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Operator: Hello, and welcome to the SES AI Third Quarter 2025 Earnings Release and Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to the Chief Legal Officer, Kyle Pilkington, to begin. Please go ahead when you're ready. Kyle Pilkington: Hello, everyone, and welcome to our conference call covering our third quarter 2025 results. Joining me today are Qichao Hu, Founder and Chief Executive Officer; and Jing Nealis, Chief Financial Officer. We issued our shareholder letter just after 4:00 p.m. today, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter and today's conference call webcast in the Investor Relations section of our website at ses.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions and uncertainties, which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. The risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. This afternoon, we will review our business as well as results for the quarter. With that, I'll pass it over to Qichao. Qichao Hu: Thanks, Kyle. Thanks, everyone, for joining today. We had a record third quarter with more than $7 million in revenue. That's more than 100% growth over the second quarter. Our all-in on AI strategy is working remarkably. Today, I want to highlight some of the successes we've seen with this strategy and what it means for the future. We reached a major milestone this quarter that we expect to have far-reaching consequences across the revenue machine we described in detail during our last call. That milestone was the release of our latest version of Molecular Universe, MU-1.0. MU-1.0 is a powerful and complete end-to-end AI for science workflow that includes 5 features, ask an Agentic LLM with access to what we believe is the world's largest database of battery relevant literature, search and formulate what we believe are the world's largest databases of battery relevant molecule and formulation level properties enabled by GPU-accelerated quantum mechanics computation and machine learning accelerated property prediction, end design and predict chemistry-specific and chemistry-agnostic machine learning models, respectively, that can accurately predict battery state of health and end of life. Due to the popularity of the enterprise tier, we also launched 3 sub-tiers within enterprise to provide greater value to more enterprise users. In addition to cloud-based molecular universe, we expect to launch on-premise molecular universe, providing greater data security to more enterprise users. This new on-premise capability, which we will be describing in more detail in the coming months, addresses specific security and privacy needs of the world's largest battery makers that should unlock a greater share of our addressable market. We are incorporating MU1.0's Ask design and predict into our ESS products deployed by UZ around the world to collect data for on-site model training. This unprecedented ability for safety and health prediction, combined with reduced maintenance costs, truly helps differentiate our products and attract new customers. Since we completed the acquisition of UZ Energy in mid-September, our ESS revenue has been growing and is already responsible for approximately 45% of our third quarter revenue. We're very excited about the revenue potential of deploying Molecular Universe to enhance our ESS products. MU1.0' Ask, Search and Formulate are also helping our users identify several new electrolyte materials that we are commercializing. These include: one, improved low-temperature rate performance of lithium ion phosphate lithium-ion cells for ESS applications; two, improved cycle life for 12% silicon lithium-ion cells for EV application; and three, improved cycle life for lithium metal and 100% silicon lithium-ion for drones and UAM applications and many more. To supply these materials discovered by Molecular Universe to our customers, we entered into a joint venture agreement with Hisun New Energy Materials, a leading electrolyte manufacturer with 150,000 tons of annual capacity to contract manufacture these materials, so we stay CapEx-light, laying the groundwork for exciting revenue growth in the coming quarters. Another revenue opportunity we expect to grow in 2026 and beyond is in drones. A dependable supply chain of high energy density pouch cells is extremely rare and critical to the development of the American drones industry. To better address this burgeoning market, we are leveraging our Chungju, South Korea cell factory, incorporating the latest materials discovered from Molecular Universe to meet customer demands. In terms of potential revenues from EV, we completed B-sample line site acceptance test this summer with one auto OEM. As a result, in 2026, we expect to start commercial supply of electrolyte materials and partner with them for cell production. Overall, it's hard for us to comprehend a more consequential period than what we have experienced over the past 2 quarters, particularly as it relates to delivering on the goals we outlined coming into this year. For instance, we noted we wanted to break into the ESS market in a big way. Now we've done so with the acquisition of UZ Energy, and the acquisition has already delivered significant revenue in 2025. We launched 3 versions of Molecular Universe this year. The discoveries made by us and our customers so far have accelerated our push into materials to supply them through the Hisun JV. We'll have more to share on our fourth quarter call about how we expect 2026 to shape up for us, but we expect success for us will look like a hardware, software integrated platform with multipronged and multi-revenue streams. As Molecular Universe, a complete AI for science workflow SaaS platform accelerates innovation across all battery chemistries, we are working with our JV partners to provide a dependable hardware supply chain for the cells developed from Molecular Universe. Just as AI for science is completely changing other industries, Molecular Universe is now transforming all battery chemistries across all applications. We are excited about the revenue growth potential brought by Molecular Universe and we'll continue to assemble the best talent, data and compute resource needed to build AI for science for energy transition. Lastly, I want to express my gratitude for our teams who are working super hard to make all of this happen. And thanks to all of you for being on this journey with us. And now here's Jing for financial updates. Jing Nealis: Thank you. I will discuss our financial performance for the third quarter of 2025 and provide some context on how we are deploying our capital to support SES AI's long-term growth and then the all-in on AI strategy Qichao mentioned earlier. Revenue for the third quarter was $7.1 million, representing a $3.6 million or 102% increase from the previous quarter. Our Q3 revenue was approximately a 55-45 split between our service revenue from our automotive OEM customers to develop AI-enhanced lithium metal and lithium-ion battery materials for EV applications and product revenue, primarily from UZ Energy's energy storage system sales. For the full year 2025, we are updating our revenue guidance to $20 million to $25 million due to UZ's contribution going forward. Gross margin was 51% for the third quarter, which is a combination of 78% gross margin from the service revenue and 15% gross margin from the product revenue. As a reminder, with UZ Energy now part of SES, we expect gross margin variation from quarter-to-quarter as our service and product revenue mix will fluctuate. Our GAAP net loss for the third quarter was $20.9 million or negative $0.06 per share. In Q2 2025, our GAAP net loss was $22.7 million or negative $0.07 per share. As of September 30, we had 365 million Class A and Class B shares outstanding, which were down $1.3 million from the previous quarter, mainly due to the share repurchase we executed during the third quarter. In the third quarter, we repurchased and canceled 1.3 million Class A shares for a total investment of $1.6 million or roughly $1.20 per share. We utilized $14.3 million in cash for operations in the third quarter. We exited the third quarter with a strong liquidity position of $214 million. As mentioned, we closed the UZ acquisition in September and recognized some UZ revenue during the third quarter. We see a tremendous opportunity to grow the UZ Energy business from approximately $10 million to $15 million in projected full year 2025 revenue to a much larger growth in the coming years as we execute our go-to-market strategy that Qichao outlined to make market share gains in the $300 billion global ESS market. When we report Q4 earnings, we expect to provide a more definitive outlook on how we see the full year 2026 revenue growth shaping up from UZ's growth in ESS, SaaS subscription use, contributions from Hisun JV and potential for the start of commercial production of electrolyte and/or battery cells from automotive OEMs, drones and robotics. The potential growth of these revenue streams, which all have different margin profiles will be much larger than what we have experienced in 2025, but the growth isn't linear from quarter-to-quarter and the margin may vary quarter-to-quarter as well. Looking ahead, we remain focused on executing our strategy while continuing to grow our top line while remaining financially disciplined. With substantial liquidity, we are well positioned for sustainable growth and long-term success. We appreciate your continued support and confidence in SES AI. Thank you. Now I will turn the call back to the operator. Operator: [Operator Instructions] And our first question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: On the Hisun JV, can you talk about how that opportunity came about? Was the company paying for Molecular Universe access? Or was this sort of an internal project at SES? And then what type of battery will this electrolyte enable? Qichao Hu: Derek, so very good question. And actually, the Hisun JV came as a request by some of the Molecular Universe enterprise users. So Molecular Universe since we launched this -- earlier this year has been growing really fast. And we had almost every major battery company and battery materials company in the world trialing this. And so in addition to the SaaS platform, both on the cloud and also on-premise, several of the battery companies that are using the Molecular Universe enterprise tier also ask us, okay, we found these materials, these formulations, these molecules through Molecular Universe. Why don't you just make these and then sell these to us because they currently buy electrolytes from companies. So it's a quite mature business model. So we said, okay, yes. we're happy to sell these materials to you. These are new formulations that they cannot buy anywhere else. And so we formed this joint venture. It's a CapEx JV we control. We control 90% of the JV, and we contract manufacture with a company called Hisun to produce this formulation, and then we sell that formulation to the cell makers. And then some of the applications, so in the call, I listed 3 and then actually all 3 are being produced. So the most popular one is a new formulation to improve low temperature performance of LFP for ESS batteries. A lot of these LFP batteries for ESS, when they're deployed in like Northern Europe, these cold places, they don't work so well when it's a low temperature. Another one is for cell phone applications. So it's a high-voltage electrolyte for LCL cells. And then another is a 12% silicon lithium-ion cells for EV applications also to improve the cycle life. So these 3, we are requested by the user, the cell maker to actually supply these materials at commercial scale to them. And this was discovered through the Molecular Universe platform. Derek Soderberg: And I guess just to that point, I guess I wasn't imagining a JV coming out of this first in Molecular Universe. Can you just talk about how you expect the monetization of that business to sort of play out over the next year, beyond sort of JVs, do you expect Molecular Universe to grow sort of as a traditional Software-as-a-Service business where every quarter you sort of add additional seats? Or do you expect there to be sort of like a stair step up on revenue as you sign kind of larger agreements? How do you sort of see the monetization of MU playing out sort of over the next year? How should we think about it? Qichao Hu: Yes. So MU is a mix of SaaS platform and materials. And then for the SaaS platform, and then we laid out the different tier pricing on the website, molecular-universe.com. And so we have the individual tiers and then the number of individual tiers is growing. And then also, we have the enterprise tiers. These are the major battery companies and then the material companies and the chemical companies. And then -- and a lot of these companies prefer on-premise. So we also sell them this Molecular Universe in a box on-premise solution. So we charge them monthly subscription. And also we sell this computer that we actually deploy on site and also service on top of that. I think the SaaS platform, we do expect to see a growing number of seats per month and also per quarter and then the material supply because a lot of these companies eventually want us to supply the materials. But the revenue coming from the Molecular Universe discovery materials is actually going to be much higher than the SaaS revenue. Derek Soderberg: And then just one final one for me, just a broad update on Molecular Universe. I think in the past, you said you've got like 2 dozen or so companies in trial testing. Can you just give us an update on maybe where that is? And I think in the past, you have mentioned there are other potential large or medium-sized battery OEMs as part of that group. Where are you at with some of those players in negotiations? And when do you expect maybe a medium or large-sized OEM to sign on to MU through a joint development? Qichao Hu: Yes. So the number now is getting close to 40 enterprise and then -- and they have gone through MU-0.5 trial, MU-1.0 trial, which is the latest version and it's gone through the initial cloud-based trial. And now we are planning for on-premise deployment because a lot of these medium-sized, especially the larger-sized enterprises, they can do the cloud trial, but then eventually, they will need this on-premise to actually deploy this. This is why we're moving towards this Molecular Universe in the box on-premise solution. Operator: [Operator Instructions] The next question comes from Winnie Dong with Deutsche Bank. Yan Dong: I just wanted to follow up on that last question that was asked. You talked about launching 3 sub-tiers within the enterprise subscription. I was wondering if you can maybe just elaborate on that? What are they sort of looking for, what are your customers looking for? And then if you can just maybe just remind us of the other subscription options that's also bringing this recurring revenue opportunity. Qichao Hu: Yes, so the enterprise 1, 2, 3, basically, they differ in terms of size of market database, the depth of the models used and also the knowledge and the know-how the models are trained on. For example, enterprise 1, we see that as like a PhD student level and the enterprise 2 is like the postdoc level and the enterprise 3 is a senior scientist level. And then, for example, enterprise 1, when they answer a question, they'll answer question typically less than 3 minutes and the enterprise 2 postdoc level answer question in about 5 minutes. Enterprise 3 will answer question in more than 30 minutes. But the depth and the quality and the new discoveries are much deeper. So a lot of the enterprise 1 are medium-sized companies and also some start-ups and then the larger companies. And so for enterprise 1 and 2, we offer only cloud and for enterprise 3 and even higher tier joint development, we offer a combination of cloud and also on-premise, which most of the larger companies want. And then in addition to these tiers, we can also do the joint development tier with the larger customers. That's where -- so now the cloud version Molecular Universe is trained only on SES internal data. But then for the joint development, we will actually put our Molecular Universe in the box encrypted and then also organize the users' data, the cell makers data and then after that I train all Molecular Universe in a box. And then we're helping them do something that they've always wanted to do, but they've never had the resource and then never had the capability to do that. Yan Dong: And then so this quarter, you saw some very meaningful revenue contribution from UZ Energy. So I was just curious if you can just maybe take a step back and help us sort of get reengage with the background of this company, where the markets are, what you think the growth could be from this business? And then maybe more broadly speaking, as you look out to the different revenue streams, so UZ Energy, Molecular Universe, you have the relationships with OEM partners for electrolyte production. Just maybe give us a sense of which channels you're most optimistic about as you head out to growth in the next 2 to 3 years? Qichao Hu: Yes. So UZ Energy is an energy storage company and they serve mainly the behind-the-meter commercial and industrial applications. And before we acquired UZ, we actually used to supply this database machine learning model to UZ to help improve the accuracy of their BMS, battery management system in terms of predicting battery health and then end of life. And then since we acquired them, now we are adding more of these machine learning-based models, which is the predict feature in Molecular Universe, MU-1.0. We are adding that into their BMS. So when we sell these -- when UZ deploys these packs to customers around the world, a lot of the customers, for example, in Norway or Northern Europe, they complain that the packs, especially in winter are just not so accurate and the BMS just stop working. So by adding this predict, we can actually -- so each UZ pack is a box, is a Molecular Universe in the box. And then we can gather data and train the predict feature of Molecular Universe locally in the box and then make predictions about these issues before the customers can actually find out about the issues. And then -- so since we've added this predict, the amount of customer calls, their complaints actually dropped. And then we plan to continue to do that. So this application is actually really exciting. So think of each ESS pack as a Molecular Universe in a box. And then we collect the data, we do local training and we make prediction on the safety. And then I think that's a really exciting connection. So we get data and we get revenue. In terms of the overall growth of revenue of the different businesses opportunities that we mentioned, UZ this year, revenue, we expect to pull about $15 million to $20 million. And I think next year, ESS, we can at least double that. So this is one area. Another is drones. This year, we are getting our initial contracts and also a lot of the drones customers in the U.S. really want sales made outside of China. So we are making these cells in our Chungju, South Korea facility. Actually, the amount of capacity for pouch cells for drones outside of China is like super rare. It's hard to find pouch cells capacity outside of China. We have them. So we expect drones to also grow in a big way for us next year. And then EV and so for example, the joint development we had with Hyundai Motors and also Honda, we are using Molecular Universe to discover these new electrolytes. And then once we identify these electrolytes, then our plan is to use the Hisun JV to contract manufacture this and then supply. So I think next year, revenue-wise, total, we should be able to at least double, if not triple, what we did this year because of all these opportunities that are enabled by the Molecular Universe platform. Operator: [Operator Instructions] And as we have no further audio questions, I will hand back over to Kyle for the other questions. Kyle Pilkington: As in past quarters, we have received some written questions from investors and time permitting, we'll go through a selection of those questions, which have not yet been addressed on the call. So the first question that we have relates to liquidity and whether management has a view on where liquidity is expected to be at the end of 2025 and will kind of scaling up of Molecular universe or the UZ Energy integration impact the cash burn or CapEx plans? Jing Nealis: I can cover that. So -- yes, I'll take that. So our liquidity balance is very strong. And given that we closed the UZ acquisition, also, we did some stock repurchase based on our program, we still expect to exit the year with somewhere between $195 million to $200 million of liquidity. And then the other thing I wanted to probably emphasize is we are laser-focused on funding growth. So our liquidity balance is sufficient to kind of grow our revenue from different streams that Qichao just mentioned, whether it's ESS drones or materials or SaaS from MU. So the cash balance is no longer to fund runway. We have a CapEx-light business model. So the UZ acquisition is helping us to grow revenue with positive gross margin. All of our revenue sources come in on day 1 with positive gross margin. So it's not a CapEx-heavy business. So our liquidity balance will be sufficient to fund the growth going forward. Kyle Pilkington: Great. The next question relates to Molecular Universe and it goes, MU-1.0 is impressive. Can you share the road map for MU for 2026? And what other features have been requested? Qichao Hu: Yes. So for now, MU-1.0 has been mainly focused on electrolyte materials. And then we've been requested to expand that to cover electrode process optimization and also cell design and manufacturing optimization. And then another big request from some of the major battery companies, they want their own Molecular Universe, which is quite exciting because a lot of these battery companies, they want to expand. They want to build factories overseas in different continents, and they need a battery bible, so to speak, basically put all their know-how, train this model into a portable Molecular Universe. So that is going to be a really exciting project that we'll be working on with these battery companies. Kyle Pilkington: Excellent. And I think we have time for one more. So the last question is, if you could provide an update on the status on 2170 and LMA pouch cells for robotics, drones and UAM. Are you seeing good prospects for sales? Or do you see a need for scale up before promoting these more heavily? Qichao Hu: Yes. So the pouch cells, especially for drones, we're seeing a very interesting convergence and standardization of the format in the drones industry around the 10 amp-hour pouch cells. And so that's quite exciting. And then we are converting our Chungju line, which we built both the EV line as well as the UAM line. We're converting that capacity to make this pouch cell. And so, so far, the capacity that we have meets the needs, but we're also seeing fast-growing demand, especially since it's produced in Korea. So we do see a quite exciting growth in this market. Kyle Pilkington: Great. With that, I'll pass it back to the operator for closing remarks. Operator: Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect. Have a great rest of your day.
Operator: Good afternoon, and welcome to SiTime's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, November 5, 2025. I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead. Brett Perry: Thank you, Ari. Good afternoon, and welcome to SiTime's Third Quarter 2025 Financial Results Conference Call. Joining us on today's call from SiTime are Rajesh Vashist, Chief Executive Officer, and Beth Howe, Chief Financial Officer. Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy and plans, future operations, the timing market and other areas of discussion. It's not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factors or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of the forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of today's conference call to conform statements to actual results or to changes in the company's expectations. For more detailed information on risks associated with the business, we refer you to the risk factors described in the 10-K filed on February 14, 2025, as well as the company's subsequent filings with the Securities and Exchange Commission. During the call, management will refer to non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for nor superior to measures of financial performance prepared in accordance with U.S. GAAP. This GAAP to non-GAAP reconciliation includes stock-based compensation expense, amortization of acquired intangibles and acquisition-related expenses, which include transaction and certain other costs -- cash costs associated with business acquisition as well as changes in the estimated fair value of contingent consideration and earn-out liabilities. We refer you to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP financial results. With that, it's now my pleasure to turn the call over to SiTime's CEO, Rajesh. Please go ahead. Rajesh Vashist: Thank you, Brett. Good afternoon, everyone. It's a pleasure to connect with you all again. We value the trust of our long-standing shareholders and extend a warm welcome to those joining the SiTime journey. As AI becomes more prevalent, it drives the need for better timing and synchronization, which in turn propels faster growth for precision timing. Our key applications are centered around AI, including networking and computing hardware in clusters, XPUs, GPUs, CPUs, et cetera, for inference, personal AI computers and AI-based next-generation communications equipment. Here, as well as in all our other end markets, SiTime provides differentiation with resilient performance and reliability. Q3 2025 was a milestone quarter in SiTime's history with revenue of $83.6 million, up 45% year-over-year, an increase in gross margins to 58.8% and EPS more than doubling to $0.87. Exceptionally strong bookings reinforce our outlook for continued growth momentum. Our growth is playing out geographically as well. In Q3, we saw double-digit percentage growth in every region. We continue with design win momentum across all our end customer segments, highlighting the broad demand for our products. In Q3, demand from CED, communications, enterprise and datacenter customers surged with segment revenue up 115% year-over-year. This marks the sixth consecutive quarter of triple-digit growth in CED and represents 51% of our revenue in Q3. We expect our growth to continue at a fast pace driven by 3 trends. First, we will generate more revenue with our oscillators and clock generators in existing design as their shipments increase. Examples include Elite and Elite RF oscillators, which enable better synchronization for lower latency and higher GPU efficiency. Second, we continue to win new designs, which will generate new revenue. For example, optical module bandwidth is doubling to the 1.6 terabit level, and these new modules are beginning to ramp now. Demand for the 1.6 terabit modules has recently doubled, indicating a sharp transition to 1.6 terabit technology in first half 2026. Additionally, SiTime's oscillator ASPs in this application are higher because of the higher frequency and performance requirements. The third reason is that CED orders are coming in with shorter lead times. With the supply chain preparedness and product architecture, SiTime has better availability and is doing a great job in fulfilling this demand. Our funnel is growing rapidly as well, particularly in clocks, where it has quadrupled to $300 million in the past year. All of these trends are giving us higher confidence for 2026. Moving to aerospace defense, precise timing is critical. For example, our Endura oscillators enable synchronized movement and robust communications. With GPS becoming increasingly compromised, localized signing with our highest performance oscillators provides essential holdover capability for continued operations. In automotive, our recently launched Chorus clock generator is ramping at top ADAS car companies and is integrating into leading L4 and Robotaxi designs. Our product road map features failsafe technology, which advances safety-first design with high stability timing and predictable failover for L4 autonomy. And finally, in mobile IoT consumer, we expect strong growth from our Symphonic clock generator in mobile applications in the coming year. We are very excited to introduce the Titan Platform, a breakthrough that marks SiTime entry into the $4 billion stand-alone resonator market. Titan opens an incremental $400 million SAM or serviceable market today, which we expect to grow to $1 billion by 2028. This platform is the result of more than 2 decades of innovation, hundreds of millions of dollars in investment and 6 generations of MEMS technology. Over that time, we've improved resonator performance by 100x, and we see another 10 to 20x improvement within reach as we continue to innovate. Titan fundamentally transforms the resonator market. First, it eliminates the need for stand-alone board-level resonators, which is a persistent challenge for customers by enabling semiconductor level packaging and integration. Second, it creates long-lived revenue streams for these semiconductor companies that integrate Titan and deliver more value to their customers. We believe Titan and our resonated road map puts SiTime years ahead of the industry. Our leadership will enable a new class of electronics that are smaller, lower power and higher performance, setting the stage for the next wave of innovation. Across the business, robust demand and a healthy funnel position, it positions us well for continued strong growth. We remain committed to further investing in R&D, deepening customer engagement and strengthening operating leverage. SiTime is well positioned for enduring success. I look forward to the opportunities ahead and to sharing our continued progress. I'll now turn the call over to Beth to discuss our financial results in more detail. Beth? Beth Howe: Thanks, Rajesh, and good afternoon, everyone. Today, I'll walk through our third quarter fiscal 2025 results and then provide our outlook for the fourth quarter. As a reminder, I'll focus on non-GAAP financials, which are reconciled to GAAP in our press release. Q3 reflects the continued execution of our strategic priorities. Our performance demonstrates the strength of our diversified products and applications, the scalability of our operating model and the growing demand for our differentiated solutions. In the third quarter, revenue increased 45% year-on-year to $83.6 million, driven by revenue in communications enterprise datacenter, which grew 115% year-over-year to $42.1 million. Sales into the automotive, industrial and defense market totaled $20.2 million, up 14% year-on-year. And sales into the mobile IoT and consumer market increased 4% year-on-year to $21.3 million, of which our large consumer end customer represented $15.3 million. In terms of the mix of revenue, the communication enterprise datacenter market represented 51% of revenue, while the mobile IoT consumer market represented 25% of revenue and the automotive industrial defense market represented 24% of revenue. Q3 non-GAAP gross margin was 58.8%, up 70 basis points year-on-year due to improving product mix and favorable product cost. Total non-GAAP operating expenses increased 14% year-on-year to $33.7 million. For the quarter, R&D expense was $18.5 million and SG&A expense was $15.2 million as we invested in both sales and marketing. We continue to be disciplined while investing for future growth. Q3 non-GAAP operating income was $15.4 million, an improvement of $11.4 million or 12 percentage points versus the same quarter a year ago. Q3 non-GAAP net income was $23.4 million or 28% of revenue, and non-GAAP earnings per share more than doubled year-over-year to $0.87. Turning to the balance sheet. Accounts receivable were $22.5 million, with DSO improving to 24 days versus 35 days in Q2 due to better revenue linearity. Inventory at the end of the quarter was $86.7 million compared to $84.1 million in Q2 as we continue to maintain strong inventory for assurance of supply. During the quarter, cash from operations more than doubled sequentially to $31.4 million. As expected, capital expenditures stepped down in Q3 to $5.1 million. We ended the quarter with $810 million in cash and short-term investments. Now I'd like to provide our outlook for the December quarter. For Q4, we expect revenue of $100 million to $103 million, gross margins of 60% to 60.5%, operating expenses of $35 million to $36 million, interest income of $7 million to $7.5 million and diluted share count of approximately 27 million shares. As a result, we expect fourth quarter non-GAAP EPS to be in the range of $1.16 to $1.21 per share. In closing, our third quarter performance and outlook for Q4 reflect the strong top line momentum and the meaningful operating leverage in our model as we scale. We are executing on our strategy to lead in high-growth, high-value markets. Our diversified portfolio continues to gain traction across AI, automotive, industrial, defense and consumer sectors, reinforcing the strength of our multi-market approach. Operational discipline remains a cornerstone as evidenced by the expanding gross margins and significant increase in operating income. With a robust product pipeline and deepening customer engagement, we are well-positioned to drive sustained growth, operating leverage and long-term shareholder value. With that, I'll open it up for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Tore Svanberg of Stifel. Tore Svanberg: Congrats on the record revenue and the very strong outlook. Could you give us a sense for what's driving the strength in Q4? I mean I assume CED is going to continue to be a strong growth driver. But yes, on a relative basis, could you talk about the 3 segments into Q4, please? Beth Howe: Sure. I'll start there, Tore. So, we do see a kind of continuation of trends and sequential growth in each of our segments. for Q4. No surprise, the AI and datacenter business continues to lead the growth in terms of the strength of the markets. But we are continuing to see adoption of our new mobile Symphonic product as well as performance in aerospace and defense as we look into Q4. Tore Svanberg: And as my follow-up, a question for you, Rajesh. So now that you've got clocks getting design win, you got the resonator product line. I'm just wondering how that serves to pull in more oscillator opportunities for you as well. Because my understanding is sometimes you get drawn in with more components, especially as you get design wins for clocks and resonators. So, any color you could add there, please? Rajesh Vashist: Yes. Thanks for that, Tore. The clocks definitely do bring the oscillators or oscillators bring in more clocks. But in spite of the very, very robust funnel that we have in clocks, we're still a relatively small player in the clock cycle. So, I think it will probably be for it to be able to pull in our oscillators to significant levels. That's probably out for about 1 year, 1.5 years at least. As far as Titan, the resonator pulling us in, I think that's definitely not going to have any meaningful revenue until late '26 or '27 even going out in the future. I think the main reason for talking about these is to indicate that SiTime has really established its position as a broad-based timing supplier, which makes us completely unique. There is nobody else that has oscillators as strongly as we do have, blocks rising and resonators coming in for the future and bringing in a lot of strategic value to the customers. So, we just wanted to expose that to investors to get them to understand how far we have come in the last couple of years in building ourselves out. Operator: [Operator Instructions] Our next question comes from the line of Quinn Bolton of Needham & Company. Quinn Bolton: Congratulations on the results and outlook. I guess I just wanted to come back for just I might have missed some of your initial comments on the Titan resonator market. But obviously, I think historically, resonators have kind of sold at lower price points than clocks and oscillators. And so, I'm just wondering, as that business ramps, I think you said late '26 into 2027. Can you give us a sense what's the margin profile of the Titan family? And is that sort of aligned with your kind of roughly 60% gross margin that you guided to for the fourth quarter? Rajesh Vashist: You're exactly right, Quinn. The ASPs are definitely lower. They're lower than oscillators typically, and they're lower than clocks typically. But as I say, it really shows up in volume because that $4 billion resonator market is a 40-billion-unit market or more. So, the ASPs are low. We're talking $0.20 or below, but the gross margins are definitely in the 60% regime and in fact, probably higher. And yes, so the design wins are typically would be in tens of millions of units level design wins. Quinn Bolton: And then you've kind of filled out the timing portfolio, and I realize you may have additional product lines you can add to oscillators or clocks. But I guess I just wanted to think about you guys raised roughly $400 million sort of in the third quarter, looking to M&A. Can you just give us any updated thoughts on M&A? I think there have been some assets that have been rumored