, and we're extremely close to situation. We're expanding the number of strains we are growing for Europe, which allows us to broaden our portfolio of products significantly. At the same time, we are broadening our distribution retail offering in Europe, which as well will open up the market for us quite significantly. William Kirk: And then, Tom, the ATM was used pretty aggressively in 2Q. Can you talk about the decision to use it now and in that size? And then given the magnitude in the quarter, how should we think about issuance going forward? Is it done? Thomas Stewart: Yes. So I would say, Bill, we're continuously evaluating our capital requirements and funding strategies to ensure we have an optimal capital structure and that balances cost efficiency with financial flexibility. You're aware, we launched the new program at the end of August. Ultimately, for us, we want to make sure we have that optionality in the market. But I think it'd be -- it wouldn't be appropriate to speculate on how it would be used. We have the program in place to the extent we need to draw on it, but we're active prudently with those proceeds. Operator: The next question comes from Aaron Grey at Alliance Global Partners. Aaron Grey: First question for me. I just wanted to double back a bit on international. I know we've talked about it in the past. I just want to bring it up again in terms of your current supply chain. Are they still happy with some reliance on third-party products? Obviously, you guys have some of your own product, you can also export internationally. Do you feel like there's any need to increase the verticality that you have to supply the international markets because of some of the supply chain issues? Or do you feel like there's still a lot of opportunity to find quality product to sufficiently meet the potential demand in international markets? Luc Mongeau: Yes. Some of our -- thank you for the question, Aaron. Some of the challenges came from flower sourced out of Portugal. So we're out of this right now. As I said earlier, we have plenty of capacity within our own GMP -- Canadian GMP facilities. So we're confident that we will be able to supply from our own source grown flower. We're not writing off having third-party flower in the future. But right now, we're really retooling the entire route to market with our own grown flower, which we have enough capacity for the foreseeable future. Aaron Grey: Okay. Great. Second, you made some nice progress on the profitability. And you mentioned continued progress towards positive EBITDA. Any updates in terms of some of the key levers and timing of when you might expect to get to profitability? I know it's something that you guys have stopped doing in terms of specific time lines, but fair to say you'd be disappointed if you didn't achieve it in some time of calendar 2026, your fiscal year either back half or front half of '27. Thomas Stewart: I would say, Aaron, we're controlling what we can control. And right now, the cost savings measures we're taking, we know will empower us to get to an improved adjusted EBITDA performance. I think it's too early to speculate at this point in terms of when that would be. But I think as you can see from the results, this has been our strongest quarter, while albeit a loss, it's our narrowest loss that we've had to date in my recent memory. So I think your -- the changes we're making in the organization is going to fully support that. And we'll keep pushing as much as we can here. Luc Mongeau: Yes. If I may add on top of this, positive adjusted EBITDA is our main and remains our main priority. That's why we're over-indexing and really retooling Europe to make sure we fire on all cylinders. Operator: [Operator Instructions] The next question comes from Frederico Gomes at ATB Capital Markets. Frederico Yokota Gomes: First question, just given the growth that you're seeing in your cannabis platform, the outlook for an adult-use, Canadian medical, international medical as well, how are you looking at your capacity right now? Do you foresee any need to invest an additional capacity, I guess, in the near future, like meaningful investments if the business keeps growing? Luc Mongeau: Thank you for the question. As I mentioned, we're doing smart investment to really unlock yield and quality of the flower that we're growing in our own facilities. We've looked at this large and wide. We're confident with limited investment that we can meet the demand and meet the growth targets that we have. Tom? Thomas Stewart: Yes. Thanks for the question, Fred. Yes, we believe our footprint, primarily with our cultivation in Kickern is sufficient to meet our needs. A lot of the focus and investment that we're making is really to improve our yield and the quality of our flower coming out of that facility, but we wouldn't expect a significant amount of additional capital investment needed to meet the demand. So I think it's -- again, it's executing with the assets that we have and improving utilization across the board. Frederico Yokota Gomes: And then just a second question, just on the -- I guess, related to that, balance sheet now in a net cash position. You obviously have access to capital and you're a good position here. But I guess if you could talk about the capital allocation priorities that you have now that you have no significantly reduced debt. Thomas Stewart: Yes. So from my view, Fred, the $300 million of cash with no near-term debt obligations, it really provides further optionality for us when it comes to evaluating our capital structure and evaluating potential investment opportunities to grow and strengthen our business. The cash also provides us with flexibility to capitalize on these potential opportunities, but also mitigate risks as market conditions fluctuate. As we all know, cannabis is a highly volatile space. So I think for right now, we're evaluating potential accretive options that are out there. But ultimately, we want to make sure we remain resilient and stabilize this company and focus on the business that we have today. Operator: The next question comes from Pablo Zuanic at Zuanic & Associates. Pablo Zuanic: Luc, I will ask my two questions upfront. One, on the vape launch. I mean, obviously, the Claybourne launching pre-rolls has been very successful. Can you give more color in terms of the vape launch? Is it just in All-In-One? Or are you also planning in 510 cartridges -- are we talking All-In-Ones just in distillates or also live resin or live rosin, liquid diamonds? If you can just give more color on how you think about the category, especially in terms of room for innovation and also the price competition there. There's been a bit of a race to the bottom, it seems on All-In-Ones. That's in terms of vape. In terms of -- my second question is more in terms of the U.S. business. I know that you've said, look, the U.S. is more of a long-term opportunity, and I understand that. But it would help if you can give an update in terms of where things stand with Canopy USA, especially in terms of any help you had to give to Acreage in terms of balance sheet or guarantees. I think in the past, the company bought debt from AFC Gamma. I don't know what happened recently in the June quarter or September quarter in terms of help Acreage operate, especially from a balance sheet and cash flow perspective. Luc Mongeau: Hope you are doing well. Let's start with the vapes and Tom will jump in for the U.S. So we're thrilled with the early results we're getting with our All-In-One. So as I mentioned, we launched Tweed, 7acres. We did really well. We actually ran out of stock. So we had to accelerate replenishment of first wave. As I mentioned, we're launching -- we're about to launch Claybourne in all-in-one vapes as a first entry. We're very encouraged by the gross margins that we're able to achieve with these products. So we're putting out there product of superior quality. So we're pricing them appropriately. And they've been margin accretive for us. As it comes to the full spectrum of live resin and so on distillate and liquid diamonds and everything. There's more developments to -- that will come there. We're committed to being a leader in All-In-One vapes. It is a key market, key growing market. So more news to come there and make sure to try the new Claybourne All-In-Ones as they come out. I was able to sample them this week. And it's what we stand for, superior elevated experiences with quality products, and those deliver on all of that. Tom, do you want to give some insights about the U.S.? Thomas Stewart: Yes, sure. So Pablo, a couple of points in your U.S. question there. So there are no guarantees between Canopy Growth and Canopy USA. So Canopy USA is an independently run and managed enterprise. They did have new financing over the summer from their lender, and the team has been working diligently to deploy that capital in the areas where they see the highest return. Overall, their focus now is on execution and really bringing the 3 companies together and executing well in the U.S. space. But to be clear, there's no funding new or otherwise with Canopy USA and Canopy Growth. Operator: This concludes Canopy Growth's Second Quarter Fiscal 2026 Financial Results Conference Call. A replay of this conference call will be available until February 5, 2026, and can be accessed following the instructions provided in the company's press release issued earlier today. Canopy Growth's Investor Relations team will be available to answer additional questions. Thank you for attending today's call.