for sale, divisions of larger analog companies. Any thoughts on like atomic clocks, there's been some acquisitions of atomic clock companies announced over the past couple of months. And so just any updated thoughts on what you might be thinking on further enhancing the product portfolio through M&A? Rajesh Vashist: Yes. We certainly are interested in M&A. And I think we're looking to get scale. Unfortunately, the atomic clock business, particularly the ones you may be referring to are quite far out in revenue terms. So, while very interesting technologically and certainly something which is a gleam in our eye, I think we would be looking more near-term for M&A that actually has some impact. Operator: Our next question comes from the line of Tore Svanberg of Stifel. Tore Svanberg: Just a few follow-ups. First of all, Beth, the gross margin is pretty strong, 60%, 60.5%. I assume that is, again, mix driven. But is there also sort of a scale element here? So, as you get over $100 million a quarter revenue, just naturally the gross margin higher? And where could we eventually go here? Beth Howe: Thanks for the question, Tore. So, as we've talked about, our target is to have 60-plus percent gross margins, and we're getting there in Q4. Product mix and ASP definitely plays a part as CED has grown, those have very attractive ASPs and margins for us. So as that business has become 50%, 51% of the mix, that is positive for us as well. And then we will always continue to work on our cost, and that is also benefited by the scale. So, I think if I look at it, product mix is definitely helping us as we mix to more and more CED and then the scale and cost components also play a role. Tore Svanberg: And then my last question is for -- back to you, Rajesh. Could you just give us an update on where you stand with your go-to-market strategy? I think in the past, you've put together some efforts to work a little bit closer with the hyperscalers, maybe even closer to some of the bigger chip players that sell to those hyperscalers. So, any update there would be helpful. Rajesh Vashist: Yes. I think we're continuing to make significant progress, particularly in the semiconductor area. I think we also see the entry of new people in the market. who are not your typical players, I mean, notably Oracle and of course, OpenAI and so on. So, I think we are looking at the whole ecosystem. And as the timing company that is focused on high-end timing, differentiated timing, those are clearly customers that we're looking at moving into. And what we find ourselves is that we -- as there's more performance, less latency, smaller size, lower power, there's a greater need for SiTime products. And I think the 1.6 terabit per second is a great example of that. In the last couple of calls when we've talked, we've seen that further out in time, but we see an acceleration among many of these technologies. So, it looks really good. Operator: Our next question comes from the line of Chris Caso of Wolfe Research. Christopher Caso: I guess the first question is with regard to the customer base, can you give us some sense right now of, obviously, AI datacenter is what's driving a lot of this right now. How much of that market are you able to address with the reach that you have now with the sales and the engineering and the customer relationships right now? And what can you do to expand that into the areas where you just don't have penetration right now as a smaller player in what's a very big market? Rajesh Vashist: Yes. I think just to be very clear, Chris, we are in the early innings of all of this. If you look at the ecosystem that we are selling to, we're selling to semiconductor companies, as noted. We're selling to the hyperscalers. We're selling to the OEMs that are working on it. We're selling to the ODMs. We're selling to the module makers. We're selling to the active cable makers. So SiTime has almost an embarrassment of riches, and we are building ourselves up and hence, the comment on both making significant efforts in R&D as we see the need for greater and greater product needs that are 1, 2 years out even, and then, of course, into the channel strategy, not only directly addressing the OEMs, but also the hyperscalers, as we mentioned, and increasing significantly our geographic footprint, both in -- in all geographies, actually, in the United States, in Asia and as well as in Europe. So, I think it's -- we are actually on a very fast growth curve in adding resources in R&D and development as well as in marketing and sales to address all these markets. But it's early innings. Christopher Caso: For my follow-up, could you talk a bit about content? And you mentioned earlier on the call, the 1.6T transition. What does that transition do to timing content -- to your content on the board? And what else should we be watching as potential content drivers within that CED segment? Rajesh Vashist: Yes. So that's probably one of the easiest ones to talk about because it's one where we see higher volumes, and we see the significant increase in ASPs and average selling prices. So that's relatively an easy one. But also in the switches, also in the accelerator cards, the connectivity cards, whether they're PCIe or the UCX or any of the other technology, I think it really comes into full force. We also think that there is a future road map where timing, the whole conversation around chiplets is starting to get very interesting. As we look forward out into the future, it's not happening now, but it's happening out in the future. I think that gets very interesting, significantly increasing content as we go forward. Operator: [Operator Instructions] Our next question comes from the line of Quinn Bolton of Needham & Company. Quinn Bolton: A couple of follow-ups. I guess the first one, the CED business, up well over 100% with the fourth quarter guidance. I guess I'm just wondering, can you talk anything about visibility, lead times in that business? Are you starting to see any shortages of other components that could constrain that business or maybe on the flip, if things are tight, do you think there may be any hoarding or inventory stocking starting to take place in the CED business? And then I've got a quick follow-up. Rajesh Vashist: Yes. I mean we're -- in our business, we certainly don't think there's hoarding. In our business, we certainly don't think that there's any shortages in the sense that SiTime, back to my prepared comments, we have built up a robust value chain, a robust supply chain, and we were able to move because of our programmability and our focus on this market. So, we were good in getting to that. We do hear rumors of some of the optical components that are in shortage. But I don't think that anybody is holding back because we see quite a significant increase in volumes. But so far, that's about it. We've also, of course, heard of substrate shortages, but I think that's sort of fairly common knowledge. Nothing that's very particular to timing. Quinn Bolton: And then I guess kind of just wondering if you had any updated thoughts sort of on just what you would now maybe call typical seasonal trends as we start thinking about modeling 2026. When you were less driven by CED and maybe a little bit more mobile IoT focused, you saw pretty strong seasonality in the March quarter. Wondering if you think that seasonal pattern starts to mitigate a little bit with the business mixing to CED? Or would you still think the March quarter is down kind of 10%, 15%, maybe more just due to seasonal factors. Just any sort of thoughts on what seasonality may now be? Beth Howe: Quinn, this is Beth. Maybe I'll start there. So, as I think about seasonality, we do still see some seasonality in our business. So, I still do expect that we'll see that pattern from Q4 to Q1. That being said, overall, our business is being driven by kind of the strong demand we're seeing across our portfolio. I think we've talked a lot about CEB and AI and the ongoing demand there as well as demand in the other segments. So again, there will -- I would expect there's still kind of seasonality as you were describing. But I also, there's a number of things that are going on that can mitigate that. I think I'd also keep in mind, as we've talked about before, that in any given quarter, we service some very, very big customers. And so, you also can sometimes, from time to time see a little bit of shifting between quarters just depending on where that demand falls and when they make the orders that is just -- there's nothing to be read into that other than just when the orders shipped. So hopefully, that gives you some insights about seasonality. But I do continue to expect that we'll see that seasonal Q4 to Q1 that we've seen in the past. Operator: This concludes our question-and-answer session. I would now like to turn it back to management for closing remarks. Rajesh Vashist: Well, thank you all very much. We are really, really pleased to be able to put out these stellar results. I think we see significant growth coming, and we are very, very happy to have you guys along for the ride. So, thank you very much. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon. My name is Makaya, and I will be your conference operator today. At this time, I would like to welcome everyone to Pursuit's 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Thank you. Carrie Long, you may begin today's conference. Carrie Long: Good afternoon, and thank you for joining us for Pursuit's 2025 Third Quarter Earnings Conference Call. Our earnings presentation, which we will reference during this call, is available on the Investors section of our website. We encourage investors to monitor the Investors section of our website in addition to our press releases, filings submitted with the SEC and any public conference calls or webcast. During the call, you will hear from David Barry, our President and CEO; and Bo Heitz, our Chief Financial Officer. Today's call will contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to the disclaimer on Page 2 of our presentation for identification of forward-looking statements and for a discussion of risks and other important factors that could cause results to differ from those expressed in such statements. During the call, we will also discuss non-GAAP financial measures. Definitions of these non-GAAP financial measures are provided on Page 3, and reconciliations to the most directly comparable GAAP financial measures are provided in the appendix of the presentation as well as in our earnings release. And now I'd like to turn the call over to David, who will start on Page 4 of our presentation. David Barry: Thanks, Carrie, and thank you all for joining us as we review our very strong 2025 third quarter results. Let us start by highlighting 4 key achievements that really speak to the strength and momentum of our business. First, we delivered a record-breaking third quarter with significant year-over-year growth that exceeded expectations, all while continuing to deliver incredible experiences for our guests. Second, based on that exceptional performance, we're raising our full year 2025 growth guidance, a reflection of both our year-to-date results and our confidence in what's ahead. Third, we're well positioned to benefit from global consumer demand trends for experiential travel to iconic destinations. That gives us a solid foundation for continued growth in 2026. And fourth, our Refresh, Build, Buy strategy continues to deliver. It's fueling growth and enhancing our collection of irreplaceable assets, backed by a meaningful pipeline of investment opportunities and a strong balance sheet that gives us flexibility to accelerate. So let's review our record third quarter results and improved full year 2025 outlook on Page 6. During the quarter, our dedicated team delivered extraordinary experiences to approximately 2 million attraction visitors and welcome lodging guests across nearly 200,000 room nights. We delivered revenue growth across all geographies, including a strong recovery in Jasper following last year's wildfires. Total revenue for the quarter reached $241 million, which is up 32% year-over-year. Our adjusted EBITDA margin expanded to 49%, reflecting the scalable nature of our business with strong demand for our incredible attractions and unique lodging properties and our diligent ongoing management of costs. Our strong team member engagement, our relentless focus on elevating the guest journey and the perennial demand for our iconic experiences and destinations continue to differentiate Pursuit, and that's driving sustained momentum and reinforcing our long-term growth. With our exceptional third quarter results, we're raising our full year 2025 adjusted EBITDA guidance by $6 million at the midpoint as opposed to our prior guidance range. We now expect full year 2025 adjusted EBITDA to be in the range of $116 million to $122 million. Now let's dive in on Page 7 with a reminder of what makes Pursuit a powerful and differentiated growth engine. Pursuit's success is anchored in a guest-obsessed experience-driven hospitality-focused culture, that's paired with authentic one-of-a-kind experiences. Our unique offering of must-do sightseeing attractions for all ages and skill levels and our distinctive lodging and iconic destinations with limited supply and high barriers to entry gives us a strong foundation for enduring success. Guided by our proven Refresh, Build, Buy strategy, we continue to scale our collections of irreplaceable experiences with growth and the guest experience in mind, anchored by focused capital allocation and discipline. Since 2015, we've nearly quadrupled revenue expanding across 4 countries. We've grown from 4 world-class attractions to 17 and from 12 lodges to 29. This is a testament to the power of our strategy and the timeless allure of experiential travel, which we believe will continue benefiting us long into the future. As shown on Page 8, our Refresh, Build, Buy growth strategy is anchored in 2 important growth levers that drive long-term value creation. Our first growth lever is delivering organic growth through refresh and build investments; and the second is to buy one-of-a-kind forever businesses that fit our strategy. We actively maintain a robust pipeline of opportunities across both levers, backed by our strong financial and operational capacity. With ample liquidity and low leverage, we're able to invest across a spectrum of high-return opportunities. On the organic growth front, we've identified over $250 million in refresh and build opportunities over the next 6 years, including an expected $38 million to $43 million in 2025. These targeted investments elevate the quality of our existing assets, they enhance the guest and team member experience and they unlock new revenue streams in our iconic destinations. We view these investments as among our most efficient uses of capital by raising asset quality, elevating the guest experience and improving financial performance, we deliver high returns, and we drive long-term value. Our buy acquisition strategy complements this by targeting irreplaceable attraction and hospitality businesses in both existing markets and new markets that have perennial demand, limited supply and high barriers to entry. We focus on businesses that deliver attractive EBITDA margins, operate in countries with strong ease of doing business and exceed the 15% IRR hurdle rate that our growth investments need to deliver. This disciplined approach ensures that we continue to scale with purpose by investing in unforgettable experiences that inspire our guests and deliver sustainable returns. Page 9 provides some visibility into our significant refresh and build pipeline, which represents a compelling set of organic growth opportunities through 2030. In 2025 and '26, we're advancing 2 large-scale multiyear lodging refresh projects. At our Forest Park Hotel in Jasper National Park, we are in our second phase of a full refresh of the Woodland Wing with upgrades to guest rooms, corridors, the exterior facade, lobby and atrium, conference spaces, food and beverage areas. And this first phase of room renovations was complete for the 2025 peak third quarter and the elevated guest experience captured a 22% increase in ADR compared to the non-renovated rooms. At our Grouse Mountain Lodge in Whitefish, Montana, near Glacier National Park, we're underway with the first phase of a full refresh of that property. Ahead of the 2026 peak summer season, we plan to have renovated the South Wing guestrooms and pool area. We're also building a new 8,250 square foot wedding and event pavilion to support the group and leisure demand, which will open later in 2026. These projects will transform and reposition these year-round lodges to better meet the expectations of mass affluent leisure travelers as well as support higher ADRs and attraction visitation. And our phased approach to renovation with construction taking place primarily during the seasonally slower fourth and first quarters allows us to minimize disruption during our busy summer months. So as we look further ahead, we have a robust pipeline of potential refresh and build projects presently in the planning stage to drive incremental capacity and yield opportunities in high-demand markets. And key examples include Jasper SkyTram investments to introduce a new lift and reimagine terminal buildings to deliver a more elevated guest experience; a refresh of the Banff Gondola and Banff National Park with a new lift and experiential enhancements to further differentiate this iconic attraction, investments at Apgar Village in Glacier National Park aimed at improving and maximizing lodging capacity to meet growing demand for this very special place. And then finally, investments in the Denali Backcountry Adventure focused on elevating and reimagining the guided journey deep into Denali National Park when the Denali Park Road reopens in 2027 and a series of additional lodge refreshes focused on transforming and repositioning properties to align with market demand. These investments reflect our commitment to enhancing the quality and appeal of our experiences, while positioning our portfolio for sustained growth and profitability. We plan to provide more details on our 2026 capital plans in February '26 and expect growth capital investments over the next 2 years at increased levels relative to 2025, primarily driven by planned large-scale refresh and build investments in the new Jasper SkyTram attraction, Forest Park Hotel Woodland Wing and Grouse Mountain Lodge subject to approvals. And while these investments take multiple years to complete, they will help propel our growth beyond 2026. Now on Page 10, let's revisit our recent acquisition of Tabacon completed at the beginning of the third quarter. which exemplifies the kind of high-quality buy opportunities we're pursuing to drive long-term growth. Tabacon is a world-class destination resort and attraction in one of Costa Rica's most iconic travel regions. Nestled at the base of the Arenal volcano and adjacent to protected rainforest, Tabacon offers exclusive access to the country's largest network of naturally flowing hot springs. It is truly unique with 2 distinct thermal river attractions paired with a luxury 105-room resort, renowned spa, signature culinary experiences and 570 acres of beautiful terrain. Tabacon is profitable 10 months of the year with full year hotel occupancy exceeding 80% and provides a positive EBITDA contribution during periods that are seasonally slower for our Canadian and U.S. businesses. The renowned Tabacon Thermal River attraction offers a premium experience for both hotel guests and day visitors. And in March of '24, Tabacon opened a second Thermal River attraction, Hot Springs Pura Vida, designed to serve more budget-conscious guests. Both attractions are open to day use guests, serving a broad range of visitors and driving incremental revenue. Through its inclusion in the Small Luxury Hotels of the World portfolio, Tabacon is accessible to Hilton Honors members, which expands its global reach and visibility among high-value travelers. This strategic affiliation enhances the resort's positioning in the luxury market, drives incremental demand from a loyal and affluent customer base and strengthens its competitive advantage within the premium hospitality segment. Tabacon is led by an exceptional local leadership team with deep roots in Costa Rica and a proven track record, this team has built a reputation for delivering best-in-class hospitality and driving sustained growth. Culturally, Tabacon is a perfect fit with Pursuit in all aspects, including the team's growth mindset and restless focus on making experiences better. As one small tangible example, the team is underway with rebranding the new Thermal River experience from its initial [ brand ] Choyin to the more compelling brand of Hot Springs Pura Vida based on learnings and feedback across key stakeholders. And we're actively collaborating on exciting future growth opportunities. We see a clear path to near-term upside through targeted operational enhancements and the full ramp-up of Hot Springs Pura Vida. And also, with strong demand and ample Hot Springs capacity, we expect to drive Tabacon's adjusted EBITDA multiple below 9x by year 3. Beyond these operational gains, we're actively exploring refresh and build opportunities across the 570 acres of acquired terrain as well as buy opportunities to expand our presence in Costa Rica with additional high-quality attractions and hospitality assets at attractive valuations. We see the potential to build a world-class collection of nature-based experiences in Costa Rica. Across Pursuit, we're not just focused on the next quarter. We're focused on the next decade, and we're confident that the choices we're making today will drive long-term value for our guests, our teams and our shareholders. Next, on Page 11, we provide some initial insights into our indicators for next year. We believe we're well positioned for continued growth in 2026, supported by favorable secular trends, sustained demand for our destinations and solid business fundamentals. Across generations, we continue to see a shift toward experience-driven travel with increasing demand for adventure, wellness and immersive exploration, all areas where we're strongly positioned to capture growth with our differentiated and authentic guest experiences in iconic locations. Our travel destinations from Banff and Jasper to Costa Rica have perennial demand and continue to attract strong visitation. In Canada, we expect another standout year for travel in 2026, supported by favorable foreign exchange rates, unique geopolitical trends and the recently renewed free admission to Canadian national parks in 2026. Our global network of tour and travel partners spanning over 80 countries are signaling strong demand for the 2026 itineraries. This early indicator reflects the appeal of our offerings and the strength of our diversified market reach. And at the heart of our success is a relentless focus on growth and elevating the guest and team member experience. And it's with this mindset that we're confident in our ability to harness these tailwinds and deliver exceptional performance in the years to come. And now I'll turn it over to Bo to review our 2025 financial results and outlook in more detail. Michael Heitz: Thanks, David. I'll start on Page 13 with our third quarter financial highlights. As David mentioned, this was a phenomenal quarter with record results that exceeded our expectations, particularly in August through the remainder of the core summer season as visitation to our markets accelerated. The team managed extremely well to harness this demand, drive the power of flow-through and deliver outsized results. We delivered revenue of $241 million in the third quarter, which was up approximately $59 million or 32% year-over-year. This growth was primarily driven by a strong recovery across our Jasper properties that were temporarily closed during the 2024 third quarter due to wildfire activity as well as by incremental growth from our new experiences and continued momentum in overall guest demand for our distinctive existing experiences in iconic places. Excluding our Jasper properties and new experiences that were not operated by Pursuit for the entirety of 2025 and 2024, our third quarter revenue increased $17.7 million or 12% from strong yield optimization and visitation across our geographies. We delivered revenue growth across all geographies, with particular strength across our Canadian operations and at Sky Lagoon, supported by continued global secular trends, our differentiated businesses and our passion for delivering incredible experiences for our guests. In addition to broad demand, Mother Nature was also on our side this season with minimal impacts to our operations from inclement weather and smoke as compared to typical years. Net income attributable to Pursuit, which is inclusive of discontinued operations, was $73.9 million as compared to $48.6 million in the prior year. Our income from continuing operations attributable to Pursuit was $76.7 million, up $33.4 million compared to the prior year. During the 2025 third quarter, we reported a pretax gain of $4.2 million from business interruption insurance proceeds received related to lost profits in 2024 from the Jasper wildfire. This brings our total insurance proceeds received since the 2024 wildfire to $23.7 million. We continue to work with our insurance carriers on additional potential recoveries. Our adjusted net income, which excludes results of discontinued operations and other nonrecurring income or expenses, including the business interruption insurance proceeds gain was $75.3 million as compared to $50.7 million in the prior year. The year-over-year growth of $24.6 million primarily reflects higher adjusted EBITDA, partially offset by increases in income tax expense and income attributable to noncontrolling interest. Adjusted EBITDA increased by $34.4 million or 41.5% year-over-year to $117.4 million, primarily driven by significant revenue growth with strong margin flow-through, supported by operating leverage in the business and continued cost discipline. Turning to our strong balance sheet highlights on Page 14. Pursuit continues to have ample liquidity and low net leverage to support accelerated growth. As of September 30th, 2025, we had total liquidity of $274.4 million, including $33.8 million in cash and cash equivalents and $240.6 million of available capacity on our revolving credit facility. In September, we expanded our revolver by $100 million to a total of $300 million. We also added Tabacon as a co-borrower and extended its maturity to September 2030, enhancing our financial flexibility to capitalize on strategic growth opportunities. Also in September, we acquired the remaining 20% minority interest in Glacier Park, Inc. for $13 million, securing full ownership of this high-performing subsidiary. This move simplified our capital structure, eliminated a $22 million noncontrolling interest liability and reinforces our commitment to growing iconic experiences-driven assets with long-term potential. At the end of the quarter, our total debt was $129.8 million, and our net leverage ratio stood at 0.7x, comfortably below our target range of 2.5x to 3.5x. Now let's look at our third quarter attractions performance on Page 15. Attraction ticket revenue reached $100.4 million, reflecting a 33% year-over-year increase driven by substantially higher visitors and effective ticket prices. Visitors increased 22% year-over-year due to a strong Jasper recovery, new attractions and overall robust demand for our one-of-a-kind sightseeing attractions with a 4% increase in same-store visitors. Same-store constant currency effective ticket pricing, which excludes our Jasper properties temporarily closed in the prior year and new attractions, grew by 9% compared to '24. This improvement was enabled by our focus on guest experience with particularly strong performance from Sky Lagoon and our Canadian attractions in Banff and Golden. Sky Lagoon continues to deliver strong growth in effective ticket price, primarily fueled by the expansion of the premium ritual experience, which was completed in August 2024. Next, let's turn to our third quarter hospitality performance on Page 16. Lodging room revenue totaled $59.7 million, reflecting a 42% year-over-year increase driven by a strong Jasper recovery, new lodging and improvement in same-store ADR and occupancy. All of our collections delivered growth in room revenue during the quarter. Same-store constant currency RevPAR, which excludes our Jasper properties temporarily closed in the prior year and new lodging, grew 6% as compared to 2024. Our lodging properties are located in iconic, high-demand experiential travel destinations, offering guests direct access to some of the most breathtaking natural settings, including at nearby Pursuit sightseeing attractions. These markets benefit from strong compression dynamics supporting both premium pricing and high occupancy. Let's turn to our 2025 outlook on Page 17. As David mentioned earlier, based on continued demand for our authentic experiences and stronger-than-expected results for the third quarter of 2025, we are raising our full year 2025 guidance. We now expect full year adjusted EBITDA of $116 million to $122 million, which is an increase of $6 million at the midpoint relative to our prior guidance range of $108 million to $118 million. This new guidance range represents substantial adjusted EBITDA growth of $39 million to $45 million relative to 2024. This significant year-over-year growth reflects our strength of execution, continued strong demand and the recovery of leisure travel to Jasper, in addition to contributions from our recent acquisitions. With the strong rebound in Jasper, our continued relentless focus on delivering exceptional guest experiences and the strength of our balance sheet, we are well positioned to drive sustained growth and strategically invest in high-return refresh, build, buy opportunities. And with that, I'll turn it back to David. David Barry: Thank you, Bo. So just in closing, I'd like to express my sincere appreciation to our team members for their passion, their dedication and their growth mindset. Their restless positive energy and commitment to excellence continue to drive exceptional guest experiences and our overall success. To our shareholders, thank you for your ongoing support of Pursuit. We're energized by the opportunities ahead, and we remain focused on executing our growth strategy to create long-term value. Let's open up the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Tyler Batory with Oppenheimer. Tyler Batory: Congrats on the strong results here. First one for me, maybe more housekeeping on results and guidance. Can you talk about the insurance proceeds in the quarter? Were those contemplated when you provided the original EBITDA guide, that $4.2 million that you cited in the investor presentation? And then can you also talk about FX, please, too? I'm not sure if that was a tailwind or a headwind in the quarter? And just how is foreign exchange movements impacting guidance for the full year? David Barry: Yes. Sure, Tyler. Happy to take those. So on the insurance proceeds, just to reiterate, we've now received $24 million in insurance proceeds in totality, $13 million of that was last year and about little under $11 million of that was in 2025. As you noted, for Q3, there was about $4.2 million of that in the business interruption recoveries bucket of that. Importantly, we're treating that outside of adjusted EBITDA given the nonrecurring nature of it. So it was never in our adjusted EBITDA guidance, and it's not in there today either. On the FX side of it, it wasn't a big driver for the quarter. And frankly, for the whole year, relative to last year is not a major driver. We did have some movements from where we started the year from an FX perspective, but that really reversed itself heading into Q2 results. So pretty neutral on the whole year. And with only a couple of months to go of not really peak operating period, it's not a huge sensitivity to that for the remainder of the year here. Tyler Batory: Okay. I appreciate the clarification on that. And then I wanted to double-click on something that we talked about last quarter in terms of ETP. And I mean, look, the same-store visitation in the mid-single digits has been very strong, but the ETP has been even stronger. And I'm curious if you can just unpack that a little bit more. How much is mix? How much is outright price increases? And when you think about the strong ETP growth you've seen this year, does that create a situation perhaps where there's some difficult comps for you in 2026? David Barry: Yes. I think first, I would say, Tyler, that one of the important factors is that any growth in ETP is a combination of several things. Yes, you've got some price increases. You've also got the tenant itself, the impact of the type of visitor, filling white space. There's a whole variety of different factors that help drive the effective ticket price. And we do have a view to the future in '26, and we have a sense of confidence, meaning that the trends are on our side. We see continued energy around the growth in experiential travel that connects in with iconic locations. We think that Canada and its position is going to continue to be strong as we look at growth coming. We have the strength of the business that prepared itself and adapted quickly. And just being, I think, alert and anticipating is part of how we were able to drive such a strong increase in effective ticket price. And Bo, jump in if I missed anything there. Michael Heitz: Yes. I think that's all true holistically. If I were to point to any particular outliers of strength this quarter, I'd probably put top of list, Sky Lagoon and Golden Skybridge as well as the Banff Gondola. Some of those are areas, where we've had recent investment that helps support the incremental yield and some of that is the continued efforts that David alluded to, all of which I think sets us up as the right baseline to build off of for next year. David Barry: Yes. Great example with Sky Lagoon. Remember, one of the choke points at Sky was the way that the ritual experience worked was that originally, we had undersized that when we had created Sky. So the investment that we made in '24 set us up really well for '25. And so we were able to, just as a reminder, take some of the lower-tier products and basically, they disappeared off the price list and everyone is just entering and visiting for the first time, purchasing the full ritual, the skill experience and really enjoying it. And that led to a couple of things: one, growth in ETP, but also growth in guest satisfaction, which is what we're looking for. Tyler Batory: Okay. Last one for me, just a couple on the Tabacon acquisition. What was the EBITDA and revenue contribution from that in Q3? And just remind us again in terms of seasonality, how that flows throughout the year? And can you also just touch on integration, bringing that under the fold here and just kind of how that's gone? David Barry: I'll take the integration part, then we could talk about some of the other things. So I have a good story for you, Tyler. The team, Andrey Gomez and the team, they are obviously in the geothermal attraction -- water attraction business with 2 geothermal attractions at Tabacon. They recently visited Sky Lagoon. And so you would think where are the parallels there? Why would a team from Costa Rica go to Iceland to visit another geothermal attraction. We think there's a lot of learning in between those 2 locations. So from an integration standpoint, that was one of the first things we wanted to do. And just on a personal level, I'll share that Andrey Gomez saw snow fall for the very first time in his life and a few snowflakes. On the first day he was visiting, everybody went to sleep, a little jet lag. They woke up the next morning to 30 centimeters. So for those of you that don't speak metric, that's well over a foot of snow. And they had a fantastic day in Iceland benchmarking Sky Lagoon and having some learning going mutually back and forth between the Sky team and the team at [indiscernible ]. And then at night, the Northern Lights came out. So a pretty fantastic experience. And so integration is going well. They have lots of really interesting growth ideas into the future. There's a high level of occupancy in that property. And so we're working on the planning of some concepts. We have 570 acres of terrain that we can expand upon. One of the prototypes we're working on is more of a luxury villa product that maybe 2 couples or a larger family would use. And so we're going to be testing those. We're modeling them out in terms of how we might construct them, but those are some of the growth opportunities we're excited for. Integration is going really well. Team is fantastic, a ton of great energy. Bo, over to you. Michael Heitz: Yes. And going back to part of your question on the financial component of this, Tabacon benefits from being much more of a year-round operation for us. It's profitable 10 months out of the year. From a seasonality perspective, I'd say the biggest quarter for them would be in Q1. Q4 is also a pretty strong quarter, but broadly, the rest really spreads out across the year. What we noted at the -- when we first closed on the acquisition was an expectation for about $3 million of EBITDA impact in the second half of 2025 and about a 10-year full year -- or sorry, $10 million of EBITDA full year impact. So another $7 million coming when you annualize that into next year. Generally, that's all performing really well for the first couple of months here. We do disclose from a revenue perspective, it's about $6.3 million of revenue in Q3, and we'll continue to break that out as we get into future quarters here. Operator: The next question comes from the line of Alex Fuhrman with Lucid Capital Markets. Alex Fuhrman: Congratulations on a really nice summer season. David, it sounds like you're targeting increased growth CapEx levels for the next couple of years. You mentioned a couple of specific hotel projects. Is it really just those couple of refreshes that are driving it? Would you say there's anything you're seeing that's maybe driving you to see maybe perhaps more than the $200 million of CapEx projects than you've talked about a little while ago? David Barry: Yes. You'll noticed in the investor presentation, firstly, as we think of organic and build within our existing businesses, we've increased that amount with our view over the next 6 years that, that amount is closer to $250 million, which are all terrific opportunities within the 4 walls of our existing businesses. So well-established businesses with really great operating teams, places that we know and we have great confidence. So those investments are among some of our most powerful, and we're able to accelerate those or control those depending on what's happening on the pipeline side. For 2025, we're investing between $38 million and $43 million into those projects. Our opportunities into the future, we'll be talking about in February of '26. But the ones that we mentioned are all ones that are heavily into planning. Jasper SkyTram is in a public commentary period now. We're working on the Banff Gondola, Apgar Village. And also, for those that have been around Pursuit over the last decade, you may recall a terrific business called the Denali Backcountry Adventure, which was a wildlife safari that took guests into Denali National Park. And for those unfamiliar with Denali, it's not a park you can drive into. You have to travel with an outfitter. So that's a terrific business that as the National Park Road comes back online, which they're targeting '26 for the trade and then '27 for the public, that's an example of the kind of investment that we'll be looking at. But we have plans that, again, reflect opportunity across a broad swath of the business, and we're prepared to certainly work hard to take advantage of those. Alex Fuhrman: And then that 9% increase in ticket prices on a same-store basis, that's obviously a really big number. Were there any particular attractions or collections that were driving it? And just ballpark big picture, can you give us a sense of to what extent that's on par with just how much attraction prices were going up with your competitors in your markets? David Barry: I'll start first with the team. I think the team globally across Pursuit was well positioned to be anticipatory to -- as demand increased to be ready to adjust to the demand. So that might be managing inventory in terms of providing availability. It might be adjusting a price. or simply adjusting the scale of an operation from, say, a labor standpoint or extending hours or any of those things that help drive overall performance. I would say everyone across all of the businesses performed really well. Obviously, there are some strong -- really strong performance across the Canadian Rockies, strong performance at Sky Lagoon, good performance in Alaska. And so just overall, everybody performed really well. As to our competitors, I think that with increased demand comes increased participation from guests from all over the world. And I think everyone benefits. So we tend not to look so much at what our competitors are doing, but we're more focused on what we're doing and how do we make experiences better and then charge more for them. Operator: [Operator Instructions] The next question is from the line of Eric Des Lauriers with Craig-Hallum Capital Group. Eric Des Lauriers: Congrats on a very strong Q3 here. Most of my questions here are going to focus around timing. I just kind of want to [Technical Difficulty] expectations and understand how you guys are thinking about it. So [Technical Difficulty] first with Forest Park Hotel and then -- Grouse Mountain Lodge. You called out second phase of Forest Park to be completed in '26, first phase of [ Green] (sic) [ Grouse ] Mountain completed in '26 as well. How many phases are currently anticipated for each of these? And how should we think about potential timing of future phases? And ultimately, when should these 2 projects be completed? David Barry: Yes. Great question. So I'll jump in. On -- if you think of Forest Park and the Woodland Wing, remember, we built the Alpine Wing in 2022. We renovated half of the Woodland Wing in 2025. And then we're underway on the renovation of the existing section of the hotel. So those things are happening now. And the goal is obviously to get things completed and ready as soon as we can into '26. And so that will take several months and through the beginning of the year and then with a plan, obviously, to be ready to reopen as soon as we can as close to the summer season. The same thing applies in terms of Grouse Mountain Lodge, the hotel for those that have been there, it's a beautiful property, really beautiful location. There's 2 sections with front desk and food and beverage facilities in the middle. So we're working on one wing, while we operate one wing and then we'll switch out. And so the benefit there is that we're able to keep the property open and keep hosting guests through this period and just manage these selective closures to be the most efficient with the business. Eric Des Lauriers: Okay. So it sounds like at least at Forest Park, excluding the Alpine Wing, just 2 phases. The second one is already underway. And then Grouse Mountain, it sounds like first phase is underway and should just be 2 phases potentially completed in '26. Do I have that roughly correct here? David Barry: The Grouse Mountain Lodge, the second phase will start after the summer season, and it will roll into '27. And one of the things I would be remiss in not mentioning is that we're also building a really beautiful event and attraction pavilion. We think we've got a real opportunity that the competition in the wedding space in Northern Montana, we think we've got an opportunity to really differentiate ourselves there for special events and weddings and occasions, and that drives hotel occupancy. It drives attraction visitation and the location in Whitefish is ideal. So we're building, I think, a really beautiful venue that will be very connected and I think just the best of what's available in Northern Montana. So we're excited about that. Michael Heitz: And then maybe just to make sure we're thinking about from a capital outlay perspective, there's also Jasper SkyTram that we've been talking about that is another meaningful multiyear project that we're underway on. Eric Des Lauriers: Yes. That was actually my follow-up here was just any commentary. understood this is -- Jasper SkyTram is a multiyear project. Just any sense, could this be completed like this is '27, '28, '29, '30? Just can you just kind of help level set it for everyone on the line here just in terms of timing for Jasper SkyTram? And understood that there's a lot of moving parts here and things can move one way or the other. But at least from my perspective, I'm not sure if this is like '27 or '29. So if you could just help us out with that, I'm sure that would be helpful. David Barry: Yes. I appreciate the moving parts comment you made because that's exactly how it feels. We're in a public commentary process now with Parks Canada. Everything is going well. We're working on the planning. So again, we'll be in a better position in February to give you a sense of timing. And so just at this point, we're still working our way through the preliminary part of the process, but definitely it's something that we're targeting to begin in '26 and go from there. So as to exact timing, stay tuned for February, and we'll be able to fill you in. Eric Des Lauriers: Great. I look forward to that. Just last question for me here, kind of high level. So obviously, you have a lot of very significant investment opportunities before you, both organically and M&A. You've cited the financial flexibility you have. You just completed a transformational acquisition with Tabacon. Just wondering if you could comment on capacity to take on more transformational investments or acquisitions from a management bandwidth perspective. Just wondering how full your plate is right now with integrating Tabacon and what kind of internal bandwidth you potentially have to take on another transformational opportunity here? David Barry: You bet. Thanks, Eric. I think there's 2 things to consider, and I'll ask Bo to speak to the financial capacity, but I'll start with our own internal capacity from a leadership standpoint. This is a great team. This is a great team with capacity. It's a strong team. It has the ability, the wherewithal and the energy to do more than one thing at the same time. And also, what's important to know is that our financial systems are already primarily fully integrated with Tabacon. And we're not trying to control and dominate in each location. We're really trying to build with the team that's in place keen to deliver really authentic hospitality, while being part of something that is a powerful network of great hospitality leaders so they can deliver authentic hospitality. So the team in Costa Rica is going to be leading and helping us grow the collection within the whole Costa Rican environment. The team in Western Canada who -- when you meet them, one of the things you realize right away is there's a tremendous capacity for growth. And I would say the same in Montana, the same in Alaska and across all of Pursuit. So there's a lot of bandwidth internally. We've got the runway for it from an expertise and time and energy, and I'll let Bo speak to our capacity financially. Michael Heitz: Yes. And fortunately, we're in a spot from a financial capacity as well with that to be opportunistic here. I mean, our current net leverage is around 0.7x. What we've talked about is we have a target longer-term range of 2.5x to 3.5x on that. Within that today, we have almost $275 million of liquidity available. So the flexibility is there from a financial perspective and from an operating perspective, and now it's about being opportunistic with the pipeline as we work through that. Operator: Our next question comes from the line of Jeff Stantial with Stifel. Jeffrey Stantial: Congrats on a strong quarter. Maybe starting off, David, apologies if I missed this earlier. Can you just remind us at this point in the year, typically, how far booked you are for 2026? And then as a corollary to that, are you seeing any interesting or discernible trends year-on-year, specifically, we obviously continue to see a bit more delayed behavior elsewhere in leisure. Are you seeing any evidence of that this far out or anything else that's worth calling out? David Barry: Yes. What I see, Jeff, and thank you for the question. What I see is positivity and -- but important to remember, it's early days. And so, we have quite strong tour and travel demand coming from our tour and travel partners all over the world. So those indicators show strong demand for 2026 and those itineraries. Our early booking pace for 2026 is ahead of prior years. We are experiencing what we would describe as this continued tailwind and the drive into adventure, experiential, wellness, leisure travel in our types of activities and destinations. You can see through the national park visitation over this summer that there was strong growth. It came in an interesting wave. And in July, we were running pretty even to the first expectation and then there was an acceleration through August and September, just in overall demand. Also a reminder, we work and live in powerful, big, beautiful places, where weather can be a factor. So when we think about '26, one of the things to just remind ourselves of is that in 2025, we had very minimal disruptions with weather or -- and you can have a forest fire that's 2,000 miles away, but it blows smoke into a particular geography for a couple of days, and that can affect visitation. So in '25, it was pretty smooth sailing. We always plan though, for disruption and then manage around that. And then we know that we're going to have some impact from some of the closures on our capital projects, certain wings of hotel shutdown, while we're opening things and rebuilding things. But those are temporal. They go quickly and then we're back in operation. So positivity for '26, we're still working on our plan. We'll be coming out with guidance in February and be able to articulate, I think, a more clear picture of exactly where we're headed. But yes, we're looking at positivity from this standpoint. And Bo, jump in if I missed anything. Michael Heitz: No, I think that's all the highlights, Jeff. I mean, on your specific question, it's pretty early days on the actual booking pacing. It's certainly relevant enough that we're speaking to it, but there's a lot of time left to go, and we'll have better color on that in February as well as it starts to evolve. The tour and travel partners piece is always a helpful indicator in the meantime where it's demand for taking allocations of rooms that they're then working to sell from there. But you can get a good sense for how much demand there is in that market from what they're seeing from their extended market. Jeffrey Stantial: That's great. And then maybe hanging on one thing you said there with regards to weather. David, could you just update us on some of the progress that's gone on in terms of reopening some of the hotel inventory in Jasper that was unfortunately impacted by the wildfire. And then just as more and more of these rooms come back online, whether that's next year or the following, is your current expectation that this will be net dilutive to your business in the market given the additional competitive supply or actually potentially net accretive just given rising tide, more foot traffic benefiting the broader market, those kind of things? David Barry: Yes, the latter. I really do believe that as our friends and neighbors rebuild their businesses and Jasper overall quality of lodging improves, that, that will have a rising tide effect on everything at Jasper. Interesting, Jasper this summer got to the same levels as 2023. And so overall visitation to Jasper National Park quickly recovered, and it happened a little bit later than we originally anticipated, but came on strong in August and September. In Jasper itself, it's very heartening to see that some of our neighbors have got foundations in the ground. They're beginning the reconstruction of their facilities. I don't expect anything will open in '26. It's more of a late '27 as these are complete rebuilds from the ground up, but encouraged by what's happening. And I think just all of us should be impressed with the spirit and energy in the community of Jasper, the Mayor and Parks Canada, they've done a terrific job. Jeffrey Stantial: That's really great to hear. And then one more question, just -- and apologies for this, it's going to be a really high-level one. But sort of circling back around to the effective ticket price performance this quarter, last quarter and for many years now, maybe we talked a lot about the pricing power. Obviously, a lot of pricing growth is driven more by improvements to the actual experience and guest satisfaction, whether that's from actual CapEx dollars or just more kind of iterative adjustments, more hours, different aspects of the experience, things of that nature. But I'm curious, strategically, how much do you think about maybe the flip side of this, which is more of that notion of sort of affordability for the guest and the importance of keeping the value proposition for a park visit compelling versus other vacation alternatives maybe it's another way to look at this, like if you look at really the comparable set here, how is that value proposition, how do you see peers, comps, et cetera, pricing relative to your pricing? And how much does that factor into your decision-making? And I realize that was kind of long-winded and maybe a little meandering, but let me know if that makes sense the way I framed it. David Barry: No. No, it's a great question. So where we start is we start with experience. And I get asked, I think, every earnings call, are you going to continue to take price and where does that lead? I think the stronger question is, are you going to continue to improve experiences? And the answer is yes. And so, an example at the Banff Gondola, where you might have argued, well, we're already at capacity and things are going well. One of the things the team did this summer was they revived a sunset program. And if you're familiar with the Bow Valley, if you're in the valley floor, you can't really see the sunset. So there's a great experience that you travel at the gondola and all of a sudden, the hours of the gondola's vitality are extended because there's programming that encourages you to come and see a sunset. And the views of that sunset from altitude are incredible. And so, there's an example of you really work on a product, you really work on an experience, you deliver it really well to guests and then that drives a business outcome. And so everywhere we look, we look for opportunities in a time of day, and we price dynamically so that if you are a more budget-conscious traveler, you've got windows in a week that are very transparent that you can pick a more affordable product at a time of day, where we know we have capacity, what we call white space that we're looking to fill and do it that way. So you try to have a range of product and what you're looking for is a strong Net Promoter Score, strong guest reviews, strong referral from guests that visit us, telling their friends what a great experience that they had. And that to us is a very important part, and it's just as important as price. Operator: There are no further questions at this time. [Operator Instructions]. David Barry: All right. Well, thank you, operator. This concludes our 2025 third quarter earnings call. Thanks to everyone who joined today. Please feel free to reach out should you have any further questions, and have a great rest of the afternoon. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to Lucid Group's 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 speaker, Mr. Nick Twork, Vice President of Communications. Please go ahead. Nick Twork: Thank you, and welcome to Lucid Group's Third Quarter 2025 Earnings Call. Joining me today are Marc Winterhoff, our Interim CEO; and Taoufiq Boussaid, our CFO. Before handing the call over to Marc, let me remind you that some of the statements on this call include forward-looking statements under federal securities law. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, vehicles and products, studios and service networks, financial and operating outlook and guidance, macroeconomic policy and industry trends, tariffs and trade policy, company initiatives and other future events. These statements are based on various assumptions, whether or not identified in this communication and on the predictions and expectations of our management as of today. Actual events or results are difficult or impossible to predict and may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our annual report on Form 10-K for the year ended December 31, 2024, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other SEC filings and the forward-looking statements on Page 2 of our quarterly earnings presentation available on the Investor Relations section of our website at ir.lucidmotors.com. We undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. In addition, management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is available in our earnings press release issued earlier this afternoon as well as in the earnings presentation. With that, I'd like to turn the call over to Lucid's Interim CEO, Marc Winterhoff. Marc, please go ahead. Marc Winterhoff: Thank you, Nick, and thank you, everyone, for joining us. First, I want to acknowledge all our employees, customers and partners. We appreciate your commitment and support. Secondly, I'm pleased to point out that in Q3, despite all of the headwinds, we delivered our seventh consecutive quarter of record delivery numbers. With that in mind, I would like to reiterate the near-term priorities we are focused on, which we laid out earlier this year, disciplined execution and scaling production, building our brand and further driving consumer demand and advancing our technology leadership, and this has not changed. We remain focused on designing and delivering the best cars period. This is the core of our business, and in a moment, we'll review our progress against these near-term priorities. But before I talk about the near-term priorities, I'd like to share how our strategy has evolved from the beginning of the year and how we have been executing that strategy with intention. Beyond expanding our core business, we are pushing hard on what will be our next chapter, a push into new markets and high-value adjacencies. So before reviewing the quarter with you, I want to explain to you a bit about the next stage of our strategic evolution, where we have already been working hard building block by building block toward the future of robotaxis, Level 4 autonomy and new opportunities for revenue. Our vehicles are not only awesome driving machines, but built on industry-leading EV technology. But also a platform for delivery of new customer service and next-generation customer experience, and we're starting with autonomy. As you all know, we announced in September that we closed a $300 million strategic investment from Uber as part of our partnership to deploy 20,000 robotaxis or more. We already reached a first milestone with successfully delivering the first batch of robotaxi engineering vehicles to Nuro. Nuro is now finalizing their integration and will begin further testing activities. And we announced last week that the San Francisco Bay Area has been chosen as the first location for deployment planned in 2026. Uber is a global leader in ridesharing and their scale, brand and global reach help position Lucid at the forefront of the B2B Level 4 market. Their strategic investment in Lucid validates our highly advanced technology platform and aligns with our strategy. But we don't stop at robotaxis because we believe demand for high levels of autonomous driving will grow as consumers have the opportunity to experience this technology and that they will not only choose vehicles that have these capabilities over those that don't, but also are willing to pay for this capability. And that's why we are very excited about our collaboration with NVIDIA to deliver full Level 4 eyes, hands and mind of point-to-point autonomous driving capabilities to our consumers. We are playing to win. We plan to leverage our agility and focus to be the first to bring full Level 4 capabilities to the B2C market, and we couldn't ask for a better partner than NVIDIA. Lucid's vehicle platforms and safety architectures, combined with the world's AI computing leader will result in a vehicle with formidable performance and intelligence. We will jointly develop L4 capabilities, drawing on years and millions of miles of data and continuously update software as technology improves to remain at the forefront of the industry. To be clear, while we are pushing for L4, with this partnership, we plan to provide significant upgrades to our advanced driving assist functionality beyond what we're already doing in-house as early as end of next year. For decades, cars have been a symbol for freedom to go anywhere at any time. With autonomy, this freedom expands by being able to be productive during your commute or being driven home safely after dinner with friends. And of course, with Lucid's exceptional driving feel, you always have the option to experience the thrill of driving your Lucid yourself whenever you choose. So in a nutshell, we continue to develop the best driving vehicles, providing the most advanced EV technology, significantly advance our autonomous driving capabilities and user experience, expanding into new businesses and optimizing our operations to become leaner and more efficient. Now maybe there's a question about developing autonomous technology fully in-house versus working with partners. Well, Lucid's strategy here is clear and very intentional. We are doing both. Developing higher levels of autonomy, especially true for L4, requires enormous investments. And while some of our peers spend vast sums for in-house development to provide this functionality to their customers, our focus is to provide a high level of autonomy to our customers as soon as possible and with optimized CapEx spend. Our partnerships are enabling us to do exactly that. Having said that, we are continuing our in-house development, but with a smart and resource-efficient approach. In early Q3, we already rolled out hands-free highway driving for the Lucid Air via OTA, and we will bring the same to the gravity soon, fully developed in-house. The verdict is still out on whether owning autonomous driving technology in-house will be a sustainable differentiator or will become commoditized in the long run. Working with our partners allows us to monitor how the technology develops and make focused in-sourcing decisions once the future path becomes clear and avoid costly investments. I hope this gives you some insight into where Taoufiq and I and the leadership team plan to take Lucid. We are fully committed to technology leadership and innovation. But at the same time, we are committed to efficient and smart capital allocation. Now let's turn back to the progress on near-term priorities. First, let's talk about our operational execution. As mentioned in the beginning, we achieved a seventh consecutive record quarter for deliveries. I've said before that our delayed ramp-up of the gravity is mainly due to a small number of suppliers not able to ramp as expected. On top of that, we had to cope with a number of extraordinary external headwinds that threatened to shut our production down several times throughout the year. That's why we are not where we want to be. Let me elaborate a bit on this to give you a flavor of what our teams are working through each day. Over the last 6 months, we have contended with 3 consecutive industry-wide supply chain crisis, magnets, aluminum and chips. These are crisis that set even far bigger competitors on their heels. However, thanks to our vertical integration and our team's agility and resourcefulness, we have been able to problem solve our way through each one to limit impact. First, the magnet shortage in Q2. The magnets we were able to get were incompatible with our unique NACS boost charging drive units for gravity. Hence, we had to temporarily shift our production plan from the grand touring trim for North America to the touring trim for export to Saudi Arabia until magnet availability improved. Unfortunately, that impacted our Q3 production and delivery numbers simply because the additional transport time needed. After we successfully crossed that bridge, a fire at our aluminum suppliers plant shut other OEMs down, but we were once again able to minimize the impact. And right after this, ship supply threatened the whole industry. While once again, our team is on the job, and we are still working through it. I hope this gives you some insight in what our teams are able to navigate on a daily basis, and I'm very proud what they have been able to accomplish and continue to accomplish. Having said that, I want to assure you that we hold ourselves to a high standard and constantly evaluate how we can improve as an organization. So today, we are making some key organizational changes to streamline decision-making, enhance accountability and accelerate growth as the company scales globally. To support these objectives, we are making the following organizational changes. Emad Dlala has been appointed Senior Vice President, Engineering and Digital. In addition to leading the powertrain organization, he will now oversee all product development functions, including vehicle engineering, digital systems and software. In his expanded role, he will continue to drive Lucid's technology leadership, lead vehicle development, improve cost efficiency and manufacturability and advance Lucid's software-defined vehicle architectures. Emad has made remarkable contributions to Lucid's technology leadership over the last 10 years, and we expect this leadership will have a similar impact on the vehicle development as he will now have end-to-end responsibility. Erwin Raphael has been elevated to Senior Vice President, Revenue with expanded oversight of Lucid's global operations. Since Erwin has been at Lucid, he has driven consecutive record results every quarter. He will now lead global sales and services operations, driving accountability for revenue and customer experience as Lucid expands further into new consumer markets worldwide. We are also appointing a new seasoned quality leader to our executive team. Marnie Levergood is appointed Senior Vice President, Quality and will lead efforts to ensure Lucid delivers vehicles that meet the highest standard of quality and craftsmanship, working in close concert with engineering and manufacturing. She previously held quality and manufacturing roles at Scout Motors, Stellantis and Magna. Levergood succeeds Jeri Ford, who is retiring after more than 35 years in the automotive industry. We thank Jeri for her service to Lucid. These organizational changes are designed to capitalize on opportunities to strengthen our business, and we are confident that they will help drive the results we need moving forward. Before I hand over to Taoufiq, I'd like to share a few points on our efforts to boost awareness and strengthen our brand. In Q3, we accelerated our focus on building the Lucid brand and increasing awareness among luxury EV intenders, and we are already seeing results. In the United States, brand awareness jumped 8 points month-over-month among consumers who plan to purchase an EV. This improvement was driven by the launch of our new brand campaign titled Driven, staring our first global brand ambassador, Timothée Chalamet, and directed by Academy Award-nominated Director, James Mangold. Driven is now the most successful brand campaign in Lucid's history with more than 7.2 million views on YouTube and over 1 billion total impressions in the U.S. Lucid's cultural relevance continues to grow. In October, we launched the We Ride for New York campaign featuring NBA, All-Stars, Jalen Brunson and Josh Hart with billboards across New York City and global extension in Abu Dhabi during the Knicks preseason game. And we are just getting started. Stay tuned for more to come. We also received another award our whole Lucid team is especially proud of. The Lucid Air Sapphire was selected as this year's German Performance Car of the Year by 30 leading German motor journalists. Let this sink in for a moment. The German Performance Car of the Year is designed and built in America. To my dear fellow countryman, sorry to wrap that in, but you probably can imagine how proud the Lucid team feels about that. Last but certainly not least, on Midsize, SOP of the first variant of our all-important Midsize platform remains scheduled for the end of 2026, and I can share that we are very pleased with the progress of sourcing and cost structure the team is able to achieve. And on our Atlas drive unit family, it is on track with again, class-leading efficiency, much fewer parts, lower BOM costs, lower weight, and it will include also a rare-earth free variant. With that said, we are entering a new phase and looking forward to a very exciting year ahead, one where Lucid's award-winning vehicles, our leading technology, thoughtful partnerships, brand and focus on execution come together to define the next generation of mobility. Thank you for your continued support and confidence in Lucid. With that, I'll turn over the call to Taoufiq to discuss our financial results and outlook. Taoufiq Boussaid: Thanks, Marc. Good afternoon, everyone. Q3 for Lucid was really about progress, preparation and stabilization in what continues to be a complex and volatile environment. We pushed through those headwinds and kept the plan moving. Revenue was up 30% sequentially and 68% year-over-year, which is a strong result. Just as important, we strengthened our balance sheet. Today, I will cover the strategic actions we took and why they matter, how the quarter played out and how we're thinking about the months ahead. On strategy, Marc already touched on our partnership with Uber, Nuro and NVIDIA. These collaborations are important because they reshape our financial model in a very meaningful way. They give us a capital-efficient path to growth and open the door to new recurring revenue streams in advanced driver assistance, software and data services. At the same time, they help us optimize costs through smarter manufacturing and operational efficiencies. These partnerships are a key part of our midterm plan to strengthen our path to profitability and deliver long-term shareholder value. We expect them to improve margins, support scalable growth and drive returns aligned with disciplined capital deployment. Now we all know the industry and geopolitical headwinds are real, but what matters is execution, and our team is delivering. We hit record deliveries, improved our product mix and set new highs for average selling prices. Production rates picked up towards the end of the quarter, which is especially important in a context where the rest of the industry is reporting major headwinds. On top of that, we expanded internationally and built strong consumer awareness ahead of next year's midsized launch. All of this puts us on a solid trajectory for Q4. And here is the big milestone. For the first time, Lucid Gravity is expected to make up the majority of our production in Q4. And the momentum is already here. October deliveries are climbing, especially for Gravity, and that gives us confidence that this quarter is going to be a turning point for Lucid. We also announced today that we strengthened our liquidity subsequent to quarter end to an increase of our delayed draw term loan facility with our majority shareholder, the public investment fund, from $750 million to approximately $2 billion, all of which remains undrawn. This increase lengthens our runway into the first half of 2027 and provides Lucid with stable access to liquidity. This underscores PIF's ongoing support of Lucid and their strong commitment to our business and confidence in our long-term strategy. We are committed to maintaining a healthy liquidity position, and we'll continue to evaluate all financing and liquidity options, including in the public markets when the appropriate conditions materialize. Now moving to our business performance in the third quarter. Demand once again exceeded our production. We delivered 4,078 vehicles, our seventh straight quarterly record and a 47% increase year-over-year. ASP moved higher with Gravity mix and more high-value configurations. On the production side, we built 3,891 vehicles and produced over 1,000 additional vehicles for final assembly in Saudi Arabia. During the first 3 quarters, we produced 9,966 vehicles, just short of 10,000 units excluding additional vehicles in transit to Saudi Arabia for final assembly. Our second shift that came online in October is expected to further accelerate our production growth. Our exit rate improved late in the quarter, and we plan to carry that momentum into Q4. Now as Marc mentioned earlier, the supply chain remains challenging, not just for us, but across the industry. We're working through issues one by one, but we can't completely rule out further volatility. On the financials, revenue came in at $337 million, up 68% year-on-year and roughly 30% sequentially, driven by deliveries growth and gravity mix. Gross margin improved about 6 points sequentially as mix improved and productivity and cost reduction actions took hold. Margins are still below our long-term goals as we work through tariffs and input costs. Adjusted EBITDA was negative $718 million, reflecting our increased sales and marketing effort and ongoing investment in our midsized platform, the Atlas powertrain platform and our autonomy initiatives. Free cash flow improved to negative $955 million on tighter working capital and execution discipline. On liquidity, we ended the quarter with $4.2 billion, $3 billion of cash and investment and $1.2 billion of credit facilities. That includes the $300 million strategic investment from Uber. After the quarter closed and as disclosed earlier today, we agreed to increase our delayed draw term loan with the PIF from $750 million to about $2 billion. It's undrawn and extends our runway into the first half of 2027. This again underscores PIF's ongoing support and strong commitment to our business and confidence in our long-term strategy. We are committed to maintaining a healthy liquidity position, and we'll continue to evaluate all financing and liquidity options, including in the public markets when the appropriate conditions materialize. Now on the outlook. We're entering Q4 with stronger visibility and a solid foundation for growth. Over the past quarters, we made real progress, refining processes, tightening quality controls and ensuring supplier readiness. We exited Q3 with higher production run rate. And in October, we successfully launched the second ship that we trained during the third quarter. We also have units already in transit to Saudi Arabia for final assembly, along with the vehicles produced so far this month. Assuming no unexpected disruption from supply chain factors, we expect total production at year-end to be around 18,000 units. This is in the range of our guidance, and it's a strong outcome given the complexity of the macro environment. Looking ahead, while the industry expects a continuation of the effects on the demand related to the tapering of incentives and the expiration of certain U.S. tax credit, which pulled some demand forward in Q3, we do see this as a temporary dynamic, and we expect a significant delivery growth in Q4. We anticipate demand to normalize in early 2026, supported by expanded marketing campaigns and the broader availability of Lucid Gravity across multiple streams. In October, while U.S. EV sales in general have dropped, our deliveries and market share have increased, showing strong demand for Lucid vehicles. While other OEMs are slowing down EV investments, we believe we can turn the current challenges into an opportunity, continue to grow market share, capturing shares from other luxury makers. We are already seeing encouraging signals. European orders are up year-over-year and North American traffic and test drives in October were solid compared to historical levels. Gravity orders becoming a larger portion of total order intake will help to drive higher ASPs and revenue. These trends are confirming the strength of our brand and position us well to capture growth as the market stabilizes. We believe the steps we've taken this year, including operational improvements, disciplined incentive management and strategic product expansion are setting the stage for sustainable growth and margin improvement. As the Gravity touring launches and our marketing reach expands, we expect to unlock new demand opportunities globally, reinforcing our long-term trajectory. For 2025 CapEx, we are planning $1 billion to $1.2 billion. We will continue to focus on scaling production, midsized development, automation and cost reduction initiatives. We intend to lower capital intensity per unit as we move through the year. Directionally, the goal is clear, more towards breakeven as mix scale and cost actions compound. To close, Q3 showed that we can grow, derisk and strengthen liquidity at the same time. Orders and delivery reached record levels, mix improved, quality and exit rate moved the right way despite higher complexity, and we extended the runway with an undrawn facility that takes us into first half 2027. Our focus remains the same: compound liquidity, derisk the ramp and improve unit economics every quarter. I want to thank our teams for their execution and our customers, investors and partners for their continued support. With that, I will hand the call back over to Nick. Nick Twork: Thanks, Taoufiq. We'll now start the Q&A portion of the call. Before we take questions from those on the phone, I want to pose some of the questions that our retail investors sent in through the Say Technology platform. The first one comes from Patrick M. Please share Lucid's plan to increase the market cap and shareholder value within the next 12 months. Taoufiq Boussaid: We appreciate the question, Patrick. What will drive market cap and shareholder value is profitability and cash generation. Short term, it's about executing against our plan to reduce cash usage and improve profitability. This relies on ramping the gravity and next year, launching and ramping the Midsize with the right focus on capital allocation and spend. Midterm, we want to further accelerate our cash generation. Marc has laid out some of the foundations of how we can achieve that. Technology and software will be key as they will allow us to maximize return in a repeatable model and with a low capital intensity. There are many exciting developments in the pipeline. I strongly believe that if we continue to make progress against the strategy we laid out, the results of these efforts will be reflected in the share price and the shareholders' return. Nick Twork: Our next question comes from Min. Any updates on the robotaxi partnership with Uber? Marc Winterhoff: Yes. Thanks, Min. This is Marc. Yes, there's a lot of updates. There's a lot of progress being made between the teams at Lucid and at Nuro, and we successfully delivered the first batch of the vehicles -- of the engineering vehicles to Nuro during the quarter for testing. We also announced that San Francisco is the first city we are working towards launching in 2026, subject to regulatory approvals. And we closed the $300 million equity investment from Uber during the quarter, which speaks to their level of confidence as Lucid as a partner. Nick Twork: Okay. Our third question comes from [indiscernible]. When will the company become profitable? Taoufiq Boussaid: Well, we have an internal road map and stage gates against which we are executing. This plan is the North Star for the company and our teams in everything we do. We haven't yet publicly communicated the timing for breakeven. But as a management team, we are continuously working towards this goal through a disciplined focus on executing our short-term plans and midterm strategy. We have a pathway mapped out, and we continue to make significant progress on both short and midterm plans, as Marc has explained. We are confident that in the short term, the combination of Gravity and Midsize will allow us to achieve the scale needed to become profitable. Midterm, Marc has explained some of the strategies and plans we are executing against to further consolidate the cash generation capabilities of the company. One last information. We are planning to organize an Investor Day early next year, which will give us the opportunity to explain our short-term plans and strategy as well as our road map towards cash generation. Nick Twork: Okay. Our next question comes from Nicholas A. What is the time line of an affordable entry-level vehicle for Lucid? Marc Winterhoff: Thanks, Nicholas. The first variant of our Midsize platform remains scheduled for the end of 2026. Nothing has changed, and we're working towards that goal. Nick Twork: All right. Now we'd like to take questions from the phone lines. Operator? Operator: [Operator Instructions] And our first question will come from the line of Ben Kallo with Baird. Ben Kallo: Maybe can we start with just where you are with choosing suppliers for the Midsize vehicle? And then if you could talk about any kind of overlap that can be leveraged from the Air Gravity suppliers? And then I have a follow-up as well. Marc Winterhoff: Yes, Ben, yes, I can take this. So we are well underway with all of our sourcing for the Midsize. So fully on track with what we -- where we wanted to be at this point in time. And I also want to point out that we are very pleased with the BOM costs that we're currently seeing that it looks like that we can achieve. As a matter of fact, in many instances, we are coming in below our own should cost calculations, which is very, very good and speaks to our suppliers wanting to work with us. And your second question is also something that we see and it's very positive that many of the suppliers we are already working with for the Air and the Gravity are now also giving us relief on our pricing for the Air and the Gravity because of being awarded the programs for Midsize. So all in all, that is a very, very encouraging development right now, and we're very pleased with the results. Ben Kallo: Great. Could you just talk about -- maybe about how you guys are prioritizing capital between what the work you're doing in autonomy and then also pushing forward with your technology manufacturing, just how you prioritize or if you don't look at it that way, then I'd love to hear that, too. Marc Winterhoff: Yes, absolutely. I mean that goes very much in line with our partnerships that we have announced. I mean they're CapEx efficient. We don't have to spend a lot of CapEx. That's exactly why we're doing it. We want to be able to provide really leading edge capability and features to our customers without having a very big CapEx outlay right now. That's why we did the Uber-Nuro partnership for our B2B market, but also now the NVIDIA partnership when it comes to the autonomy for consumer vehicles. So yes, I mean, that's exactly what we are planning to do. And while we are doing that, we are monitoring also where it makes sense for us to, in the future, invest capital. But at this point right now, given the -- it costs a lot of money and very big numbers of investments in order to do this completely in-house, and that's why we chose that path. Operator: One moment for our next question. And that will come from the line of Itay Michaeli with TD Cowen. Itay Michaeli: Maybe just to start, a couple of questions on the L4 announcement with NVIDIA. Can you maybe roughly share how you're thinking about the time line for achieving Level 4 on consumer-owned vehicles? And then for the Midsize, do you expect that the L4 hardware will be standard on the vehicle? And if so, does that have any impact on the projected price of the vehicle? Marc Winterhoff: Yes. So on the L4 side, I don't think that we have right now the number -- or actually, we have internally, obviously, a plan, but I would like to communicate that once we are a little bit further down the road in the project and we have the first dots on the board. What I can tell you is that the first result that we want to roll out of that partnership is basically an L2+, L2++ version for Gravity and also for the launch of Midsize by the end of next year. So that's the first step. And from there, we will then roll out via OTAs additional updates. We will also already have all the hardware changes being made, but we will then roll out additional updates in order to get to L4 eventually. But I reserve the right, right now, not to say it's end of next year or next year, but rather come with a date when we are very confident that we can hit it. But at the same time, both NVIDIA and ourselves have very ambitious targets. That's why we did this together with our, let's say, accelerated engineering approach and their, let's say, firepower when it comes to running the large models and calculations, we are confident that we can do this sooner or later -- than later. Itay Michaeli: Terrific. That's very helpful. And then just as a follow-up, maybe just on the outlook. With the uptick in production in Q4, how should we think about just the deliveries with -- in relation to that production level as well as maybe the impact on kind of COGS per unit as you ramp production and, of course, ramp the Gravity as well? Marc Winterhoff: Yes, I can take it and maybe afterwards, you can also chime in to fish. But I mean, when it comes to deliveries, we're not guiding deliveries. But obviously, we are expecting a significant ramp-up of the deliveries in Q4 and the majority being the Gravity. And when it comes to COGS, I mean, obviously, the more volume we have in our installed factories with what we have there, the lower the COGS will become, but Taoufiq, maybe you can... Taoufiq Boussaid: Yes. I think you hinted at the key point. So it's really -- I mean, when you think about the COGS, I mean, directionally, obviously, we have a plan and the plan is that to continue progressing and reduce the COGS per unit compared to the performance from last year. So that was the plan. Directionally, we gave a direction when it comes to the gross margin, which is a good proxy to assess where the COGS will land. We didn't assume some of the headwinds that we had to deal with like the tariffs, which are obviously impacting the COGS this year. But directionally, the combination of the incremental volume resulting from the ramp of the Gravity and some of the volume projections that we are currently assessing for next year, plus the benefits that we're getting from the bill of material and our suppliers that Marc has touched on will help us crystallize some of these improvements that we're aiming at in terms of COGS per unit in the short term. Operator: And one moment for our next question. And that will come from the line of Andres Sheppard with Cantor. Andres Sheppard-Slinger: Congrats on the quarter. Marc, I was hoping to maybe get a sense of how the contract with the government of Saudi Arabia, the one up for 50,000 plus, another option for 50,000. If you can maybe give us an update on kind of where that stands. I think in the past, we've said most deliveries to that agreement will be the Gravity and then the upcoming Midsize. So I know you're not guiding anything for '26, but should we expect some deliveries to that region next year? Or will that likely come after the completion of the IM2 facility? Marc Winterhoff: Yes. Thanks for the question, Andres. Well, absolutely. I mean, as of now already, we are developing -- delivering vehicles to Saudi Arabia as part of that arrangement. And it was always planned to be on a certain level, lower level when we only have the Air, then we're adding to the deliveries when the Gravity becomes available. I would say that the big increase versus this agreement, the 50,000 that we have already, will come with the Midsize. So -- but you will -- we will have higher deliveries to the government in -- now in 2026 with the ramp-up of the Gravity, absolutely. Andres Sheppard-Slinger: Got it. Okay. That's helpful. And then maybe one for Taoufiq. So you've extended your capital runway looks like into first half of 2027 now. I'm curious if you can maybe refresh us on near-term capital needs. Does that -- extension now in the draw facility, does that account for the maturity in September of '26? Or how should we think about that? Taoufiq Boussaid: No, that's 2 separate things. So the maturity, I guess you're referring here to the convert. So the convert will need to be refinanced, and we have a plan for that. So it's not directly related to the DDTL. Operator: One moment for our next question. That will come from the line of James Picariello with BNP Paribas. Thomas Scholl: This is Jake on for James. So first, I just wanted to follow up on the NVIDIA partnership. Obviously, you guys set a pretty ambitious goal of being the first company to roll out consumer Level 4 capability. Virtually every major automaker has some form of kind of advanced ADAS program. And after billions of dollars invested, no one has really been able to move past Level 2+. So can you just provide some color on why you think you'll be able to succeed where everyone else has failed? Marc Winterhoff: Yes, James, maybe I can take that. Well, I guess, Obviously, a lot of things have changed in the -- I would say, in the recent year or so when it comes to approach to autonomy. I mean -- and that's actually a good point that you're saying because if we would have -- there was a question earlier about capital investments around this topic. If we would have done what others have done earlier, like 5 years ago, we would have probably invested billions and nothing to show for. But the technology with the end-to-end models and the compute power in the meantime has drastically changed. And the way those end-to-end models can be trained, this is now completely different than how it was 2 years ago. And so that makes us confident with everything that we are seeing right now and obviously, in our conversations and our testing with NVIDIA, we see a path now to get there. And why we think we can be among the first, I mean, obviously, we cannot guarantee this. We can only say that we are, together with NVIDIA, do everything to be the first. It has also a little bit to do with our vehicle cycle, where are we in the -- with the development versus others that are further out until they even can do something like that. So yes, but given the drastic change in AI technology and approach to autonomy, that's what makes us confident that it's achievable now. Thomas Scholl: And then can you just provide some color on the new vehicle order trends you've been seeing since the expiration of U.S. EV tax credits in October. Obviously, the Air and the Gravity weren't eligible for the 30D credit, but it looks like roughly 65% of your U.S. sales in the third quarter came from leases where people were able to take advantage of the 45W credit. Marc Winterhoff: Yes. Well, I mean, what I can definitely say is that actually our delivery numbers in October, meaning first month of the fourth quarter actually went up. And so that is a very encouraging trend compared to many of our, let's say, competitors that have EVs and ICE. There are several ones that reported, I think, a drop of about 50%. Our numbers went up and so did our market share. And we credit basically our vehicles, in particular, now the Gravity becoming more and more available with us ramping up the production with that. So we believe we're in a very good spot when it comes to sustaining the demand and then, therefore, the deliveries. And we also believe that this is a passing phase, meaning we think that by beginning of next year, the demand will normalize compared to what we are seeing right now or what others are seeing right now. Operator: [Operator Instructions] Our next question will come from the line of Tobias Beith with Rothschild. Tobias Beith: I've got 3 questions, if that's okay. First one is for Taoufiq. The gross margin rate when I adjusted for income from emission credit trading depreciation improved by 8 points quarter-over-quarter and was possibly flat on a pre-tariff impact basis. My question is, why wasn't leverage on volumes and the impact of product mix visible? Taoufiq Boussaid: So the thing is that if you look at the production of Q3, the impact from mix was not as big as what we wanted it to be because we're still in a ramp-up phase for the Gravity. The numbers are improving versus Q2, but they are still at a meaningful level where they can significantly impact the volume. But the real reason behind this flat or lack of improvement is mainly related to the increase of inventory and the impairment associated with that. So we have increased the inventories in preparation of the ramp-up in Q4. We are in a loss-making situation, and we needed to impair these inventories, and this is hitting the gross margin. Tobias Beith: Okay. I understand. Marc, what is Lucid's plan regarding the localization of production of the Midsize platform, if at all? I appreciate that the global automotive trade is in flux at the moment, but even an expansion of AMP-1's capabilities would probably have a lead time of at least a year if you started tomorrow. Marc Winterhoff: Well, I mean, we have already made preparations for that to build the Midsize in AMP-1. So I actually thought that we've talked about this some time ago, but maybe not. I mean AMP-1 in Arizona is planned to produce the Midsize as well. It's not only our plant in KSA. AMP-1 is also already being prepared. We will have still to make some investments, but it's actually not that much. Much of the investments that are needed in order to produce the vehicle are already there. So that's the plan. I mean we're more talking about, okay, when would we have to expand that. But for that, we want to be very prudent, and we want to see how everything goes before we pull the next phase. But yes, it is definitely planned to be also built here in AMP-1. Tobias Beith: Okay. And last question, the PowerPoint, it shows for the first time, I believe, a detailed render of the Atlas propulsion system. It's very impressive. It seems to show that there's a new inverter, redesigned thermal management system. And I know that the Atlas propulsion system was mentioned in your prepared remarks, Marc. But I wondered if I could ask for even more of an update on the Atlas, please, given its importance. Marc Winterhoff: Yes. Well, I mean, what I can say is definitely that it's totally on track. So that's why we are now starting to leak -- or not leak actually, a little bit of information. But I mean, it's coming out actually really great. I mean it's -- from a cost perspective, it's a material change, and we will also share soon probably at the Investors Day that we are planning the details how far below of our current generation the cost is, we have much fewer parts, highly integrated, as you just mentioned, the inverter in everything. So weight is lower, efficiency is even higher from what we have right now. So we are very, very pleased with that. And we also have different versions where we have also versions of the Atlas that doesn't have -- doesn't need any rare earth. So I mean, we're really very -- yes, very convinced that this is a big step forward for us. Tobias Beith: Can I ask why not do all of the Atlas without rare earth, given it has caused problems for Lucid and the broader industry in the last 6 months or so? Marc Winterhoff: That will be, let's say, the long-term plan, but certain applications, certain power requirements for certain trims require, at this time, still permanent magnets. But that is the goal that we obviously try to figure that out. And again, in the -- maybe in the Investor Day that we are planning, I mean, Emad will definitely be there, and he can probably tell you in a short explanation over about 2 hours what exactly we are doing there. But yes, I mean, happy to provide further insights on that. Operator: Thank you. As I'm showing no further questions in the queue at this time. This concludes today's program. Thank you all for participating. You may now disconnect.
Operator: Good afternoon, and welcome to the ADMA Biologics Third Quarter 2025 Financial Results and Business Update Conference Call on Wednesday, November 5 2025. [Operator Instructions] Please be advised that this call is being recorded at the company's request and will be available on the company's website approximately 2 hours following the end of the call. At this time, I would like to introduce the company. Please go ahead. Unknown Executive: Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' financial results for the third quarter of 2025 and recent corporate updates. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brad Tade, Chief Financial Officer and Treasurer. During today's call, Adam will provide some introductory comments and provide an update on corporate progress, and then Brad will provide an overview of the company's third quarter 2025 financial results. Finally, Adam will then provide some brief summary remarks before opening up the call for questions. Earlier today, we issued a press release detailing the third quarter 2025 financial results and summarized certain achievements and recent corporate updates. The release is available on our website at www.admabiologics.com. Before we begin our formal comments, I'll remind you that we will be making forward-looking assertions during today's call that represent the company's intentions, expectations or beliefs concerning future events, which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to factors, risks and uncertainties such as those detailed in today's press release announcing this call and in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update any such statements, except as required by federal securities laws. We refer you to the disclosure notice section in our earnings release we issued today in the Risk Factors section in our SEC filings and our quarterly report on Form 10-Q for the quarter ended September 30, 2025, for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. Please note that the discussion on today's call includes certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric is available in our earnings release. With that, I would now like to turn the call over to Adam Grossman. Adam, go ahead. Adam Grossman: Good afternoon, everyone. ADMA delivered another record quarter of sequential and year-over-year growth, underscoring the strength of our business model and disciplined execution. We delivered total revenue of $134.2 million, representing a 10% quarter-over-quarter increase and 12% growth year-over-year. GAAP net income reached $36.4 million, up 6% quarter-over-quarter and 1% year-over-year, and adjusted EBITDA grew to $58.7 million, representing 16% quarter-over-quarter growth and a 29% increase year-over-year. These results demonstrate the durability of our growth engine and the expanding leverage in our fully integrated U.S. domiciled business model. Our performance continues to be led by ASCENIV, our differentiated and patent-protected specialty IG exclusively targeting complex immunodeficient patients. ASCENIV delivered record utilization this quarter, driven by strong prescriber adoption and sustained patient demand. 2026 payer negotiations are progressing positively and are expected to further expand coverage, improving access and accelerating growth. For select payers where restrictions previously existed, we anticipate improved ASCENIV reimbursement access beginning next year. Equally important, a retrospective cohort analysis in an investigator-initiated study of primary immunodeficiency patients demonstrated statistically significant reduction in infection rates following transition from standard immunoglobulin therapy to ASCENIV. Patients experienced 2.1 infections per year while receiving prior lines of standard IG therapy compared with 0.9 infections per year on ASCENIV, representing a reduction of greater than 50% with a p-value considerably inside of 0.05. These findings suggest that ASCENIV provides enhanced protection against infections in real-world clinical practice. Data validation and extended analyses are ongoing. ADMA plans to submit these results for peer-reviewed publication in the near term with additional findings planned to be submitted at the Clinical Immunology Society 2026 Annual Meeting. Operationally, the FDA's lot release of our first yield enhanced production batches represents a major inflection point. This process innovation is expected to improve per batch output by 20% or more, driving sustained gross margin expansion beginning in the fourth quarter of 2025 and continuing through 2026 and beyond. Regulatory release of these batches was achieved in the ordinary course, positioning us to realize our first full year of yield enhancement production in the entirety of 2026. In addition to strengthening our commercial operating model, we continue to invest in innovation and pipeline advancement. Our SG-001 program is progressing as planned, and we recently submitted a CNPV voucher application to the FDA. If approved, this voucher could meaningfully accelerate further regulatory review timelines, giving us a clear advantage as we move into registrational clinical development. SG-001 remains a meaningful long-term opportunity with the potential to address significant unmet medical needs in patients vulnerable to Streptococcus pneumonia infection. Preclinical data for SG-001 demonstrated broad serotype-specific antibody activity, encompassing a wider range of pneumococcal serotypes than those targeted by any currently available pneumococcal vaccine, underscoring the potential for SG-001 to provide enhanced protective coverage. We view this program as a natural extension of our core competencies in hyperimmune IG development and manufacturing and as a potential key value driver for ADMA's next phase of growth. Although SG-001 is excluded from our $1.1 billion or more fiscal year 2029 revenue guidance, we believe approval could occur within this time frame. And if successful, we believe the new product could rapidly scale to peak revenues following potential commercial launch. We believe SG-001 represents a potential $300 million to $500 million in annual high-margin revenue opportunity with IP protection through at least 2037. Turning to capital deployment. Our approach remains disciplined and strategic, focusing on creating stockholder value. Following our successful JPMorgan-led debt refinancing earlier this year, ADMA maintains an undrawn $225 million revolving credit facility, providing flexibility to fund growth and stockholder value initiatives. We continue to repurchase ADMA shares under our authorized program, funded organically to date through free cash flow and maintain a strong capital position to potentially reinvest in high-return initiatives that enhance stockholder value. Looking forward, our focus remains clear: expand ASCENIV access and utilization, scale yield enhanced production and product mix shift, drive continued margin expansion, advance our capital-efficient pipeline and return capital to stockholders through share repurchases. We believe these priorities will collectively position us to achieve more than $1.1 billion or more in annual revenue in 2029 with a clear line of sight to durable earnings growth. With that, I'll now turn the call over to Brad to review our third quarter financials in more detail. Brad Tade: Thank you, Adam. Our third quarter results highlight ADMA's consistent execution and expanding profitability. Total revenue for the quarter was $134.2 million, up 10% from the second quarter and an increase of 12% year-over-year. Gross margins expanded to approximately 56.3% compared to 49.8% last year, driven by ASCENIV's growing mix and early yield enhancement benefits. Excluding the plasma sale of $13.8 million during the quarter, product level gross margins reached 63.7% during the third quarter of 2025. GAAP net income totaled $36.4 million compared to $35.9 million in the prior year period, while adjusted EBITDA increased to $58.7 million, representing 16% growth quarter-over-quarter and 29% year-over-year, reflecting continued operating leverage and cost efficiencies. Year-over-year, net income growth was tempered by a higher effective tax rate and temporary competitive dynamics in the standard IVIG markets, mainly impacting BIVIGAM. Enabled by the company's outperforming third-party plasma suppliers, ADMA opportunistically completed a sale of approximately $13.8 million of normal source plasma on the spot market at a negative margin contribution to optimize working capital and go-forward cash flow. These factors are short term. Post quarter, standard IVIG market conditions are stabilizing and record ASCENIV demand continues to drive margin expansion. ADMA ended the quarter with a strong balance sheet and liquidity position. Third quarter cash reflected approximately $23 million in share repurchases settled during the period, planned inventory build and a $12.6 million facility expansion investment. Working capital dynamics are expected to normalize in the coming quarters, supporting accelerated cash growth through 2026. We maintain a strong balance sheet with an undrawn $225 million revolver, providing ample flexibility for growth. Turning to our outlook. ADMA's full year 2025 and 2026 financial outlook reflects continued ASCENIV demand strength, yield enhancement production efficiencies and disciplined operational execution. For 2025, total revenue is now expected to be $510 million, up from prior guidance of more than $500 million. 2025 adjusted net income is modestly adjusted to $158 million due to a higher effective tax rate. Fiscal year 2025 adjusted EBITDA guidance remains expected to be $235 million. These forecasted annualized 2025 results position the company strongly to end the year on a high note and enter 2026 from a position of strength. For 2026, total revenue is now expected to be at least $630 million, up from $625 million or more previously. Adjusted net income has increased to more than $255 million, up from $245 million previously, and adjusted EBITDA is raised to more than $355 million, up from $340 million or more from previous guidance. The increased 2026 adjusted net income guidance now considers a full corporate tax rate for fiscal year 2026. Looking longer term, ADMA expects fiscal year 2029 total annual revenue to exceed $1.1 billion, supported by yield enhancement efficiencies, expanding ASCENIV demand and continued gross margin gains. Potential contributions from SG-001 and capacity expansion are excluded from this outlook and represent meaningful upside to ADMA's long-term earnings power. Following its JPMorgan-led refinancing, ADMA maintains a strong balance sheet with an undrawn $225 million revolver and forecasted robust cash generation. Share repurchases continue to be funded organically, reflecting disciplined capital allocation and long-term shareholder value focus. With that, I'll turn the call back to Adam for closing remarks. Adam Grossman: Thank you, Brad. Before we open the call for questions, I wanted to take a step back and reflect on how far we've come and where we're heading. Just 3 years ago, ADMA was at the early stages of its commercial expansion. Today, we're generating record revenue and profitability, achieving best-in-class gross margins with substantial expansion forecasted from here and setting the stage for what should be sustained earnings growth across the next decade while advancing a compelling new product cycle. Our yield enhancement milestone is a defining moment in that journey. It not only validates our technical capabilities but also positions us among the most efficient plasma fractionators in the industry. With FDA released yield enhanced production lots now flowing through our supply chain, we believe we are strongly positioned to finish 2025 on a high note and accelerate year-over-year growth rates in 2026 from a position of operational strength with line of sight expected meaningful cost savings, improved production mix throughput and the potential to add incremental manufacturing capacity without significant capital investment provides optimism for our future. On the commercial side, ASCENIV continues to outperform expectations and remains at the center of our growth story. We are witnessing both expanding utilization in existing accounts and growing interest from new treatment centers. As payer access improves in 2026, we expect adoption to accelerate further, supporting our expectations of strong double-digit revenue growth well into the back half of the decade. The combination of expanding coverage, real-world data validation and increased patient acceptance is creating durable, powerful momentum across ADMA's health care ecosystem. Looking further ahead, our R&D platform continues to progress. The SG-001 program is advancing on schedule, and we remain enthusiastic about its long-term potential. We believe we can advance this pipeline program directly into registrational trials following continued and successful preclinical development and potential ultimate IND submission. When combined with our manufacturing know-how and regulatory expertise, SG001 has the potential to expand ADMA's leading position in the specialty immunoglobulin space while adding meaningful high-margin revenue in the out years. Financially, ADMA has never been stronger. We are operating with a clean balance sheet, a fully funded growth plan and forecasted accelerating cash generation. Our capital allocation priorities are clear, reinvest for growth, maintain balance sheet flexibility and return capital to our stockholders through opportunistic share repurchases. This strategy reflects our confidence in the business and our commitment to building enduring value. In closing, I want to thank the entire ADMA team for another exceptional quarter. Your hard work, expertise and passion make all of this possible. To our investors and stakeholders, thank you for your continued confidence in our company and partnership as we execute against our mission to improve patient lives while creating durable stockholder value. With that, operator, please open up the call for questions. Operator: [Operator Instructions] Our first question comes from Anthony Petrone with Mizuho. Anthony Petrone: Maybe to start with the data. I want to congratulate you and the team there. 50 -- greater than 50% reduction in infections using ASCENIV versus standard IG therapy. You have a plan to publish those data, present next year at Clinical Immunology in April. Maybe a little bit on some of the constructs of what we should expect in the publication. What types of adverse events maybe were avoided with ASCENIV? Will there be cost-benefit analysis in those -- in that study publication? And then I'll have a couple of follow-ups. Adam Grossman: Thanks for the question, Anthony. So I was very pleased that our compliance group allowed us to talk about this data. So I can't give away too much, but we evaluated a robust patient cohort that was appropriately sized, and we were able to generate statistically significant data. Very, very proud of this. The data demonstrates a significant reduction in infections in these patients that are switching off of their standard IG and moving to ASCENIV. This is the real-world setting. These are complex PI patients that are switching. And again, we're just very pleased. I mean, 2.1 infections while they were on standard IVIG compared to less than 1 infection per year with a p-value of less than 0.05. We think that this is really just a very clear way of demonstrating what clinicians have been reporting to us and what we've been reporting as a company about the clear clinical differentiation that ASCENIV provides compared to standard IG and why these complex and refractive and comorbid PI patients seem to do better on ASCENIV. We expect that the data is going to reinforce prescriber confidence. It's going to strengthen payer coverage. Our negotiations with payers have progressed very nicely throughout 2025, and we're anticipating expanded access into 2026. So we're continuing to analyze this data. We plan for a peer-review publication, as you mentioned, early in 2026. And we expect this and other investigator-initiated studies that are ongoing to further validate ASCENIV's utility and really define the patient profile that we're targeting. In 2026, we really plan to ramp up medical education and publications. We plan to provide continued real-world outcomes data. And we think all this is going to bode well for ASCENIV's growth in 2026 and beyond. Anthony Petrone: All right. That's very helpful. The follow-up here would be, we've picked up from physicians that with data and this certainly -- with data indication -- indicating that you can get efficacy benefits with ASCENIV that perhaps there's a percent of the immunologists out there that would consider using ASCENIV sooner to treat some of these complex PI patients. So what do you think this data can do for demand into next year? And how should we be thinking about the growth curve once this data is digested and of course, your supply situation has improved. And I'll get back in queue. Again, congrats on the study. Adam Grossman: Thank you so much, Anthony. Look, we've seen record utilization of ASCENIV throughout the third quarter, and that has continued to be observed as we enter the fourth and are in the middle of the fourth quarter. This data is really just reinforcing everything that we've experienced. Payer negotiations, I mean, look, we still stand firm on our position that ASCENIV should not be used as a first-line therapy. We think that your question about, could this in the minds of prescribers be used earlier in the treatment cycle, possibly. We do see some private payers moving ASCENIV up where you don't have to fail as many step edits, there could be less. So we think that payer expansion is going to improve. And again, the more data that we can put and publish in the public domain, the better it's going to be to reinforce and maintain ASCENIV's strong position. We do expect strong double-digit growth. We do think that the data that we're putting out there, the patient testimonials, our medical education strategy and our enhanced publication strategy for next year is all going to work together to continue to drive utilization. Regarding the growth curve, I mean, look, we've, we've increased guidance for 2026 top line and earnings metrics. Very proud of where we are with yield enhancement with our first FDA released commercial batches of yield enhanced product now flowing through the supply chain. So we think that you're going to see continued accelerating utilization of ASCENIV continued growth of our IG portfolio throughout 2026 and beyond. Operator: Our next question comes from Kristen Kluska with Cantor Fitzgerald. Rick Miller: This is Rick Miller on for Kristen. We've got 2 here for you. You've been saying back half of this year, you're expecting an acceleration and then into next year. So is there any additional color you can give us on what you were seeing that sort of gave you the confidence around raising the revenue guidance? And then we'll have one more for you after that. Adam Grossman: I mean the confidence is that we see it in the redistribution data. I mean the product pull-through at record levels, exceeding internal expectations throughout the third quarter. Fourth quarter is no different. We feel very confident in ASCENIV's utility. I think the data that I was just speaking about, this is what physicians and patients are experiencing in the real-world setting. So we're making a good drug. We're making more of it than we ever have before. We had more product available in the third quarter than we have had historically, and we see it continuing to pull through at a rapid pace. So very encouraging. I mean, look, again, Rick, we've talked about, and I don't like to sound like a broken record, but the patients who are switching to ASCENIV are patients that are not thriving on their standard IG, and they're looking for alternatives. One thing I can say is that in the late summer, we started our first direct-to-patient medical education programs, and we think that those are starting to have a meaningful impact as well. The key is if you're an immune-compromised patient receiving IG and you just don't feel well, have a conversation with your doctor, talk to your nurse practitioners, advocate for yourself, you're your best advocate and see if ASCENIV is the right product for you to switch to. So all these factors combined are what's contributing. Our field team is working in unison. We've had some great hires throughout 2025. And we continue to just knock down doors and uncover new institutions that are starting their first patients. And it's everything that we've really described is that same institutions are now starting to add patients that they've identified in their queue, if you will. We've got more product available, and that's been the message throughout the third quarter that, look, we've got more product for you. You can start putting patients on therapy. And we see it in our supply chain that we've got the ability to ensure the continuity of care for these patients. So we're starting them. They're staying on therapy, and they're doing well. That's what contributes to this growth. And that's why in our fifth plus year or so from launch, we're forecasting very robust acceleration as we wind down 2025 and enter 2026. Brad Tade: Yes, exactly. Adam, just to expand on that. I mean, we're talking about the guidance that we just raised for 2026, and that represents 24% year-over-year growth on revenue. It represents 51% year-over-year growth on adjusted EBITDA and 61% year-over-year growth on adjusted net income. So exactly what Adam was saying is those are the things that are providing us confidence to raise that guidance, and we are feeling pretty good and strong about 2026. Rick Miller: Okay. And then maybe one more. After the FDA lot release for the yield enhanced product, are there any other gating factors here before we start to see the impact on 4Q? Adam Grossman: No. We're going to see this flow through. The majority of product sales in the fourth quarter, we think, will be from yield enhanced product. ASCENIV certainly, most of it, again, we think will be from yield enhance. But very excited about this. Again, it was something that was an unknown that we said probably will go off in the normal course, which it did. And we're very pleased. Dialogue with the agency has been good, and it's business as usual. So very excited for what the fourth quarter should bring in 2026. Operator: Our next question comes from Gary Nachman with Raymond James. Gary Nachman: Congrats on the progress. Just following up on that last point, with the FDA releasing the first lots of the yield enhanced batches, just give us a sense of how long that process takes? And will it now be a lot easier going forward for new batches, just how that all works? And then just also give us a sense of how much gross margin will expand in 4Q and into next year, what that cadence will look like, I guess, off the 63.7% in 3Q that was normalized? Adam Grossman: Sure. So FDA lot release, as we've said, can be as short as, call it, 2 to 3 weeks to as long as, call it, 6 to 8 weeks. There is no -- there was nothing different that occurred with the yield enhanced batches, Gary. It was just -- we just wanted to make sure that everything went through in the normal course, which it did. So we're receiving FDA lot releases routinely. No issues there, and we continue to have ample inventory and supply available of our IG product portfolio to meet the demands for the market. With respect to gross margins, I mean, we reported -- we reported this quarter that if you back out the plasma revenue, Brad, keep me honest here, product level gross margins were 63.7%. So we're feeling very good about product level gross margins. And we feel that it should continue to expand as we continue with ASCENIV mix shift from a revenue and a unit perspective. Our goal is, again, to get to using half the plant's capacity at least to make ASCENIV, if not more. And that's what's going to drive us to our out-year guidance for 2029 now. that is $1.1 billion or more in revenue. So we're feeling very positive about it. Everything is going very well from a lot release perspective. And the visibility with our third-party supply contracts is what's giving us this encouragement to get more patients on drug. We're making more ASCENIV. We're producing more batches than we originally planned for 2025, and that's going to ultimately give us more product to sell in 2026. Brad Tade: And Gary, just to expand on that, on the gross margin piece. mean as we get into 2026, we've always been saying that we're going to see margin expansion. And at 63.7% less the plasma sale, we're at the beginning -- I believe we're at the beginning of that, right? We're at the beginning of that margin expansion journey. The operations team is constantly looking for cost savings initiatives, and they're getting after it and they're getting after it hard. And as we continue to see this mix shift between BIVIGAM and ASCENIV, and we continue to see the yield enhancement lots roll out, if everything goes in our direction in 2026, we'll be potentially hitting the plus 70% gross margin line, and that's going to be very nice from a drop-through to net income and adjusted EBITDA. Gary Nachman: Okay. That's helpful. And then with the payer discussions that you're having to improve access next year, just talk a little bit more on that because you previously said that was in pretty good shape. So I just want to get a sense, do you have to give up any discounts or rebates to get more favorable access? And then how much of the HEOR data is actually a factor there? We're obviously very excited to see that data as well. So I'm curious if you started having discussions yet with the payers or that's still to come in terms of that new data? Adam Grossman: So we are always in active discussions with a number of different commercial payers, Gary. You couldn't see me smiling when you were asking your question, but I was smiling. I mean the payers certainly like their rebates. We're in active negotiations around this. We don't think that anything is going to be so significant that it's going to change our gross margin outlook or our product level margins significantly. But we all understand how it works. So the negotiations with the payers have actually been pretty positive over the last couple of months as we ended the third quarter and enter the fourth quarter. My field reimbursement and market access team is seeing some, I don't know if you can ever use the word acceleration in approvals with commercial payers, but appropriately defined use case patients are getting approvals. Some payers are working more rapidly with us than others, and we're trying to alleviate the bottlenecks across the entire commercial payer landscape. Again, the majority of ASCENIV especially, BIVIGAM as well is through Medicare, where it's a lot easier to get reimbursement more rapidly. But from a commercial payer perspective, which is about, call it, 40-ish, 45% of utilization, we're seeing movement from some payers who had us restricted. We're coming off restricted less, we're moving up from a step edit perspective. And I think as these negotiations transpire, if there's things to report, we'll certainly keep the street informed. But data, obviously, the more data helps. You asked about the outcomes data. The payers are seeing this in their own patient profiles. I mean they're seeing that these are patients that have cost their plans money. These are patients that do get hospitalized maybe once or twice per year, and they're staying out of the hospital. They're not getting as sick. We're reporting today that in this investigator-initiated study, we're seeing a significant reduction in infections. This is not a one-off. This is what payers are seeing. And all of this contributes into their decision to approve ASCENIV and approve a switch from standard IG to this product. So everything seems to be working well. Again, our field reimbursement team is doing a great job and our market access team is negotiating in a very collegial way with a number of different payers right now. And we wouldn't have put it in the prepared remarks or in the press release if we didn't feel confident that we were going to see improvements to our commercial payer profile. So we expect that to occur early in 2026, and we're very optimistic for the growth for the future. Gary Nachman: Okay. That's all very helpful. And then just last one, just a follow-up on an earlier question about, also using that data to expand the number of physicians or centers that are going to be using ASCENIV. So just want to confirm, are you still currently around 100 or so, whether it's physicians or centers that are using ASCENIV? And to get to your peak target for 2029 of greater than $1.1 billion, where does that need to go? Does it need to double? Could it -- you've talked about a 300 sort of target, I guess, ultimately? And how long do you think it will take before you get there? Adam Grossman: All good questions. Thank you, Gary. we do say that there are about 300 clinical immunologists that follow large groups of these primary immune-deficient patients. It's certainly greater than 100 prescribing docs now. I mean we've really seen rapid uptake throughout the summer of new docs saying, "You know what, I'm readyâ€. And the fact that our commercial team since the start of the third quarter has been out there saying that we've got more product, you can start your patients on therapy. I mean, people took us seriously. So that certainly helps, Gary, when you're dealing with a scarce raw material like we are with ASCENIV, less than 5% of these plasma donors have the antibody profile that we're looking for. But the clinician universe that we target, they're well aware of our partnerships with Grifols, Kedrion and others to access a wider group of collection centers to get more plasma. So folks have been listening to our messaging. They know that Grifols, Kedrion and others are reliable suppliers. And I think we've really been able to do a great job at building the confidence for the continuity of supply throughout 2025. And that's what's been encouraging for new docs to put patients on and existing prescribers to add more patients in their queue. Look, we're -- we increased 2025 revenue, I believe, right, from $500 million to $510 million. We feel confident about this. We feel good that our ability to supply product to the health care community is solid. And that's really what's helping to drive this, is the confidence of our commercial team, telling the prescribers that, look, we've got the product available. They're accelerating the accession of these patients, getting them on therapy, starting the payer conversations earlier. Our field reimbursement team has grown this year, and it will probably grow a little bit next year, but they're all working very, very hard to expedite new patient starts. And that's what's ultimately going to drive growth. You're asking me about the full year 2029 revenue. I mean, I feel good that -- we're in a good position, Gary, both from who the physicians are and where the patients are to hit $1.1 billion. We feel good about our ability to collect the raw material. I mean you've seen inventory step up. We're swapping out normal source plasma, replacing it with high titer plasma inventory to make more ASCENIV. We're elbows deep in the budget for 2026, and we're forecasting more ASCENIV production than we had in 2025, and that's ultimately going to drive increasing revenues in 2026 and 2027. So is there an opportunity to achieve the $1.1 billion earlier than 2029? I think it's possible. But at this point in time, we feel confident that we should hit this in 2029. And in normal ADMA fashion, if we can do it faster, we certainly will. Operator: We have a question from Anthony Petrone with Mizuho. Anthony Petrone: I was following up on the experience you're seeing with the new centers from earlier this year. You mentioned a 5% hit rate on collections at those new centers. I'm just wondering, as time goes on and perhaps with your partnerships either with Grifols or Kendrion, you train those sites to sort of have more proactive donor outreach, do you think that the donor -- the 5% RSV hit rate in those additional centers can improve over time? Adam Grossman: So the hit rate will always be the hit rate, but the amount of plasma that our third-party suppliers will collect of high titer, I think, will grow, Anthony. Look, the third-party suppliers have meaningfully outperformed, full stop. The team at ADMA that does our proprietary RSV screening assay and testing, they've got it under control. They've ramped up. I mean we invested time, money, effort, blood, sweat, tears to get to this point. And we feel really, really good about the supply chain continuity and the ability to rapidly identify these donors and collect that plasma from our third-party providers. As I mentioned, and I think folks can see in the contracts, I know that there are some terms that are redacted, but there are financial incentives for our third-party suppliers to hit our target collection goals. They all want their bonuses and by [dollar ], we want to pay their bonuses. So I think it's a very symbiotic relationship. I think it's going very, very well. And again, I cannot emphasize enough about how good the team has done here at ADMA, but our third-party suppliers have meaningfully outperformed. 2026 conversations with our third-party suppliers are going well. We feel like we're in a great position to collect more plasma than we did this year for next year. And that's ultimately going to give us confidence into '27, '28 and '29. So things are going very, very well from a plasma supply standpoint. We're building inventory. We've got the inventory we need to be successful. And we feel like we're in a great position to at least meet, if not exceed the upwardly revised guidance targets that we've set for 2026. Operator: Ladies and gentlemen, this will conclude our question-and-answer portion of the call. I'd like to turn it back over to Adam now for additional closing remarks. Adam Grossman: Thank you, everybody, for taking the time this afternoon. We really appreciate your continued support of ADMA Biologics. And if you have an ADMA Bio center or one of our third-party centers near you, please go donate plasma, save a life. And to the ADMA team that's listening, thank you for all you do. Let's crush it until the end of the year. Thanks, everybody. Have a good afternoon. Operator: Ladies and gentlemen, this does conclude the conference call for today. We appreciate your participation, and you may now disconnect.
Operator: Hello, and welcome to the Procore Technologies, Inc. Q3 2025 Earnings Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Alexandra Geller, Head of IR to begin. Please go ahead. Alexandra Geller: Good afternoon, and welcome to Procore's 2025 Third Quarter Earnings Call. I'm Alexandra Geller, Head of Investor Relations. Before I begin today's call, I wanted to share that Howard Fu, our CFO, is unexpectedly out of the country attending to a sudden family emergency and will not be joining today's earnings call. For that reason, with me today are Tooey Courtemanche, Founder, President and CEO; and Matthew Puljiz, Senior Vice President of Finance, who will be joining in Howard's place on a onetime basis. You will hear from Howard again soon. Further disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website and our periodic reports filed with the SEC. Today's call is being recorded, and a replay will be available following the conclusion of the call. Comments made on this call include forward-looking statements regarding, among other things, our financial outlook, go-to-market model, CEO transition, platform and products, customer demand, operations, stock repurchase program and macroeconomic and geopolitical conditions. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks, uncertainties and assumptions and are based on management's current expectations and views as of today, November 5, 2025. Procore undertakes no obligation to update any forward-looking statements to reflect new information or unanticipated events, except as required by law. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Therefore, these statements should not be relied upon as representing our views as of any subsequent date. We'll also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP measures is provided in our press release and our periodic reports filed with the SEC. And with that, let me turn the call over to Tooey. Craig Courtemanche: Thanks, Alex, and thank you, everyone, for joining us today. Let's start with our Q3 performance, which represented another strong quarter. Some highlights include: revenue growth was 14.5% year-over-year, which is consistent with last quarter's growth and reflects our underlying business momentum and performance that we've seen this year. Non-GAAP operating margins increased quarter-over-quarter to 17%, reflecting our commitment to improving our efficiency profile. We had another strong quarter for large deals with the number of 6- and 7-figure deals accelerating to 31% year-over-year growth and the number of $100,000-plus ARR customers now totals more than 2,600. And our go-to-market model is yielding benefits, positioning Procore for efficient growth. Another very important highlight from the quarter was our announcement that Ajei Gopal would join Procore as our next CEO. Ajei officially steps into the role on November 10, at which point, I will focus exclusively on my role as Chair of the Board, where my commitment to our customers, the industry and Procore's mission will remain as strong as ever. I've had the privilege of serving as Procore's CEO for nearly 25 years, and it has been the honor of a lifetime. Needless to say, the Board and I were incredibly diligent and thoughtful in our search for Procore's next leader. And I can confidently say that we have found the ideal person, both in operational track record and in his sincere quality of character to guide Procore through this next phase of growth. Ajei has more than 35 years of proven experience, including leading a multibillion-dollar global technology company and driving shareholder value. He has relevant vertical software experience, most recently serving as the CEO at ANSYS. During his tenure, ANSYS significantly improved its operating performance and more than quadrupled its market value. His prior roles, including serving as operating partner at Silver Lake has shaped him into a versatile leader who knows how to scale innovation, navigate complexity and deliver lasting impact. Ajai's track record is clearly impressive, but his deep passion for transforming the physical world through digital innovation is what ultimately convinced me that he was the right choice. He recognizes and values the privilege of leading software companies that help its customers build things that are lasting, tangible and impactful. In his career, he has been inspired by the pride those creators felt in building something so transformative, and he sees the same pride in construction and in Procore's customers. That shared sense of purpose is why I know he is the right leader to guide us into the future. So you'll hear directly from Ajei later in the quarter once he officially steps into the role as CEO. Since this is my last earnings call at the helm, I want to take a moment and leave you with why I am so optimistic and confident about the future of Procore. First and foremost, let me remind you that construction is one of the largest and most essential global industries, estimated to reach $15 trillion in construction spend by 2030, and yet it remains one of the least digitized. With Procore as the clear category leader, I believe that this market is ours for the taking, offering tremendous opportunity for durable long-term growth. Construction is a massive yet cyclical industry that has been operating in a down cycle for quite some time, which has been a steady headwind to our business. For example, our focus area of U.S. nonresidential and multifamily construction has gone from growing 25% year-over-year in Q1 2023 to negative growth of 2% for the last 2 quarters as reported by the U.S. census. That represents a staggering 27-point reduction in growth over 2 years. And yet in that same 2-year period, Procore has continued to grow faster than this end market by approximately 10 to 20 percentage points. During that period, we also increased the annual construction volume committed on our platform by more than 30% even in the face of this headwind. And I am proud that in Q3, Procore reached another exciting milestone, surpassing $1 trillion in annual construction volume contracted to our platform across all global stakeholders. This clearly demonstrates our team's ability to execute and take market share even in challenging construction cycles. I want you all to know that when this cycle inevitably turns upward, and it will, we strongly believe this headwind will become a tailwind. My conviction for Procore's future is further reinforced by the strength of our platform. From day one, we've been solely focused on construction and have built the only unified construction platform that supports all types of projects from vertical to horizontal across the entire construction life cycle. By connecting people, processes and data in one place, we believe our platform is uniquely positioned to harness the power of AI for our customers. This was a key topic at our annual industry conference, Groundbreak, just a couple of weeks ago. We announced exciting new innovations, including our Agentic road map that harnesses our comprehensive and unmatched corpus of proprietary construction data to further extend our platform advantage. Our customers were able to interact with our agents on the expo floor, and they shared that they believe that these innovations will be game-changing for the industry. At Groundbreak, I met with our Customer Advisory Board. And during a Q&A session, unprompted our customers raised their hand one by one, sharing that Procore's partnership and unwavering commitment to our customer success is why they selected us and why they continue to stay with us. It was truly a powerful moment for me, one that reinforced the impact of our true partnership approach. Over our nearly 25-year history, this dedication has earned Procore the trust of the construction industry, which is paramount for a sector defined by high risk and tight margins. So I think this long-time customer quote for Brasfield & Gorrie sums it up well. "The Procore platform and the people behind it are enabling our teams to collaborate more effectively, operate more efficiently, raise the bar for excellence in project execution and drive innovation in how we work. We look forward to continuing to build on this partnership in the years ahead." My confidence in Procore's future is further bolstered by our commitment to improving our margin profile. While we have achieved 1,900 basis points of non-GAAP operating margin improvement since the start of 2023, this only scratches the surface of our profitability potential. Our business model offers substantial margin leverage. We're deeply committed to unlocking this potential and view continuous improvement here as a priority for our business. The changes implemented over the past year have positioned us for future leverage, and we currently see no structural hurdles that would prevent us from reaching our profitability milestones and compounding free cash flow per share. I also believe that we are in a stronger position with our go-to-market model, yielding positive benefits and improved execution. To share some specifics, we are seeing higher year-over-year pipeline conversion, improved expansion rates and lower voluntary sales headcount attrition. Our customers continue to share overwhelmingly positive feedback on the increased technical resources now at their disposal, which are making them even more successful, productive and efficient. Naturally, there are areas where we want to improve and continue to get better. But overall, we are pleased with how our team is executing. And of course, this motion continues to secure new logos and strengthen existing customer relationships. In Q3, we added new customers across all stakeholders, including one of the largest defense contractors in the world, a top 40 ENR general contractor, Valvoline Inc., one of Canada's largest electricity transmission companies, the Department of Transportation for a Mid-Atlantic state and Horowitz Mechanical. This quarter, E2Optics, a leading technology infrastructure contractor, also became a large new Procore customer. While they initially approached us for help with preconstruction, the conversation quickly shifted from software replacement for a specific pain point to full operational transformation. E2Optics chose Procore's unified platform to gain visibility and control across the entire project life cycle, connecting estimating, operations, resource management and analytics. The key differentiator for them was the power of Procore analytics and our reporting dashboards. By standardizing their data on our platform, they can now measure performance, fuel continuous improvement and finally unlock critical project data that's trapped in siloed systems. Moving forward, E2Optics will use Procore to build hyperscale data centers, health care, higher education and other commercial facility projects. Another new large logo win in the quarter was with the medical facilities arm of one of the largest managed care organizations in the U.S. In Q3, they purchased Procore to replace a host of fragmented solutions that led to inefficient processes and highly manual workflows. The decision to partner with Procore was driven by our proven ability to provide a construction-specific solution that streamlines operations and enhances scalability across their entire organization. They'll use Procore to build hospitals and medical office buildings across the country. We also had strong expansion wins across stakeholders in Q3, including a leading Irish construction company, ENR 23 Brasfield & Gorrie, a top 5 ENR 600 specialty contractor, Goodman Australia and a Fortune 200 natural gas company. One of our largest expansions in the quarter was a 7-figure win with a leading hyperscale data center campus provider. With major data center projects across the U.S., EMEA and APAC, they more than doubled their annual construction volume to $10 billion, and they went all in on Procore spanning the entire construction life cycle. A key driver in this deal was their interest in leveraging our new resource management products to create a system of record for assets and materials tracking as well as Procore Pay for lean waiver and compliance tracking. You may recall that resource management is a comprehensive offering of labor, equipment and materials, the most critical management areas for subcontractors and self-perform GCs, and it's an area that we have made significant investments in over the past years, beginning with labor, then adding equipment last year and closing the loop with materials set to launch next year. Another 7-figure expansion win was with related companies, one of the largest privately held real estate development and management firms in the U.S. Related had been using Procore on a few regional agreements. And in Q3, they displaced a host of incumbent vendors to expand enterprise-wide on Procore, adding volume and new products. With a large and growing pipeline of development, Related needed a scalable unified platform to connect teams, standardize workflows and deliver real-time visibility into project performance. Moving forward, Related will use Procore to execute on their expansive pipeline of large-scale commercial real estate developments as well as data centers and renewable energy projects. As you can see from these wins, our competitive positioning remains as strong as ever. We have a broad market opportunity that encompasses global general contractors, owners and subcontractors, and the landscape remains largely greenfield. And it's important to note that many of our largest deals are uncontested. In fact, half of our top 10 new logo deals this quarter, which included all stakeholders involved no other vendor in the prospects evaluation. While investors often assume that large upmarket transactions are competitive in nature, the reality is that our clear category leadership frequently positions us as the only viable platform that can digitize the construction industry. As you can hear from my remarks today, I have deep conviction in Procore's future. As Procore's founder, I am transitioning the company from a position of strength, ensuring that Ajei inherits a strong foundation for our next stage of growth. I believe that with Ajei leveraging his proven operational expertise as a CEO and my continued commitment to our mission and our vision as the Chair of the Board, we have an unbeatable combination. But more than that, and the time that we spent together, Ajei and I have grown close over a shared passion and appreciation for empowering the builders of the world with technology. We already met with several of our largest customers, and I have been impressed at how quickly Ajei has picked up on the nuances of the construction industry and how he's begun to build a rapport with industry leaders. And I am very confident he's going to continue to strengthen those relationships. I'm handing over the reins with complete confidence that Procore is in the right hands and has the opportunity to deliver substantial shareholder value. The road ahead for this company and for our industry has never looked more promising, and I fully intend to remain a shareholder. I just want to say thank you all for your support, and thank you, Ajei, and a big thank you to all Procore customers, partners, employees and shareholders who have helped us get to this point. We never could have done it without you. With that, I'm going to turn it over to Matt to walk you through our financial performance. Matthew Puljiz: Thanks, Tooey, and hello, everyone. Today, I'd like to cover how our Q3 performance is emblematic of our commitment to free cash flow per share improvement. You've heard us reference free cash flow per share as our North Star metric and the 3 ways in which Q3 specifically improved this are: one, durable growth; two, margin expansion; and three, modest share count growth. But first, let's cover our financial results for the quarter. Total revenue in Q3 was $339 million, up 14.5% year-over-year. Our Q3 international revenue grew 14% year-over-year and was impacted by currency headwinds. On a year-over-year basis, FX contributed approximately 1 point of headwind to international revenue growth. Therefore, on a constant currency basis, international revenue grew 15% year-over-year. Q3 non-GAAP operating income was $59 million, representing a non-GAAP operating margin of 17%. As for our key backlog metrics, current RPO grew 23% year-over-year and current deferred revenue grew 14% year-over-year. Now let me share some additional color on our performance. Beginning with the top line, we delivered another quarter of net new ARR growth that was notably faster than revenue growth. This strength came from multiple areas with outperformance from our owner and specialty contractor motions, strong growth from our mid-market team and continued execution in North America. Expansion was also strong within many of these dimensions, and we continue to see cross-sell improve its contribution to expansion bookings, which we largely attribute to our go-to-market operating model. We are very pleased with these results, particularly given this execution took place in a construction macro where the combined U.S. nonresidential and multifamily sectors had negative 2% growth. Procore's 14.5% growth is a premium of 16.5 percentage points compared to these sectors. We believe that continuing to execute the way we have will extend our category leadership and increase our market share. Our strength in the quarter also contributed to strength in cRPO. Keep in mind that this metric has been benefiting primarily from longer average contract duration, and we saw this dynamic increase further in Q3, which incrementally benefited cRPO. When normalizing cRPO for this dynamic, the year-over-year growth is consistent with both Q3 revenue growth and ending ARR growth. We expect this disparity could shrink as early as Q4 as we begin to anniversary the longer contract duration impact. Taking a step back, the decision by our customers to lengthen their contract terms is a powerful reflection of their long-term commitment to Procore's platform. In addition to durable growth, we also delivered another quarter of improvement in our non-GAAP operating margin, which increased 380 basis points quarter-on-quarter. We are proud of this progression, which did include some onetime benefits in G&A, primarily pertaining to facility and tax reimbursements. The entire management team remains aligned and committed to continued profitability improvement, and we believe we are well positioned for margin expansion in the years to come. From a share count perspective, our Q3 loss of diluted share count grew 1% year-over-year. Our lower dilution was driven by 2 factors: one, we continue to be disciplined in how we deploy equity compensation; and two, year-to-date, we have repurchased approximately $129 million in stock, representing 1.9 million shares. While our previously authorized repurchase program expired in October, we are pleased to announce that we have implemented a new repurchase program for another 1-year period for an additional $300 million. This new program maintains our flexibility to opportunistically deploy a lever in our capital allocation strategy to optimize long-term shareholder value. Our strong Q3 results reinforce the compounding power of our free cash flow per share algorithm, which can be summarized as: one, durable top line growth. We feel very good about our ability to execute and take market share even in a challenging construction cycle; two, continued margin improvement. We have demonstrated leverage in our model and are positioned for further margin expansion in the future. And three, we expect our diluted share count to grow modestly each year before repurchasing any shares. The combination of these levers is how we intend to compound free cash flow per share and drive shareholder value. With that, let's move on to our outlook. For the fourth quarter of 2025, we expect revenue between $339 million and $341 million, representing year-over-year growth of 12% to 13%. Q4 non-GAAP operating margin is expected to be 14.4%. For the full year fiscal '25, we are raising our revenue guide to a range of $1.312 billion to $1.314 billion, representing total year-over-year growth of 14%. We are also raising our non-GAAP operating margin guidance for the year to be 14%, which implies year-over-year margin expansion of 400 basis points. Regarding fiscal '26, we are generally comfortable with the Street's revenue dollar estimate per FactSet and do not feel the need to update estimates at this time. Given Ajei is starting as CEO next week, we want to provide them sufficient time to onboard and ramp before providing formal guidance. And before I close, on behalf of Howard and the entire Procore team, I want to say to Tooey, thank you. We are all grateful to have had this opportunity to work for you. Your authentic leadership has influenced us tremendously. And I know I'm not alone when I say that you have truly made this world a better place, not just because of the success of Procore, but also because of the success of our customers and the success of all the individuals you have impacted by your life's work. So from myself and on behalf of our leadership team, employees, customers and shareholders, we are thrilled that your mission continues here at Procore, and we look forward to supporting you in your next chapter as Chair of the Board. And with that, let's turn it over to the operator for Q&A. Operator: [Operator Instructions] Our first question for today comes from DJ Hynes of Canaccord. David Hynes: First, Tooey, congrats on all that you've accomplished. I know this isn't goodbye, but wishing you the best of luck in the new role. Maybe we can start -- I think you said in the past that perhaps the signal of a turning point in end market demand would start with the owners. So I guess the question is, is that still a reasonable way to think about things? And what are you seeing in that segment of the business? Craig Courtemanche: Well, let me start with what I'm seeing, and then I'll talk about the owners in particular. The headline is that what we're seeing in the macro environment is pretty much what we saw last quarter and the quarter before that and the quarter before that. So there really has not been a big change in the macro headwinds that are out there. But as I've told you in the past, I do believe that owners are -- that's where projects begin, right? And so the more owners get excited about building projects, the better it is for Procore because we sell to owners, GCs and subs. So in general, it is a good place to look for it. And as I said in my opening remarks, we do believe that this is going to -- this headwind will eventually turn, and we will have a tailwind. And -- but I do want to also caution you that when that happens, it takes time for projects to get green lit and to get permitted and to get put into construction volume before it hits Procore's revenue. But it is -- it will turn, and we're excited about that. David Hynes: Perfect. And then, Matt, maybe a follow-up for you. I mean the comment that stood out in your prepared remarks was that net new ARR growth came in notably faster than revenue growth. And I just want to unpack kind of what you're trying to convey there? And does that portend revenue growth acceleration here in the future? Matthew Puljiz: Sure. This was a very common question we got 90 days ago as well when we reported Q2. And so I'll just reiterate, we had another strong quarter. We're on pace for a strong year. And all of our commentary we made 90 days ago around our base case of growth, I would reiterate that today. If anything, the third quarter just increased our confidence in this topic. Obviously, there is an upside case, there's a downside case. We can talk about those if you're interesting. But right now, we're operating well within the base case, and we feel really good about that. Our optimism is high. Our confidence is high. And yes, we're looking forward to delivering a Q4 when we report in February. Operator: Our next question comes from Matthew Martino of Goldman Sachs. Matthew Martino: First of all, Tooey, I'd echo the congratulations on your last earnings call on retirement. Excited to see your impact as you continue to work behind the scenes with customers. For the first question I have here for Tooey. Tooey, I'd love to hear your perspective on how you think about the data center opportunity. I appreciate that this is a kind of 2%, 3% share of nonres historically, but there's been a flurry of major announcements in the past 3 months. Procore itself signed a large expansion in the quarter. Wondering if your thinking here has evolved on how impactful the data center build-out can be for Procore, especially with a few of your larger customers directly tied to the theme. And I have a follow-up. Craig Courtemanche: Yes. So Matt, first and foremost, I would have corrected you, but you've said it for me, which is data centers as exciting as they are, do not make up a very large portion of the overall construction economy. But I think that being said, first, I also want to say Procore has done very, very well in the data center world. We're everywhere, and it's something that we're very proud of. I mean it is a strength. But as you know, the construction economy is made up of many different sectors. And when one wanes, one waxes. And so we have a -- that is one example of an area in the market, which is doing particularly well. But you can also look at things like multifamily, which have been struggling for the last few years as a downward trend. So data centers are exciting. Everybody is talking about it, but it is a small portion of our business. Matthew Martino: Got it. And then, Matt, for you, nice to see cRPO hanging in there in the mid-teens. Could you maybe peel that back a little bit and give us a sense of how renewals trended in the quarter, whether you're seeing a higher proportion of stable or growing ACV commitments relative to the past few quarters? Matthew Puljiz: Yes. It was -- the 2 dynamics influencing the reported number were all of the strength Tooey talked about in the strong quarter. And I would include renewals in that category. It was very healthy in that regard. The other dynamic, obviously, is what we also called out in my prepared remarks around the contract duration ticking up. But the underlying health of the business, I would describe as stable to positive and trending in the right direction. So we feel pretty good about that. Craig Courtemanche: Yes. Matt, one thing that just jumped out at me, and that's why I put it in the prepared remarks is the fact that Procore now has $1 trillion of committed construction volume annually on our platform. And when I set out to start this business many, many years ago, I could have never imagined having that amount of impact on an industry, and it's just a testament to how we're doing with the new acquisition of customers as well as our expansion of our existing. Matthew Puljiz: And Matt, you might remember last November at the Investor Day, that number was roughly $900 billion. So it gives you another sense of how customers are feeling about their renewal activity with us. Operator: Our next question comes from Brent Thill of Jefferies. Brent Thill: Tooey, the cRPO, I think, is the highest growth you've seen in 7 quarters. And I'm just curious if there's anything to consider? Is that just a sign of, hey, ongoing continued good execution, macro may be opening up a bit or any other factors on that side? And I had a quick follow-up. Craig Courtemanche: I'm going to let Matt start, and I'm going to come in over the top. Matthew Puljiz: Yes. Brent, so the 2 drivers of the cRPO performance are: one, strong quarter. We can talk about our category leadership. I'll let Tooey cover that. And then obviously, the second dynamic is the increasing contract duration that we've been having. When you -- normalizing for all of that, the underlying cRPO growth rate is very consistent with the revenue growth rate in the quarter. But I'll let Tooey explain like thematically what's been happening in the business. Craig Courtemanche: Well, so as you hear me say all the time, Brent, that first and foremost, the opportunity is just -- is so large. The TAM is so big. And also the fact that we are the system of choice for the industry when it comes to construction management, primarily because we're the best platform that's out there. And I think the other contributing factor is our go-to-market motion has been very strong, and it's driven by an extremely good brand presence in the markets that we serve. So all of that just reflects the strength of us and how we're feeling -- how our customers feel about us. Brent Thill: Okay. And just on the go-to-market too, you mentioned it's yielding benefits. I know many of the changes are in the rearview mirror. But where have you started to see kind of the biggest improvements in the field? What has been maybe your and Larry's proudest moment of what the changes? Is there 1 or 2 areas that you're -- you can point to and highlight that this has been a great outcome? Craig Courtemanche: Yes. So I would say, primarily, the customer intimacy that we have generated through providing additional resources to our customers to make them more successful is something that really is driving a lot of goodwill, which leads to both revenue expansion on dollars committed as well as additional products being sold. So that has that downstream impact, which is really, really powerful. And so we have been kind of excited about that. And I don't know if you want to add anything. Matthew Puljiz: Yes. So I would talk about there's some pretty tangible benefits we've seen. Overall, improved execution, which is great. We've now had a few quarters in a row, really began in Q4 of last year and it's continued in Q3 of this year. We've got higher pipe conversion, which is a great sign, improving expansion rates. We've actually had lower voluntary headcount attrition in sales and go-to-market, which is great. That keeps productivity online for a longer period of time. And then clearly, the big one is when you hear directly from customers themselves and Tooey touched upon that. So in aggregate, we feel like we're operating quite well. We think we are where we thought we would be. At the same time, there's no mission accomplished banner being hung up in the Procore offices here. We want to get better. We see opportunities to get better, and we will. But we're pleased where we are right now. Operator: Our next question comes from Saket Kalia of Barclays. Saket Kalia: Tooey, really nice way to cap off your term as CEO. So kudos. Tooey, maybe on that topic for you. I don't know if it's been said yet, but just congrats on hiring Ajei. I mean he did a great job at ANSYS. So great to see. Understanding that he hasn't started yet, what are some of his ideas about the business that maybe intrigued you during the search process? I'm curious. And I don't want to preannounce anything that he's planning, but I'm just kind of curious what was intriguing about some of his thoughts on the business? Craig Courtemanche: Yes. Well, so it was remarkable because early on in the conversations that Ajei and I were having, we kept honing in on our passions around serving the people who build the world around us. And his experience prior to his new role at Procore really, really -- is a good analog to what we're trying to do here. So first and foremost, that was kind of the moment where I think we both saw like, wow, this is something that could be great. And I've had the great privilege of getting to know Ajei over the last couple of months and even more in the last few weeks. But it just turned out that he is not only a great operator, but he's also just a great person. And I was driving into work this morning, thinking to myself like I am more confident now than I've ever been because I have so much faith in him, and he's such an inspirational leader. So that's a comforting place to be in this moment in my life. Saket Kalia: Yes. That's great. Matt, maybe a few for you for my follow-up. I know we don't talk about net revenue retention rates expressly, but it sounds like they're trending up. I was wondering if you could confirm that. And maybe more specifically, what products specifically are sort of driving what sounds like an improving NRR and whether we can -- we think it can continue into next year? Matthew Puljiz: Sure. So there's some puts and we disclose that metric every Q4. And when we report in February, we'll definitely quantify it. So I'll keep my answer qualitative to your point. But there are puts and takes going on in there. I would describe churn year-to-date as stable, which is good. I would describe expansion as improving. So those 2 things would be the tailwind going into NRR. The headwind would actually be the same dynamic that's happening in cRPO with the longer contract duration. One of the reasons why customers are electing to take longer-term contracts is the option to pool your construction volume. You may have heard us talk about this before, pooled models. Pooled models are a great option for customers. It's a win-win. We get a longer commitment. They get a lot more flexibility. We're quite happy about that. But those contracts do come with an NRR of 100% throughout that contract term. So that's the headwind. So I wouldn't be surprised we end up in a very similar place where we were last Q4. This is why it's not the best metric for us. You can see the financials may look good, but NRR may look unchanged for all the reasons I described. And then on the product front, if I had to single one, I would probably pick financials. But as you may have recalled, what we talked about at Groundbreak, we're pretty optimistic about what's going on in resource management. And there's -- those are things there that are going to be quite beneficial to us in the long term. Craig Courtemanche: I would drill in analytics as well. Our customers love our analytics product. Operator: Our next question comes from Jason Celino of KeyBanc Capital Markets. Jason Celino: Tooey, it's been a pleasure, and we'll still see you at Groundbreak. So you're not -- you won't disappear from our lives completely. But like taking a step back a little bit, I think when you guys went public 4 years ago, you had that chart showing that construction was second underdigitized industries. I know the industry has made a lot of progress over the last few years but... Craig Courtemanche: Agriculture and hunting, Jason, yes. Jason Celino: Yes. Yes. Good memory. When we think about what the next 5 years might look like, like where do you think the industry digitizes the most? Open-ended question, but thought I'd ask. Yes. Craig Courtemanche: Yes. By the way, this is one of the things that I just am so grateful for because we do have this corpus of proprietary construction data that is unprecedented. In this era of AI, I believe that we are extremely well positioned to drive tremendous productivity into the entire industry, from the owners to the GCs all the way to the subs. And it's because we have this data that we can share with the industry. So they don't have to make the same mistakes over and over again, and they can optimize their business. And the industry has been plagued for decades with a labor shortage. The more we can do to drive productivity into the organizations that we're serving, the better they perform as companies and the more grateful they are and the more they want to buy at Procore. So I'm really excited about our opportunity to leverage the data on the platform to enable this industry to get off the bottom of that list and move up. Jason Celino: Okay. Great. And then I think you're still beta testing some different pricing and packaging adjustments. Just curious how that testing is going and when we might hear more concrete details of when these changes will be rolled out across the board? Matthew Puljiz: Sure. I can take that one. So what Jason is referring to, if you don't know, is historically, our products have been sold a la carte. And we are in a pilot right now with a cohort of current customers and new logo prospects where we are offering our solutions in a kind of a good, better, best bundles and packages that are tailored to the stakeholder. So, so far, Jason, it's going quite well. I would say the feedback from customers has been positive in terms of the simplicity of the menu of options. If you want to land with a modest amount of solutions, you can and you have a very clear graduation path to adopting a bit more, and that was the downside to our prior, I should say, our current model right now. We're not really expecting this offering to really change the financial trajectory of the business. It's really just more about simplicity and having something very digestible for customers to kind of consume, so we can digitize them on their own journey path. Craig Courtemanche: And Jason, we've been hearing this for years from our customers that there's a certain subset of our prospects that would much prefer a simpler pricing model, so they don't have to go through the a la carte process. So this is just another example of Procore meeting our customers where they want us to meet them. And I am very excited that it is showing such positive results. Operator: Our next question comes from Joe Vruwink of Baird. Joseph Vruwink: Congrats, Tooey. The large deal activity is good to see. There's nothing that strikes me about the seasonality in 2Q and 3Q that's naturally conducive to large deals or surfacing large deals. I would think that 4Q is probably when more large deals tend to happen. So I just wanted to confirm that point that you're not pulling anything out of the pipeline early, that sort of thing. But more specifically, just asking about how the 4Q large deal opportunity is shaping up. And if the conversion rates you noted earlier stay at pretty good levels, could that maybe be an upside driver as you think about how you're going to exit this year? Matthew Puljiz: Yes, it's a great question. I'll start and Tooey can kind of come in over the top. So you're right, typically in software and certainly at Procore's history, you do not see the large deal activity in the middle of the year. You typically see it in Q4. It's difficult for us to discern if this is a new pattern given it's a small sample size. But I do think the one large change from our past to today is we are in a little bit of a different operating model. So we are giving the team credit for that. I would say our Q4 pipeline is healthy. I like the breadth of it. We have a large quantity of different stakeholders, different geos, different deal sizes, frankly. So whether the large deal activity continues in Q4 or not remains to be seen, but our optimism is quite positive in Q4. Craig Courtemanche: I guess the only thing I'll add is, I said this in the opening remarks, and Matt just alluded to it, but the success in the quarter was based on a broad set of stakeholders, right? So we're no longer a company that relies super heavily on GCs. We have a very strong owners business and a subcontractor business as well. And so going into Q4, it's nice to see that mix across all stakeholders. Joseph Vruwink: Okay. That's great. And then I wanted to ask, I know you kind of addressed 2026 with where Street estimates are. I guess, leaving that aside for a moment, I think in the past, another way you typically addressed forward revenue potential is to steer folks back to your cRPO growth. And so if that's growing very near revenue today, I would normally think about that type of growth rate as maybe a starting point for what next year's revenue can be. Without getting super explicit on the exact number, is that relationship still applicable here? Or has something changed about cRPO where it's not going to have that relationship anymore? Matthew Puljiz: I would say that relationship would still exist, but I do think we have to remember, we are getting a new boss on Monday. And when we want to provide our formal guide for next year, we'll do that in February. And then I think that's probably the best point in time to talk about next year more specifically than we have done this year. But we can't speak about Q3. We can talk a little bit about our confidence level in this current quarter. That remains. And I would use that information as you wish. Operator: Our next question comes from Joshua Tilton of Wolfe Research. Joshua Tilton: Congrats Tooey on a great run. And congrats, Matt, on tonight, you did a great job. Two questions for me. Maybe the first one, kind of a follow-up to Saket's question, but a little bit more direct. Tooey, you're messaging how you feel you're leaving the company from a position of strength. So as you transition the leadership role from a position of strength to somebody who we also agree with you is going to be a great leader, where do you just see the -- where do you see the place that Ajei can maybe make the biggest positive improvement to the business over the next few years? Craig Courtemanche: Well, as I mentioned, Josh, when I went out searching for the next leader of Procore, the primary driver I was looking for is somebody who's actually seen this before. They've taken a business from $1 billion to $3 billion to $5 billion and that they actually know and have the pattern recognition to do so and to do so successfully. The other piece was across the fact that Ajei has so much experience building a global business, building out partner ecosystems, all the things that are kind of the next phase needed for Procore. So I think he brings a toolbox with him that is filled with the tools that are required to build the future of Procore. Joshua Tilton: Helpful. And then maybe just a follow-up for Matt. Also maybe I acknowledge it's a little too early here. But I guess when we think about Ajai's ability to make all those changes that you just mentioned 5 seconds ago, you're very clear on the call that you guys are committed to expanding margins going forward. Do you feel like you can remain committed to that margin expansion while also giving Ajei the room that he needs to improve the growth profile of the business if he believes that that's the right path for Procore going forward? Matthew Puljiz: Short answer is yes. I think the range of magnitude and the exact quantification of that needs to be determined, which I think your question is very spot on and fair and quite frankly, something we'll be talking about a lot internally over the quarter before we lock this plan. But we have been spending some time with him already before his formal start date. And I'd just echo the comments Tooey made. This is a very credible operator. He has really asked a lot of excellent questions to us. And I'm speaking -- I'm filling in for hour tonight, but I think it's very safe to speak on his behalf by saying our job is to give him as many options and paths and flexibility as possible. And we are guiding for 400 bps of non-GAAP EBIT expansion this year. I think that's a very doable number next year. And I think it's likely we go a little bit higher than that. But beyond that, I think it's appropriate for him to get into the seat and then we can actually deliver something next year. Joshua Tilton: Super helpful. Congrats again, and we're very excited to see what Ajei can do. We agree on everything you said about it. Operator: Our next question comes from Ken Wong of Oppenheimer. Hoi-Fung Wong: Since we're coming off of Groundbreak, Tooey, would love to get some feedback from you in terms of kind of how customers were talking about the competitive landscape? What were you hearing in terms of your product versus one of your larger peers out there? Any kind of changes out there that you were picking up on? Craig Courtemanche: Great question, Ken. I have to be totally honest with you. I didn't talk to one customer who brought up a competitor once at Groundbreak. So that didn't happen. But let me focus on the feedback that we got. The feedback is that our customers and our prospects that attended Groundbreak were yet again blown away by the achievements we've done over the last 12 months since the last one. And we are just getting very, very positive feedback. I want to tell you, too, they're very excited about AI, right? And as you know, this is going to change the world, and we're really bullish on it. I received an e-mail yesterday from one of the -- the CEO and the Chairman of the Board of one of the largest construction companies in America talking about wanting to partner with me and partner with Procore on -- to get like a front row seat to Procore's AI strategy as well as getting access early to our tools. So there is a lot of excitement around the things that Procore can do. And yes, so that was no real talk to talk about competition at all. Matthew Puljiz: But Ken, it's Matt. I would add, as far as actually what like the internal data shows, I'll just reiterate what Tooey had said in his prepared remarks, we feel like this dynamic is quite favorable to Procore, and we stand behind our past disclosures on this front. It's been very consistent, very positive. So we feel quite good about it. We respect our competitors quite a bit, but we are very confident in ourselves to continue our category leadership. Hoi-Fung Wong: Got it. And then maybe just quickly, and I know you've touched a lot on the kind of the longer duration. I guess when you're looking at that data, any sense how much of that is maybe product driven in terms of kind of customers wanting to commit more because of product and therefore, it makes sense to maybe stretch things out. How much of that is the go-to-market, obviously, pushing up enterprise, you'll naturally see longer-term deals. Any context you can give us in terms of kind of some of the key components you think might be kind of pushing customers in this direction? Matthew Puljiz: I think all the things you bring up are fair and are contributing. A couple of things to note. Our go-to-market folks, they're not incentivized to sell a 3-year contract over a 2-year contract. So the duration or the term is very much determined by the customers themselves. Now some may want a longer period of time to ramp into greater amount of products as you're bringing up. But if I had to pinpoint one specific cause or one specific driver, it probably has to do with these pooled contract models. And it's really about having more flexibility to deploy volume given there might be uncertainty into their project schedules. That would probably be the single biggest driver. But yes, as we move more upmarket, as we establish more strategic relationships with these customers, all of that's going to come with longer duration. Craig Courtemanche: I'd also point out that I firmly believe that we are so mission-critical to the customers that we serve and that it only makes sense for them to make a longer-term investment in us. It's very difficult to rip and replace all of the things that Procore does. So when you make a commitment to Procore, you're making a commitment, and that's, I think, a testament to how mission-critical we are. Operator: Our next question comes from Daniel Jester of BMO Capital Markets. Will Hancock: This is Will Hancock on for Dan Jester. So you guys touched a bit on the macro environment, but just wondering if you'd be able to share any additional color on the current demand environment, if you're seeing traction in international geos given your guidance and sales changes to give regions added layer of support? Craig Courtemanche: Maybe I should just start by saying I'm going to reiterate, no change notably at all in the macro environment, still a challenging macro environment, both in the U.S. and abroad. And so not a lot to say there. I don't know if you want to. Matthew Puljiz: No, I concur. It's been very consistent, not getting worse, not getting better. It's been quite stable, but it's been a steady headwind for us. Craig Courtemanche: But I will say we're very, very optimistic about our performance facing these headwinds and it's something that we're proud of. Matthew Puljiz: That's right. Yes. And when it does turn, we expect it will be a tailwind to the business. It's just difficult to determine when that will occur. Will Hancock: Great. That's helpful. And then a quick one here on the 4Q guide. How should we think about hitting that top end of the range? And what kind of assumptions did you guys factor in on the lower bound? Matthew Puljiz: I would say regarding our guidance, the philosophy has not changed. And so you can kind of trace that back to what we have done in the past and what we've delivered, and we've applied that same mentality to the fourth quarter. So we continue to be confident and stand behind that guide. Operator: At this time, we will take no further questions for today. So therefore, that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.
Magnus Ahlqvist: Good morning, everyone, and welcome to our Q3 report. We continue to develop on a good path, execute on our strategic focus areas and are glad to report a solid set of results for the third quarter. The organic growth in the quarter was 3% and North America and Ibero-America both contributed with solid growth. And now to a highlight. The operating margin was 8.1% in the quarter. We had solid improvements across all segments as well as in the Services and Technology & Solutions business lines. And as announced last quarter, we are closing down the government business within Critical Infrastructure Services. And adjusted for this business, the organic sales growth was 4% and the operating margin was 8.3%. EPS real change was strong at 19%. And the operating cash flow is above 100% in the quarter, and we continued to improve the leverage and the net debt-to-EBITDA ratio is now at 2.2. The business optimization program that we initiated at the beginning of this year is contributing and the vast majority of the cost savings have now been executed. So shifting then to the performance just for an overview in the business lines and the segments. And as stated, we are recording significant margin improvements in both business lines. Continued strong Technology & Solutions margin development with 50 basis points to 11.7%. And the sales growth in Technology & Solutions was 4% in the quarter. This is below our target, but we have a strong offering, and we have taken actions to increase the focus on client engagement and commercial development, and I expect these actions to generate stronger momentum in the coming quarters. The margin in Security Services improved 30 basis points to 6.9% and this was supported by high margin on new sales, portfolio management and strong development of the Aviation business, while the SCIS business hampered. Growth in Security Services was 1% in the quarter, and the growth rate in Services is negatively impacted by active portfolio management and the SCIS business. But important, we expect to finalize the active portfolio management work in Europe and Ibero-America during the first half of 2026 and that work is progressing according to our plans. So with that, let's move then to the segments. And as always, we start with North America, where we are pleased to report solid organic sales growth at 6% and a record Q3 operating margin. Healthy portfolio volume development and price increases in the Guarding business were key drivers of the growth and continued double-digit growth in the Pinkerton business contributed and the performance in the Technology business also supported. Technology & Solutions growth was 2% in the quarter. And similar to the previous quarter, growth in Technology was decent, but we had lower Solutions growth. And we are fine-tuning our go-to-market approach with Solutions in North America, where we leverage our in-house technology capabilities in a much better way than before. And with these changes now being in place, I expect improved growth in the coming quarters. We improved the operating margin in the Guarding and Technology business units to 9.5%, and this was supported by good cost control and leverage. So all in all, very strong performance and a record Q3 operating margin in North America. And moving then to Europe, where the operating margin improvement stands out as the highlight of the quarter. The organic growth was 2%. Price increases, impact from Turkey and aviation supported, while active portfolio management had a clear negative impact on the growth in the quarter. Sales growth in Technology & Solutions was 4% and slightly below our expectations. The operating margin improved with 70 basis points to 8.4%, and this is a significant improvement and is the result of strong execution on all strategic priorities by our European teams. And as commented, we continue to address and renegotiate the low-performing contracts in the services business in Europe. This has a clear negative impact on the growth in the short term, but it's fully in line with our strategy and the plans that we set a couple of years ago. And we expect the work where we're addressing the low-margin contracts to be completed during the first half of 2026. So all in all, very good development by European teams and also here an operating margin at a record level. We then shift to Ibero-America, where we're also pleased to report good organic growth and solid margin improvement. The organic growth was 5%. This was driven by high single-digit growth in Technology & Solutions and price increases in the Services business. And similar to Europe, there is a negative impact on the growth from active portfolio management, but we're making good progress and driving conversions to Technology & Solutions. The operating margin improvement was solid in the quarter, and the majority of the improvement is related to improvement in the services business, but some temporary one-offs also contributed. So all in all, a very good quarter also in Ibero-America. And looking then at the performance across the group, we are driving disciplined execution of the strategy, and I'm really pleased to see strong execution across all segments and from all the teams. Our customer offer is stronger than ever before, and we're also glad to report improving client retention. So with that overview, turn to the finance update and handing over to you, Andreas. Andreas Lindback: Thank you, Magnus. And we start with the income statement, where we had organic sales growth of 3% and improved the operating margin with 60 basis points, leading to a currency adjusted operating profit growth of 11% in the quarter. As we communicated in Q2, we have introduced 2 new KPIs, which are adjusting our organic growth and our operating margin for the government business to be closed down within SCIS. In the third quarter, the adjusted organic growth was 4% and the adjusted operating margin was 8.3%. And this is higher than our target to have an adjusted operating margin of 8% in the second half year of 2025 and puts us in a good position to achieve the target as we are closing the year in the fourth quarter. The close down of the government business itself is progressing according to the plan that we laid out in the second quarter and had limited impact on the operating result in Q3. Looking then below operating result, there are no material developments in amortization of acquisition-related intangibles nor in the acquisition-related costs. Items affecting comparability was SEK 1.5 billion, where we in the third quarter have made a provision of USD 154 million for the government business close down, in line with what we communicated in Q2. The remaining SEK 65 million of IAC is related to the ongoing transformation and business optimization programs. Both programs are running according to plan and the full year forecast of SEK 375 million for both programs combined remains unchanged to our previous guidance. And as Magnus mentioned earlier, we have executed the business optimization program well and the vast majority of the target SEK 200 million run rate cost savings by the end of 2025 has been executed in the third quarter. And as we're looking into 2026, we are planning to continue to reduce the investments under IAC in comparison to the SEK 375 million this year. I will come back with more details to you in Q4. Our finance net came in at SEK 419 million, which is a reduction of SEK 158 million compared to last year, and we continue the positive trend of reduced financing costs as interest rates and our debt levels are going down. For the full year, we expect the finance net to land in the range of SEK 1.8 billion to SEK 1.9 billion, which is a material decrease compared to the SEK 2.3 billion we had in 2024. Moving to tax. Here, our full year forecasted tax rate is 29.2%. The increase compared to our full year 26.7% estimate in the second quarter is mainly due to the $154 million closedown cost where we expect around 60% of the total cost to be tax deductible over time. Adjusted then for the closedown impact, the full year forecasted tax rate is 26.8%, in line with our previous communication in Q2. All in all, a strong quarter where our currency adjusted EPS growth, excluding IAC, was 19% in Q3 and 18% for the first 9 months of 2025. We then move to cash flow, where our operating cash flow was solid at SEK 3.3 billion or 106% of the operating income. This despite some negative timing impacts from Q2, as I mentioned in the previous quarter. Both our DSO and our general working capital position continued to improve and supported a good outcome in the quarter. The free cash flow landed at SEK 2.7 billion, supported by solid operating cash flow, the reduced interest payments due to the lower interest rates and debt levels and temporary positive tax timing impacts in the U.S., and we expect a majority of the positive timing impacts to reverse in the fourth quarter. For the first 9 months of the year, we have strengthened our operating cash generation, having an operating cash flow of 74% of our operating income compared to 58% last year. We are in a good position to meet our full year target of an operating cash flow of 70% to 80% of operating income, where we always target to be at the upper end of that interval. This despite that we have one additional payroll in our U.S. Guarding business in Q4, which will impact the fourth quarter cash flow negatively approximately USD 40 million. This is a negative timing impact that we have every fifth or every sixth year in the U.S., and this timing impact is relevant for Q4 as well as for the full year 2025. In 2026, we will then be back to the normal payroll pattern with 1 less payroll compared to this year. We then have a look at our net debt, which was SEK 33.4 billion at the end of the quarter. This is a reduction of SEK 2.6 billion compared to Q2, mainly supported by the strong free cash flow generation. In the quarter, we also had SEK 308 million of total IAC payments, where SEK 175 million of this was the second payment related to the U.S. government and Paragon settlement. The residual is mainly related to the ongoing transformation and business optimization program and the government business close down, which was SEK 43 million in the second quarter. And as a reminder, the total Paragon settlement amount is USD 53 million, which we pay in 3 approximately equal installments. We have now made 2 payments and the third and final payment has been made in the fourth quarter. Moving then to the right-hand side, where the net debt to EBITDA was 2.2x. This is 0.5 turn improvement compared to Q3 last year, where the positive EBITDA development, good cash generation and the strength in Swedish krona all supported positively. And we are well below our target net debt-to-EBITDA of less than 3x and expect to continue to deleverage our balance sheet in the short term. Moving on to have a look at our financing and financial position, where we continue to have a strong balance sheet, strong liquidity, and we remain without any financial covenants in our debt facilities. And after a period of important refinancing focus, our main focus in the second half of 2025 is to use the strong cash generation from the business to amortize debt. In the quarter, we have repaid SEK 1.4 billion of debt. And in the fourth quarter, we plan to amortize approximately SEK 2 billion on the term loan maturing next year. This will continue to support our cost of financing going forward, and we will have very limited refinancing needs throughout 2026. And as always, we remain committed to our investment-grade rating. So with that, I hand over back to you, Magnus. Magnus Ahlqvist: Very good. Thanks a lot, Andreas. And before we open up the Q&A, I'd just like to share a few reflections regarding the longer-term development and also a little bit looking ahead. So back in 2022, when we did the STANLEY acquisition, we accelerated the work to change the profile of Securitas to create a company with the strongest technology and digital offering to our clients in combination with high-quality Guarding services. We also shared the ambition to improve the operating margin from the prior decade, where we have been around 5% to achieve around 8% by the end of 2025. And we outlined the main focus areas to drive this improvement to 8%. And I think those of you who are following us, you're familiar with the bridge here. We exceeded 8% operating margin in Q3, and Q4 is seasonally somewhat lower margin, but we're on a good track to deliver on this ambition in the second half of this year. And while the impact from M&A activity has been limited in recent years, we have made considerable progress in the other areas. And we're about to finalize the heavy lifting work with active portfolio management and strategic assessments. But this work has been very important to create a sharper and more focused company where all the business that we are running is fully aligned with our strategy. And when you're looking at SCIS, and this is more related to a question we received a couple of times, -- the close down here and the result doesn't really represent a significant part of our overall business. It is only around 1% of the operating result. So while large in volume, very limited in terms of the operating result impact from that close down. And when I look at the strategic assessments, the remaining assessments that we have under consideration now represent approximately 1% of group sales. So we are nearing the completion of an important phase with important work. It has been rigorous and hard work, but it's been important to shape a stronger and a more focused company. And just to repeat the message also from the second quarter, we have received a question on a number of occasions on what basis we consider reaching the 8%. And as communicated earlier, if we reach the 8% operating margin in the second half of this year, excluding the SCIS business that we're closing down, we will have achieved the ambition. And delivering on this ambition is an important milestone since it represents a historical shift in the profitability profile of Securitas. But having said that, it's just a milestone on a longer journey. And talking about that journey, we have come a long way in shaping the new Securitas to be a sharper and a much stronger company. And when you take a little bit of a longer-term perspective, we are operating in a market with good growth, which is spurred by increasing threat levels, increased demand for digital and technology solutions and where we are uniquely positioned with the investments we have done in the last 5 to 6 years. And we have intentionally transformed and repositioned our portfolio to the parts of the market where there is good underlying growth and the real security needs are more important than the price per hour. And we partner with our clients for the long term, investing into the relationship, and we are building the best security solutions based on the client needs, leveraging technology, digital people and more and more real-time insights. And all of this has also led to much more profitable Securitas today compared to the 5% company we were for many years. Today, we're executing on our plan to get to 8%, as stated in the second half of this year. And we have also been able to lift the margin for 19 consecutive quarters and at the same time, deliver strong EPS growth to our shareholders. And in the increasingly complex and volatile macro environment, we're also a resilient business with the majority of our revenue is recurring and with an excellent client retention of 90%. And all of this has also been elevated or translated into higher cash flows where we are now delivering cash flow above our financial targets, and this has also contributed to an accelerated deleveraging after the STANLEY acquisition. So we're now in a position that is much, much stronger, and we can continue to invest into the growth of our business. So as we're finalizing the strategic phase, we're a much stronger company, very well positioned in an attractive market to increase our focus on profitable growth. And as more and more units reach the required profitability levels, so that means for good sustainable business, they also gained the right to shift focus on driving profitable growth. And looking at the longer term, we will continue to improve the margin as we are building scalable solutions to our clients. So we stay focused, confident and also very excited about our longer-term opportunities, and we're looking forward to sharing more in the Capital Markets Day in June. So with those perspectives, we can conclude this Q3 presentation. We're executing according to our plans, deliver strong margin with 8.1% in the quarter, EPS improvement of 19%. So with that, let us open up the Q&A session. Operator: [Operator Instructions] The next question comes from Raymond Ke from Nordea. Raymond Ke: A couple of questions from me. First one on Technology & Solutions or T&S, you had 4% in real sales growth this quarter. And on paper, the target the Board stated out for Securitas to achieve a growth within T&S of 8% to 10% sounds like it's congruent with its target of achieving 8% in EBITDA margin with the T&S having higher margins. But the outcome since your CMD seems to show that you've been forced to prioritize portfolio management at the expense of growth within T&S, at least short term. Is that a fair description, would you say? And your position now at sort of 8%, would that allow you to shift your focus more towards T&S growth? Magnus Ahlqvist: Thanks, Raymond. Well, we -- just to put some context on the Technology & Solutions growth, this is obviously a long-term target. I believe that we are very well positioned. We've spent a couple of years doing very diligent and robust work in terms of the integration. When you're looking forward, we feel confident that we're going to be able to drive the growth here at a really healthy pace. Where are we right now on that? Well, we're mostly, as we've communicated before, done with the integration work. What we are doing now based on the strength in the offering is that we're investing more in commercial capability based on the strong offering that we have. And we're also fine-tuning in a number of parts of the organization. And some of that fine-tuning is related to how we become better at cross-selling, how we start to become better at actually leveraging the combined client base. We're also aligning incentives. I should also say that it's a little bit of a mixed picture when you look at the growth rate in technology, if you look at the growth rate in solutions. Solutions, we've had really strong traction in North -- sorry, in Ibero-America, good traction in Europe. But in North America, as I've explained in the last couple of quarters, we also under new leadership, did a little bit of a reboot in terms of the organization setup. And it was the right time to do that because historically, when we didn't have strong technology capability, we're also working with other companies to help us with the technology part of the solution. Today, our own technology team is the main partner and provider. And that enables us to build a much more efficient and also much more scalable platform for the longer term. And there, why growth has been flat now in the last couple of quarters in North America, I expect that now based on the actions that we've initiated to really improve in terms of the growth. So I believe that we are in a good phase and also in really, really good shape to drive this one, but also some fine-tuning and optimization is needed and also some of the commercial investments. Andreas Lindback: In relation to the 8% target, we should say that in 2023 and 2024, we had stronger Technology & Solutions growth that have supported us on our journey to 8%. And although it is 4% now in the quarter, we still have a positive mix effect compared to the Guarding business and how that is growing as well. But one final lens on it. When we said 8% to 10%, that also included one part of M&A activities where we have said that we have done less as well. So that is one of the reasons then why we are not coming all the way up to the 8% to 10% target because it's mainly within Technology & Solutions which our M&A activities would be geared against. Raymond Ke: Right. That's very helpful. And then maybe sort of a follow-up, if you could maybe provide a bit more color with regards to how you intend to accelerate T&S growth, mainly to help us analysts better understand the pace of growth acceleration that we should be expecting across your segments going forward? Magnus Ahlqvist: Yes. So if you look at that, it is very much related to what I mentioned. So strengthening and investing a bit more in the commercial capability. We have really strong offering. I've recently also been with a number of our clients in the U.S. a couple of weeks ago. Feedback is strong. partnerships are strong and our clients and also new clients are also looking at Securitas as the main partner. So we are well positioned. And I think that is the key point. So our offering is strong, but I think that we will benefit from also investing a little bit more in the commercial resources and capability as we go forward. And then as I mentioned, we're also working in a much more diligent and intentional way now in terms of how we are leveraging existing client base for cross-selling. These are things that also relate a little bit to the work that we've done in the last couple of years to also have the right types of tools and digital platforms to enable that together with incentives as well to be able to drive it at scale. So I feel that we are in a good position here to drive this at a healthy clip going forward. Raymond Ke: Just one final, maybe sort of a detail on this, but could you elaborate on -- you mentioned the positive one-offs that boosted the margins in Ibero-America. Maybe I missed that, but how big were they? And how should we think about them going forward? Andreas Lindback: This is related to some reduced provisions related to legal cases. So there was a positive impact to the operating margin in the Ibero division. Normally, we mentioned something when it impacts at least 0.1% margin-wise in Ibero in the segment Ibero. In this case, it was a bit more than 0.1%. But just to help out there. But then important to say as well that the majority of the margin improvement in Ibero-America was driven by operational improvements, not this one-off related items. And on a total group level, it doesn't have any material impact whatsoever. Operator: The next question comes from Daniel Johansson from SEB. Unknown Analyst: I am [ Andreas ]. I'll limit myself to 2 questions here, I think. Maybe starting a bit on the cash flow. You had another quarter here with a very strong cash flow, and you're in a very good position from a balance sheet perspective. And all else equal, you probably deleveraging further here going into Q4. So I'm wondering a little bit on how you think about capital allocation here for the coming quarters and year. I mean you have a target of 3x net debt to EBITDA. There's a wide margin to that target already. You're through a quite heavy investment period. You're planning to amortize debt. So do you have enough interesting M&A in the pipeline that you would like to pursue? Or is there an opportunity for higher shareholder remuneration through extra dividends or share buybacks? Yes, if you can help me a little bit to understand on how you think about the balance sheet from here. Andreas Lindback: Thank you. When it comes to capital allocation priorities, number one, as you say as well, is to below 3%, which we are with good headroom as well when it comes to our leverage point. Priority #2, invest to drive the growth in our Solutions business. We have a CapEx guidance of around 2.5% of sales, and that we will continue to do. Priority #3 for us is the dividend to our shareholders, 50% to 60% of net income to be paid out on an annual basis. And then priority thereafter is related to bolt-on M&A activities. And here, as you rightfully say, there has not been so much activity. We have opened up for it, but we have also been focused really on driving the organic improvements in the business. We have also been focused on the strategic assessment program. So that is something that we will work on accelerating, although like you say as well, there is not a big, huge pipeline right now today, but that will, over time, start to increase. And then after that, I mean, if we don't find enough acquisitions, so to say, then we will continue to deleverage our balance sheet here. And over time, we can consider any other shareholder returns, but it's not a topic today and in the short term. And then we will have to come back to you on a more longer-term view in our Capital Markets Day here in June. Unknown Analyst: Understood. And then maybe a smaller question on the other segment. If I understand it correctly, SCIS still hampering you on a year-to-year basis. But when I look at the other segment, the loss is only SEK 56 million, so quite in line with last year. Is that due to continued good performance in AMEA and lower group costs or anything more of a one-off nature in there? Or yes, what explains that you don't have a bigger loss given SCIS is still negative, it seems? Andreas Lindback: No big one-offs. You're right. Our business in AMEA -- Africa, Middle East and Asia and the Pacific are performing well, which is supporting other. Group cost is under control. So there is no major changes there. And then we have the residual performance in the SCIS business. Operator: The next question comes from Allen Wells from Jefferies. Allen Wells: A couple from me, please. Just mindful of the kind of portfolio management comments, you said that they will continue in Europe, America into the first half. So is it right to assume that, that kind of very low single-digit growth kind of profile that we've seen for this year in those regions, but at least continues in the first half next year? I'm just keen to understand how you see the potential timing and shape of growth recovery there? And that's the first question. Secondly, just a quantification question on the tax timing comment that you made in terms of the unwind in the fourth quarter. Exactly what does that mean in terms of the impact on cash flow? And as I just think about the 3% organic growth number that you posted in Q3, what is the pricing component of that versus volume, just at an average group level? Just keen to understand where pricing is. Magnus Ahlqvist: Thanks, Allen. So on the active portfolio management, if you're looking at the current trading, it's a several percent type of impact that we're seeing on the numbers that we're reporting in the last couple of quarters. So that's the reason we highlight that there is a significant impact. We don't provide guidance, but we continue to work as we've done before. It's obviously to take care of our clients in a good way, do this in an orderly fashion. But I also call it out because it is important that we also complete that work and get that work behind us because the sooner that we do that, we can also start to focus more on profitable growth again. So that's really the perspective. But we don't provide any guidance. But I think going back a number of years, a lot of people were wondering, okay, does this mean that you're going to shrink significantly in business, et cetera? Well, as you know, over many, many years, that hasn't happened because we also have had a healthy intake in terms of new business. So we're on the right path, but we also need to finish that job, very important in Europe and Ibero-America. Then if you compare a little bit to North America, you also see the benefit there. We were done with this work earlier in North America, and they're obviously also back to much healthier growth levels, and that really contributes. So this is all part of the plan, but good thing now is that we're now kind of nearing completion of that work in the next couple of quarters. Andreas Lindback: When it comes to the 3% growth, the majority of that is price. And where we do have volume increases is in our North American business, where we have seen a good portfolio development. And it's also a very good place to have a good growth given the margin profile that we are having in our North American business. They have been through the [ APM ] program, as Magnus has just talked about. And now we are turning that business more and more into growth focus. So it's really good to see the growth numbers and the volume development in the North American business. But all in all, on the group level, most of the 3% is price. When it comes to the cash question related to tax, we have had some positive timing impacts both in Q2 and Q3 in the U.S., and we expect that to reverse in Q4. And we have talked about USD 30 million, USD 40 million of negative impact in Q4 on the cash flow related to that. Allen Wells: Can I maybe just one quick additional follow-up. Just mindful of U.S. government shutdown at the moment. Is there any impact in your business there? I guess most of it might be in SCIS, which is closing down. But I'm just wondering if there's any impact over the last month or so in terms of Securitas there. Magnus Ahlqvist: No, there is no significant impact. Operator: The next question comes from Viktor Lindeberg from DNB Carnegie. Viktor Lindeberg: Only one question from my side. Looking at the business you've reshaped now quite impressively in the past 3 years in my book at least. And looking now forward in the market, if you could help us pin down the, let's say, tendering activity that you see. How is the market in light of all the uncertainty we see with the headlines every now and then and tweets and so forth. So curious to understand the overall market tendering activity and where you see yourself in light of your profitability journey now when it comes to maybe win ratios that you have seen or foresee going forward to not only defend the 8% margin, but in light of being able to propel further upwards? Magnus Ahlqvist: Thanks, Viktor. I think this is a part that we are very excited about, and I appreciate your comment. It's been quite heavy lifting within the business over the last 4, 5 years in terms of shaping the company into the profile that we now start to become. Very intentional work. We followed by the book, most of the things that we set out to do internally 5, 6 years ago and executed on those. So I think that we are -- as a company, we're in a much stronger position. And when I look at the market, we're also -- I mean, we're operating in large, growing, attractive markets. So we're in a very good position also to tap into that and to leverage that with the strength of the offering that we have. The kind of uncertainty that we're seeing around the world, and this is obviously related to geopolitical uncertainty. It's also related to increasing crime and risk levels. My clear takeaway from a number of the client discussions, and I mean we are serving many of the most reputable companies in the world. They are looking in light of that for a strong partner, a really, really trustworthy and reliable partner that has strong capabilities. And those capabilities to us are very much focused on technology, digital and our services capabilities that we have in our portfolio. So I think that we are really well placed in that, and there is also a healthy market. An important shift that we have been able to achieve in the last 5, 6 years is that we have been much more granular and also much firmer in terms of what are the profitability levels that we need for the business to be sustainable. And I think that has been as the market leader in our industry, that has been really, really important work for us to carry out. But then when you're looking at the market because that's obviously more on a macro level, we also then have a strong position. We know the market is growing, but we're also in the last 4, 5 years, also focusing in on the segments where we see that there is a very clear security need. There is a focus on quality. And some of those that -- where we're also enjoying very, very good growth today. Examples are in technology segments. It's in the data center segments, pharmaceuticals, defense, just to mention a few. And what I'm seeing here is that the positions that we have built a few years ago we just continue to expand and grow those ones. And that gives me a lot of confidence that we are really in a much better position today, much more intentional and in a good position as well to now after we get a lot of the heavy kind of lifting work behind us to also optimize a little bit more in terms of continuous margin improvement, but also then really doubling down on more profitable growth because we have a strong offering and we want to grow, but we need to get some of that work done. But the good thing now is that now it's not 4 or 5 years out. It's a couple of quarters out. And I think that is the exciting position that we are in right now. So I believe we're in a good position, Viktor, and also a good market. Viktor Lindeberg: And by your comment, it does not really sound that clients are waiting to make decisions. It seems the market is progressing as it usually does. No incremental hesitation. Is that a fair assumption? Magnus Ahlqvist: I think so. This is a fairly slow moving and fairly conservative industry from my perspective. But it's also based on security is so important that most of our clients, they are also very deliberate in terms, okay, what are the things that we need in our security solutions and who is the partner going to be. And for that reason, some of the selling cycles are a bit longer, but the way that we build our business is very much focused on long-term value creation. So once we are in a relationship with a client, we usually develop that continuously and over time, and that is a real position of strength for us. But I wouldn't say that there is a hesitancy in that sense. It's rather the question, how can you help us and really leverage technology and digital capabilities that we have and that are also out there in the market to be able to run a more effective and more efficient security program. And there, I feel that the kind of the increasing complexity from that perspective it is clearly in our favor because then most customers also realize that it doesn't make any sense for them to invest in all of that capability. It requires real deep know-how that we have in our technology business that we're building digital capabilities and also much stronger guarding capabilities. So it's matching in a really good way. And that's the reason I'm saying I think we're in a really good position when I look at the next 5 to 10 years after a period of really reshaping the company. Operator: [Operator Instructions] The next question comes from Simon Jönsson from ABG Sundal Collier. Simon Jönsson: I just have a follow-up question on the M&A in Technology & Solutions specifically, of course. Just wondering where you think or where you see that the market is currently in terms of multiples paid for acquisitions of the kind of assets that you are looking for ballpark figures would be fine. Andreas Lindback: Thank you. Given that we have not been so active in the market, I would not really comment upon that today, to be honest, as well. That's something I need to come back to. But the things that we have done have been more or less on the same levels as -- I mean, same levels as we have done bolt-ons before. I think we should take out the STANLEY transaction that was one big transaction, generally speaking, where we have said that we paid a premium to get that down. So the multiples in the technology market is lower than that for sure. But I haven't seen any trend of reduced multiples later over the last years. So normally, in the technology space, you would pay double-digit multiples -- low double-digit multiples. And then it all depends on what kind of cost synergies that we have and, of course, revenue synergies as well. So those are the comments I would like to give at this point in time, Simon. Operator: There are no more questions at this time. So I hand the conference back to the President and CEO, Magnus Ahlqvist, for any closing comments. Magnus Ahlqvist: Very good. Thanks a lot, everyone, for joining us today. We continue on a good path as stated and excited about the next phase in our journey. Thank you.
Operator: Good afternoon, ladies and gentlemen. Welcome to Workiva's Third Quarter 2025 Earnings Call. My name is Chuck, and I will be your host operator on this call. [Operator Instructions] Please note that this call is being recorded on November 5, 2025, at 5:00 p.m. Eastern Time. I would now like to turn the meeting over to your host for today's call, Ms. Katie White, Senior Director of Investor Relations at Workiva. Please go ahead. Katie White: Good afternoon, and thank you for joining Workiva's Q3 2025 Conference Call. During today's call, we will review our third quarter results and discuss our guidance for the fourth quarter and full year 2025. Today's call will include comments from our Chief Executive Officer, Julie Iskow, followed by our Chief Financial Officer, Jill Klindt. We will then open up the call for a Q&A session, where we will be joined by Mike Rost, our Chief Strategy Officer. After market closed today, we issued a press release, which is available on our Investor Relations website, along with supplemental materials. This conference call is being webcast live, and following the call, an audio replay will be available on our website. During today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for the fourth quarter and full fiscal year 2025. These forward-looking statements are based on our assumptions as to the macroeconomic, political and regulatory environment as of today, reflect our best judgment based on factors currently known to us and are subject to significant risks and uncertainties. Workiva cautions that these forward-looking statements are not guarantees of future performance. We undertake no obligation to update or revise these statements. If the call is reviewed after today, the information presented during this call may not contain current or accurate information. Please refer to the company's annual report on Form 10-K and subsequent filings with the SEC for factors that may cause our actual results to differ materially from those contained in our forward-looking statements. Also during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of GAAP and non-GAAP measures are included in today's press release. With that, we'll begin by turning the call over to Workiva's CEO, Julie Iskow. Julie Iskow: Thank you, Katie, and thank you all for joining us today. In Q3 of 2025, we delivered another quarter of strong financial performance, powered by the continued demand for our broad portfolio of solutions and our AI-powered platform. We beat the high end of our revenue guidance with 23% growth in subscription revenue and 21% growth in total revenue. On a year-to-date basis, we've delivered 22% subscription growth and 20% total revenue growth. This performance underscores the resilience of our business and the focused execution by our team at Workiva and our partners. As a result of the Q3 revenue beat, we're increasing our full year 2025 revenue guidance. We continue to deliver value to the market because we focus on customer needs. Our customers need to trust the numbers they're disclosing. They need to provide transparency across their business, both financial and nonfinancial information. And yes, they must be accountable with assurance as a requirement every step of the way. So our customers are looking to us and our platform to solve their most challenging problems. This value we deliver to our customers is highlighted by the continued growth in our large contract cohorts. In Q3, the number of contracts valued over $100,000 increased 23%. Those over $300,000 increased 41% and contracts valued over $500,000 increased 42%, all compared to Q3 of 2024. This large contract growth was driven by both additional solution sales within our existing customer base and the landing of larger new logo deals. At the same time, we delivered a non-GAAP operating margin of 12.7%. This is a 470 basis point beat on the high end of our guide. It's also an 860 basis point improvement compared to Q3 of 2024. With this margin beat, we're raising our full year 2025 non-GAAP operating margin guide by 200 basis points at the midpoint. These results reflect our continued focus on durable growth and meaningful margin improvement. They also demonstrate tangible progress toward our medium- and our long-term operating margin targets. We believe that our disciplined execution and our operating rigor position us to deliver additional leverage over time. I'll move on now to provide some representative Q3 deals. These customer wins provide meaningful insight into our business. They highlight the breadth of our solution portfolio, the location and the types of customers that we're selling to and the role that our partners play in the adoption and the success of our platform in the market. I'd like to start off with a few deals that demonstrate our continued success as a global platform company. First, a top 5 global pharmaceutical company signed a mid-6-figure 2-solution account expansion deal for sustainability reporting and policy management. Already a 13-year loyal SEC reporting customer, they nearly tripled their spend with the platform expansion into the GRC and sustainability solution categories. This global organization invested in the Workiva platform to support their sustainability road map. The road map includes requirements across CSRD, ISSB and other local requirements in some of the 100-plus countries in which they operate. The deal was sourced and it will be delivered by a Big 4 firm. Second, a North American telecommunications and media company signed a mid-6-figure account expansion deal for 4 solutions. The deal included audit management, controls management, operational risk and sustainability. This 9-year loyal SEC customer more than doubled their spend with this account expansion and now uses 6 solutions on the platform. There were several business drivers behind this deal. They included replacing multiple GRC solutions and consolidating on a single platform to drive efficiency and cost savings, enabling risk mitigation across sustainability and operations and providing support for an integrated annual report, combining both financial and nonfinancial information. Workiva was the only solution evaluated that could address all 3 of these requirements on a single platform. The deal was sourced and will be implemented by a Big 4 firm. And third, we closed a high 6-figure expansion deal with a European-based energy services company. The deal covers 6 solutions, sustainability reporting, controls management, enterprise risk management, policy management, compliance and operational risk management. The customer first adopted Workiva back in 2022 for ESEF reporting. It has since increased its annual spend more than eightfold, now exceeding $1 million in annual subscription revenue. This was a competitive win over multiple GRC solution providers and multiple sustainability reporting solutions. The deal was sourced and will be delivered by a Big 4 firm. Our deal momentum extends beyond platform-wide wins. We continue to land and expand with the financial reporting category, which remains a durable growth area for us. A key financial reporting driver is our multi-entity reporting solution, purpose-built for multinational organizations managing complex global structures and operations. A strong Q3 example of a multi-entity reporting deal is a 7-figure expansion with a leading global oil and gas company. This customer more than doubled its spend and now leverages 6 Workiva solutions. As part of a multiyear financial transformation tied to ERP consolidation and an S/4HANA migration, Workiva will enable the modernization of their local statutory reporting across 300 legal entities. This deal was sourced and will be delivered by a regional consulting firm. Another example of our multi-entity reporting deal momentum is a mid-6-figure account expansion with a U.S.-based global manufacturing company who's been a Workiva customer for 14 years. The deal adds 2 financial reporting solutions, multi-entity reporting and regulated financial reporting, and it increases the customer's annual spend nearly fourfold. Both solutions replace legacy manual processes previously managed through desktop tools. The deal was sourced and will be delivered by a regional consulting firm. Expansion deals aren't the only driver of financial reporting growth. A strong new logo win in Q3 was a 4-solution deal with a European export credit corporation. The customer adopted Workiva for SEC reporting, ESEF reporting, bank regulatory reporting and sustainability. They're pursuing 2 major initiatives, standardizing SEC and ESEF reporting on a single platform and preparing for CSRD compliance as a Wave 1 filer. Workiva was the only solution evaluated that could support their integrated reporting requirements across both sustainability and financial reporting. This deal was a co-sell and will be delivered by a Big 4 firm. I'd like to move on now to one of our vertical-specific solution categories, financial services, and I'll highlight just a few of our Q3 wins in this vertical. First, we secured a mid-6-figure new logo with one of Europe's top 10 banks. The customer adopted 5 solutions, SEC reporting, ESEF reporting, sustainability reporting, multi-entity reporting and bank regulatory reporting. The deal replaces multiple on-premise systems and manual spreadsheet-driven processes. Multiple Big 4 and global consulting firms participated in the co-sell effort. Delivery is to be executed through several Workiva partners. Second, we closed a 7-figure new logo deal with a European fund services administrator. This was for fund reporting. This was a competitive win over the incumbent on-premise software solution. The customer selected Workiva for 2 key reasons, our ability to scale reporting across 2,500 funds and our platform's clear differentiation from legacy technology. The deal was sourced and will be implemented by a Big 4 firm. Turning to sustainability. Demand remains steady as organizations respond to expanding stakeholder expectations and evolving regulatory mandates. First, a top 5 global payments provider signed a 6-figure expansion for Workiva Carbon. They purchased our carbon solution to support multiple regulatory frameworks as well as the California climate disclosure rules. The deal replaced a legacy carbon accounting system and represented a competitive win over 4 alternative solutions. The customer has been publishing a global impact report for 7 years aligning its disclosures with GRI, SASB, UNGC and the UN SDGs. But it found that its prior carbon accounting system was insufficient to meet the evolving requirements. This deal was a co-sell and will be delivered by a Big 4 firm. Second, a top 5 Australian bank signed a 6-figure expansion for sustainability reporting. It was to meet the new Australian sustainability reporting standards, AASB S1 and S2. These standards require sustainability disclosures within annual filings, and they cover governance, strategy, risk management and Scope 1, 2 and 3 emissions. Australia's approach demonstrates how regulators are embedding sustainability into financial reporting through ISSB alignment. Approximately 1,000 organizations qualify as Group 1 filers with the first mandatory reports due June 30 of 2026 for June year-end entities. This deal was sourced and will be implemented by a Big 4 firm. Let's move on now to GRC, which in Q3 included several notable wins. First, a U.S. financial holding company signed a mid-6-figure expansion for enterprise risk management, a Workiva SEC reporting customer since 2012, this firm has expanded into 7 solutions across the platform, including multi-entity reporting, living will, stress testing, bank regulatory reporting, sustainability reporting and now enterprise risk management. This most recent expansion increased annual spend by 25%. The new solution will centralize 45 internal enterprise risk reports covering risk metrics, categories, subcategories and risk statements. The deal was a co-sell and will be implemented by a Big 4 firm. Second, a U.S.-based regional community bank signed a multi 6-figure expansion for 3 GRC solutions, controls management, operational risk management and policy management. A 13-year SEC reporting customer, the bank now uses 5 Workiva solutions. This expansion more than tripled its annual spend. The deal was sourced and will be delivered by a regional consulting firm. Wrapping up our solutions section. Here are a few highlights on capital markets. Q3 saw a notable uptick in IPO activity. Workiva supported several high-profile IPO listings, including Sigma, Klarna, HeartFlow and Shoulder Innovations. For Workiva, an improving capital markets environment extends well beyond the S-1 filings. First, we engaged with private companies years before they go public, through our private company reporting and internal control solutions. We believe that a stronger IPO outlook increases the incentive for companies to invest early in scalable reporting processes. And second, more SEC registrants expand the addressable market for additional Workiva solutions, including SEC and SOX reporting, even in instances where we're not directly involved in the S-1. We are encouraged by Q3 IPO activity and the economic environment supporting the rebound. We're optimistic that the IPO momentum will continue into Q4 once the U.S. government shutdown ends. Let's shift focus to discuss innovation. In September, we hosted Amplify, our annual user conference. We welcomed over 2,300 customers, partners and investors in Washington, D.C. We showcased our commitment to innovation, and we launched product enhancements to continue to meet and exceed our customers' growing expectations. During the event, we announced several agentic AI extensions, and we launched Intelligent Finance, Intelligent Sustainability and Intelligent GRC. Each delivers specialized fit-for-purpose capabilities that enhance customer speed, agility and confidence. These offerings leverage the fact that the Workiva platform is intelligence ready. Being intelligence ready means that all data and narratives are structured, consistent, traceable, interpretable machine readable and built with context, not just content. This is what differentiates Workiva. Our reports are structured, validated data products, not static documents, They allow AI and automation to read, reconcile and publish with full lineage, embedded controls and regulator-grade assurance. We also embed global frameworks and taxonomies directly into the platform, transforming every report into a machine interpretable data product. As a result, AI can operate without guessing what's material, how metrics are defined or how to compare them. With Workiva AI at the core of our unified platform, we're delivering an intelligent companion that enables customers to achieve their most critical outcomes faster and with confidence. A great example of how our AI capabilities are driving value to our customers is a Q3 multi 6-figure new logo win with a rapidly growing privately held defense contractor. The customer purchased 4 solutions, controls management policy management, compliance management and private company financial reporting. It was our AI-powered GRC capabilities that differentiated us from the competition. This company is building their first controls management framework. They're creating company policies and building a compliance program for the cybersecurity maturity model certification. This is a prerequisite for doing business with the U.S. military. By leveraging Workiva AI, including the AI-powered control creator, the customer will author and implement policy control and compliance frameworks in-house, reducing reliance on third-party consulting spend. At Amplify, we also hosted our Annual Investor Day. We detailed our commitment to both durable growth and improved operating leverage. Our recent margin progress in 2025 reflects the disciplined approach we've been taking to achieve greater operating leverage in the business. Since the start of the year across every function, every department and every team who have been focused on 4 themes. First, organizational and operating model redesign, We're simplifying span of control and reducing layers. We're evolving the operating model across sales, customer success and R&D and we're putting a greater emphasis on performance management. These ongoing efforts will provide a structure that reduces duplication and strengthens execution. Second, process streamlining and automation. This includes both single and cross-functional initiatives. We're streamlining and improving workflows and leveraging technology where it brings value. And yes, that includes the automation of routine tasks and the use of AI. Third, optimizing product and go-to-market resources. We're sharpening our investment discipline so that we can direct resources towards initiatives with the highest likelihood of success and the greatest customer value. And finally, more focus on fiscal discipline. We're exercising greater financial discipline across all functions. Together, these focus areas are designed to increase productivity as we grow and scale, and drive greater operating leverage across the business. By functional area, here's a quick summary of our productivity initiatives. For cost of sales, we're scaling digital support optimizing cloud computing costs and shifting low-margin setup and consulting services to our partners to get greater leverage. For R&D, we're focused on workforce diversification, engineering productivity and scaling our operating model. Finally, we do recognize sales and marketing is where we have the largest opportunity to drive additional efficiency and productivity. Our approach is practical, to minimize the risk of disrupting growth as we continue to focus on capturing our large and expanding TAM. We've targeted 3 areas to improve sales productivity. First, transitioning to a more efficient sales structure and creating better alignment of sellers to territories. Second, a focus on staff which includes up-leveling our seller expectations and bringing in new hires that have seen scale, sold platforms and know how to win with strategic partners. And third, we're bringing even more precision to where and what we sell, optimizing our coverage models to improve efficiency, drive focused new logo growth and achieve greater account expansion. We're committed to staying in the lead and going after our growth opportunity, while at the same time, improving productivity within and across our organization. Finally, I'd like to share an important leadership update. After over 15 years with Workiva, Michael Hawkins is stepping down from his role as Executive Vice President and Chief Sales Officer, effective today, November 5. Mike has been part of Workiva since our early days, and he's helped to shape the company that we've become. Mike has played a key role in our evolution from a single solution company in the U.S. to adjusted global platform serving thousands of customers. I'd like to thank Mike for his years of leadership, his dedication to our mission and his many contributions to our success. His impact on our people, our customers and our growth will be felt long after his departure. We also announced today the appointment of Michael Pinto as our new Executive Vice President and Chief Revenue Officer. Michael's career spans more than 25 years, driving rapid growth for some of the world's largest technology companies. Most recently, he was the Senior Vice President and General Manager for the Americas at Databricks, a $4 billion revenue run rate data and AI company. Prior to Databricks, he held senior sales leadership roles at Amazon Web Services, Medidata and SAP. Michael will oversee Workiva's global sales, partnerships and alliances and commercial operations. He'll focus on scaling and accelerating profitable growth, modernizing go-to-market strategies, strengthening customer engagement and advancing global expansion. We believe that his leadership experience, his track record of guiding multiple companies to scale and his deep understanding of enterprise SaaS strongly align to what's required for our next phase of growth. Finally, a brief update on our CFO search. We have identified a final candidate but we're not yet able to provide detail at this time. As you know, bringing in a sitting public company CFO is a complex process. And there is a sensitivity in the timing of the communications and the announcements. In closing, I'd like to thank our team of dedicated employees across the globe for their relentless focus on innovation, our customers' success and our go-to-market execution that continues to fuel our growth. I'd also like to acknowledge their disciplined commitment to productivity and performance that's driving measurable improvement in operating leverage in our business. And with that, I'll now turn the call over to Jill to walk you through our financial results and updated 2025 guidance in more detail. Over to you, Jill. Jill Klindt: Thank you, Julie, and good afternoon, everyone. Thank you for joining us. Today, I will begin by providing an overview of the financials and key metric highlights for the third quarter of 2025. I will then provide guidance for Q4 and the full year 2025. As Julie discussed, we had a strong Q3, generating $224 million of total revenue, up 21% over Q3 2024 and beating the high end of our revenue guidance by $4 million. There was an approximately 1 percentage point positive impact on revenue growth due to foreign currency fluctuations. Q3 subscription revenue was $210 million, up 23% from Q3 2024. Both new customers and account expansions continue to contribute to our solid revenue growth with new customers added in the last 12 months, accounting for 40% of the increase in Q3 subscription revenue. Q3 professional services revenue was $15 million, flat versus Q3 2024, with decline in setup and consulting services, offset by higher XBRL services. Our non-GAAP operating margin for the quarter was 12.7%. This 470 basis point beat on the high end of our guidance was driven by stronger-than-expected top line results, increased PTO usage and continued focus on operational efficiency and productivity. I'll now move on to our performance metrics for the quarter. We had 6,541 customers at the end of Q3 2025, a growth of 304 customers from Q3 2024. Our gross retention rate was 97%, exceeding our 96% target. And our net retention rate was 114% for the quarter versus 111% in Q3 2024. Similar to revenue growth, there was an approximately 1 point positive impact on NRR due to foreign currency fluctuations. During the quarter, 73% of our subscription revenue was generated from customers with multiple solutions. This is up from the 68% we achieved in Q3 2024. Growth in our large contract customer metrics also reflected strong momentum. As of the end of the second quarter, we had 2,372 contracts valued at over $100,000 per year, up 23% from Q3 the prior year. The number of contracts valued at over $300,000 totaled 541, up 41% from Q3 2024. And the number of contracts valued over $500,000 totaled 236, up 42% from Q3 2024. Moving on to the balance sheet and cash impacts. As of September 30, 2025, cash, cash equivalents and marketable securities were $857 million, an increase of $43 million over the prior quarter end. In Q3, we used a portion of our generated cash to repurchase 126,000 shares of our Class A common stock for $10 million. This was done under the share repurchase plan approved by the Board in July 2024. As of the end of the quarter, we had $40 million remaining of the original $100 million authorization, which we will continue to deploy periodically in order to help manage dilution. As of September 30, 2025, we expect $701 million in remaining performance obligations to be recognized over the next 12 months. This is an increase of 21% versus the prior year. I also wanted to discuss a couple of notes on the PTO program changes I shared at our September Investor Day. In the U.S., we will be transitioning from our current accrued PTO program to a flexible time off plan at the beginning of 2026. As the accrued PTO was used, it will have a positive impact to op margin, but this impact will not flow down to our free cash flow margin. There will not be a onetime cash impact on the balance sheet due to this transition. Turning now to our outlook for Q4 and full year 2025. With our outperformance in Q3, we are now raising our full year revenue guide and increasing our operating margin guide to reflect our ongoing commitment and focus on driving both durable growth and improved operating leverage across the business. With that in mind, for the fourth quarter of 2025, we expect total revenue to range from $234 million to $236 million. We expect services revenue will be down compared to Q4 2024. We expect non-GAAP operating margin to be in the range of 16.7% to 17.4%. For the full year 2025, we are increasing total revenue guidance to range from $880 million to $882 million. Similar to 2024, we expect total services revenue will be down year-over-year as we move low-margin services to our partners. We now expect subscription revenue growth will be at least 21% year-over-year. We now expect our non-GAAP operating margin will range from 9.2% to 9.4%. This 200 basis point improvement at the midpoint reflects our revenue beat and our ongoing commitment to drive expanding operating leverage in the business. We now expect 2025 free cash flow margin to be approximately 12%. As we look to 2026, I want to provide some early comments on next year in order to help with your modeling. In 2026, we expect to make continued progress towards our 2027 medium-term revenue and operating margin goals. We expect XBRL services revenue will continue to grow at a modest low single-digit rate in 2026, while we expect setup and consulting revenue to decline from 2025 to 2026, as we continue to move low-margin services to our partners. The net result will be relatively flat total services revenue for the year. Similar to 2025, we expect operating margin in the back half of 2026 will be stronger than the first half. We expect momentum on improved operating leverage to continue well beyond next year. Julie walked you through our approach to improving productivity and driving operational efficiency within the organization, while executing on our long-term profitable growth strategy. Year-to-date, we've raised our full year 2025 operating margin by over 400 basis points from 5% to 5.5% at the start of the year to 9.2% to 9.4% today. This improvement reflects how thoroughly operational rigor is being embraced by every employee across the organization. Our commitment to productivity is at the core of our short-term strategy and long-range planning. As you all know, this is my last earnings call. I wanted to say how proud I am of everything the Workiva team has accomplished over these last 17 years. I look forward to watching the company achieve its highest potential in the months and years to come. I also want to thank my amazing team. It has brought me great joy to get to know and work with each and every one of you. You all have made my time here meaningful and truly special. I hope your path forward is filled with rewarding challenges, exciting opportunities and significant achievements. To our analysts and investors, it has been a pleasure working with all of you over the years and I wish you all the best. Thank you all for joining the call today. We're now ready to take your questions. Operator, please open the line for Q&A. Operator: [Operator Instructions] And the first question will come from Rob Oliver with Baird. Robert Oliver: I had 2. But first, Jill, just wanted to say best wishes. It's been a pleasure working with you. And good luck to Mike Hawkins as well. First question, Julie, is just around platform sale, you made reference to some competitive consolidations within some of the wins you had this quarter. And I guess, kind of a bigger picture question, when the office of the CFO buyers are thinking about kind of applications aligned with underlying data and workflow integrity, are you starting to see a bit of a tipping point where more of these functionalities, whether it be things within GRC or things within the financial suite around filing are starting to be consolidated around a single buyer, and should we expect that to happen more in the next couple of years and color you have there would be great. And then I had a quick follow-up. Julie Iskow: Sure. Thanks, Rob, for the question. And I would say that the trend that you're describing is a trend and it probably comes from 2 things really. One is the age-old just consolidation when companies are looking to take more responsibility for their productivity, for their efficiency and so forth. That's one. Just -- there's so many benefits to a platform, and we've seen that since day 1 as we've evolved to the platform. It's just a responsible thing to do in the CFO and the CIO office, of course. But then there's the trend of data and the importance of it and the ability to leverage it and how it works across all of our solutions. And certainly, there is a recognition. You see this by our increase in expansion deals that there's a recognition that these solutions in the office of CFO played better together. We have capability that makes them better together and that data, that's one of our key competencies really is the ability to bring all that data together, the financial and the nonfinancial CFOs get a much better and more comprehensive view of their business. And so I would say it's, one, for the efficiency of the platform, but, two, also data, particularly with AI and so forth and be able to leverage it and get better insights more quickly. It's just way more important now we have the tools and the capabilities to be able to leverage it. And our platform is unique in that we have all of these capabilities together, and our customers get a much more holistic view and they're able to leverage that for better business decisions and speed and accuracy and so forth. So 2 reasons why the trend you've spotted is going to continue. Robert Oliver: Great. Very helpful. And then just a quick follow-up around, you guys touched on at the Analyst Day portion down in D.C., the kind of a new approach to pricing around good, better, best. And I just wanted to get any color you could provide around early reads or indications around the acceptance of that pricing? I mean, I know you guys are already not a seat-based model. So you're not facing at least from what we can tell any of the risk or concerns around that. But would be interested to know what the early indicators are on the pricing change? Julie Iskow: Sure. And this is nothing we are disclosing at this time. It certainly plays a positive role in our expansions. We can share that. And again, early on and looking forward to doing more of it and rolling it out in a broader way across the platform. But thank you for highlighting. It's a great way to get our additional capabilities in and roll them out and get increased adoption. So thank you, Rob. Operator: Your next question will come from Steve Enders with Citi. Steven Enders: Okay. Great. And Jill, great to have worked with you over the years. Maybe just starting with you, I want to touch a little bit just on the early kind of view in the '26. I appreciate some of the guide points there. But maybe how should we think about the kind of continued operating margin expansion. Is it -- does it seem a little bit more kind of straight line from here to the medium-term targets? Or is there still a view of a hockey stick? And then I guess, secondarily, just, is there any way to maybe frame the magnitude of the accrued PTO change and the impact that might have on margin over this year or in the next year? Jill Klindt: Sure. Thanks, Steve. For the op margin for 2026, as I mentioned, we do expect, as the trend has shown for the past couple of years, for margins to be better in the second half versus the first half. We will continue to have that seasonality. Thinking about the trajectory towards our 2027 medium-term target, we will continue to make progress, and you saw us make great progress this year. We're very pleased with the guidance that we're providing and the progress that we've made and everything that Julie has talked about as far as the company focusing on that margin improvement and focusing on productivity and getting leverage from our existing resources will continue into 2026. And so we will continue to see the results of that work throughout the year. We're not going to provide a specific number on margin for 2026 at this time, but I can tell you that we will continue to progress towards our updated 2027 medium-term target, the updated amount that we provided during our Investor Day in September. And then related to PTO, just as the second part of your question related to the PTO portion of that question. If you -- you can always take a look at our footnotes and looking at the balance of our accrual at the end of Q3, it's at around $19 million. A large portion of that would be from the U.S. Our accrued PTO balance will never go to 0, but as far as helping to build some models, we will see that balance continue to decline, and we expect the U.S. portion of that balance to decline significantly through the end of 2026. Steven Enders: Okay. Perfect. That's helpful. And then just on the, I guess, the large deal execution. I mean, I think for the past couple of quarters, we've seen record adds in the $300,000 and $500,000 customer level. But I guess, anything to call out that maybe is helping drive that or support the strength there? And then I guess, how do we think about maybe the forward trend there continuing as you look at the pipeline going into Q4 and into next year? Julie Iskow: Sure. I can take that. And I'll say again, probably a two-pronged answer. One, the platform is resonating, and we are just -- we are getting better at selling it. So I think it's those 2 things. It's execution and the platform resonating the market. So just again, these solutions with the platform that has all of these capabilities unified together with data, with the capabilities we continue to roll out, it is resonating in the market across financial, nonfinancial and assurance. And we also have a team, a go-to-market team that is executing and they continue to get more capable of selling with partners, of selling larger deal sizes and selling multi solution. We just continue to get better and better in execution. And I think those are the 2 reasons that you are seeing that trend. Operator: The next question will come from Alex Sklar with Raymond James. John Messina: This is John on for Alex. Wanted to ask here on the capital markets activity. Can you maybe touch on the deal pipeline there? It certainly sounded like IPO activity or your share of IPO activity picked up. But can you maybe talk about the reasons behind that? And maybe any early perspective on how things are shaping up for 2026? And then I have a quick follow-up. Julie Iskow: On capital markets, specifically, we can comment on that certainly. One of the questions we get most consistently on earnings calls is around the capital markets. And we did see an increase in activity this quarter. And we had a lot of great high-profile IPOs, Sigma, Klarna, HeartFlow, et cetera, and we're encouraged by it, but we also know we're in the midst of a shutdown. So we expect it to continue once the shutdown goes away, if and when, And so we do expect it to come -- the momentum to continue on post that. We don't talk about, of course, forward-looking activity around our pipe. But we did give guidance for the quarter. So you probably have an idea about how we're thinking about the next quarter. John Messina: Okay. Helpful there. And then on the international side, continue to see positive momentum there in business coming from international markets. Can you maybe talk a little bit more about what you're seeing internationally, maybe how sales cycles are trending there versus domestic markets? And then maybe any differences you'd call out in multiproduct adoption internationally versus here in North America. Julie Iskow: Sure. Year-to-date, revenue outside of the Americas represents, at this point, greater than 19% of our total revenue compared to 17% in the year about a year ago. And we continue to put focus on it. Europe has become a strong story for us in the past 12 months. Demand has been healthy. And it's essentially broad-based as it is across our -- all regions really, it's broad-based in the region. We're selling the value of the platform. We've got the multi-solution deals, partner-led, we're getting new logos and account expansion. So we continue to remain optimistic about the market opportunity and the future growth there. So good healthy demand, broad-based. Operator: Your next question will come from Jacob Roberge with William Blair. Jacob Roberge: Jill, it's been great working with you, best wishes moving forward. Julie, can you talk a little bit more about what you're seeing in the demand environment? I know you all have talked about some macro uncertainty over the past few quarters, but both revenue and bookings growth continued to be very strong. So it would be great to hear what you're seeing in the environment and just how the Q4 pipe is shaping up. Julie Iskow: Sure. I mean, this year has been defined by consistency, but it's consistent uncertainty. Just a lot of change. Changes are different every week, day, tariffs, policy changes, elections, government shutdown, inflation, rate cuts, the list just goes on. But the Workiva teams just continue to execute through the consistent change. And as we've mentioned in the past many times, our broad portfolio of solutions gives us a resilient business. But make no mistake about it, there is definitely uncertainty out there. but we are powering through with our value proposition, and it's a good one in these times, providing transparency, accountability and trust, and it just continues to resonate in the market. Jacob Roberge: Okay. That's helpful. And then just on GRC, from the Analyst Day in your prepared remarks today, it seems like there's some good momentum with that business right now. What do you think has changed for that business over the past year that's helping drive that growth? Julie Iskow: Something went wrong there. Can you say which business you're talking about? I missed it. Jacob Roberge: I was talking specifically about the GRC business and just some momentum you're seeing there. Julie Iskow: Yes. Again, we continue to be very competitive in that market, rolling out capabilities, but we're seeing in the market a move to a cloud. And we are, again, moving strongly there on our execution. There's a lot of legacy software out there and teams are getting stronger and stronger and also many multi-solution deals there. So it's a great platform expansion. It's a land capability. So it just continues to get strong and continue to move on the trends of legacy software removal and also move to the cloud. Operator: Your next question will come from Brett Huff with Stephens. Brett Huff: Congrats on a nice quarter. First one is, can you give us an update on how the base that is kind of your core base of the SEC reporting. I know that was going to be a big focus of potential cross-sells and sort of returning to those folks also with the good, better, best upgrades. To us, that seems a really big asset that you all have that you're just starting to really go back to. Any update on that on how that's going, how the conversations are evolving? Julie Iskow: Sure. Thank you for highlighting that. I mean our base is, of course, one of our tremendous assets with 95% of Fortune 100 to 85% of the Fortune 1000. We are executing well on account expansion. I highlighted a number of those deals on the call today. You can see some longtime SEC reporting customers moving into our other categories. So that account expansion is very strong. We also highlighted our account expansion and the percentage increases for those with ACV over $300,000 and $500,000 in the low 40%. So it is a -- an absolute focus for us is expanding into the installed base and bringing them more value and bringing the unified platform and all the capabilities. Brett Huff: That's helpful. Just final question for me. Can you talk a little bit about some of the nonregulatory drivers from the FSG product? I think last quarter or maybe at the Analyst Day, you were talking about some of the science-based targets and things like that, you're still seeing good momentum there. Beyond sort of the direct regulatory drivers, is that still a part of the conversation still driving new logos for you all? Julie Iskow: Yes. I'm glad you brought sustainability up. It's very simple. It just -- it remains a strategic solution for us. Has the near-term tailwind subsided? Yes, and we've been open about this, but we continue to win large deals in the sector. And you said it yourself, and it is beyond regulatory drivers. There's business performance, there's risk management, companies wanting to be resilient. They want to manage stakeholders and they're tracking to yes, those science-based targets you mentioned. So yes, it's regulation worldwide, but it's also a number of other factors that are driving this business. And again, it does remain a strategic solution for us. Operator: The next question will come from Adam Hotchkiss with Goldman Sachs. Greyson Sklba: This is Greyson Sklba on for Adam. And Jill, it's been great working with you. I wanted to actually start on the sustainability demand environment. I know you touched on it briefly. Is it fair to say that you're seeing a similar softer demand environment in that space than what you called out in the previous few quarters? Or did you see a little bit of improvement there in 3Q? I just want to marry that with some of the strong sustainability deals that you called out in your prepared remarks. Jill Klindt: So as far as sustainability and what we're seeing currently, you just heard Julie talk about the -- that some of the -- we haven't had the same tailwinds and we talked about this, this year, but it has still been a consistent driver. You heard her talk about some of the deals that we were able to close during the quarter, and we still see demand as far as sustainability reporting that's not tied to regulatory drivers. And so we would say that it's a similar story to what we were seeing that it has not -- or ever gone to 0 that we continue to sell sustainability, and we believe it will have -- there'll be a long demand within that solution for us. Greyson Sklba: Got it. And I also just wanted to quickly ask on the free cash flow margin guidance. I saw you brought that back up to where it was in the beginning of the year. And so I'm just curious, what are the drivers behind that and sort of bringing that back to the 1Q guide. Jill Klindt: Yes, sure. Thanks for the question, Greyson. So thinking about our free cash flow margin, early in the year, we did have, back to sustainability, we had the moderation in demand for that business in the first half. And so it did influence us to reduce our free cash flow margin earlier this year from our original 12% that we have guided. And then since then, though, we have seen improvement in our op margin, which, of course, is a tailwind to our free cash flow margin. And we've also seen, as we talked about, improvement in Q3 and had good business during that quarter as well, and we're pleased with the results. And so it's going -- it's a combination of all those things that are influencing the -- our ability to bring that guide back up to 12% for free cash flow for the full year. Operator: The next question will come from Andrew DeGasperi with BNP Paribas. Andrew DeGasperi: Thanks, and good luck, Jill, for the future. It's a pleasure working with you as well. I wanted to ask a question on the appointment of Michael Pinto as Chief Revenue Officer. I know titles matter. And I don't remember a Chief Revenue Officer per se being at Workiva recently. Can you maybe elaborate, why is that if it is or if I'm wrong, a meaningful change in terms of that person being in charge of sales organization? And what do you expect -- what changes do you expect him to bring forward or if there's any change in the reporting lines in terms of what -- how it was before. Julie Iskow: Sure. I'll start by saying Michael is being brought in to take our go-to-market machine to the next level. It's -- the change is all about future growth and scale for us from $1 billion to the multibillions, building scale and efficiency in the sales organization, accelerating our high-performing partner ecosystem, driving new logos, account expansion, revenue retention activity, all of this in partnership with our go-to-market teams, marketing and customer success organizations and so forth. So that is why he's here. It's all about the next era of growth for us. On this title, I mean, we looked at market standard titles for the role. He's taking on the global sales organization, the partnerships and alliance and all the commercial organizations. So this is the title and the role, and we're enthusiastic about having him in and look forward to what he's bringing. Andrew DeGasperi: Got it. So it sounds like there's been a change in terms of the people that report to him to a degree or to that role before. But in terms of also -- I noticed the change in tone this earnings call, just in terms of your focus on efficiency, both across sales and marketing, R&D and gross margin expansion, of course. So am I right to think that there's been a shift pretty much since the Investor Day in terms of improving that and you're actively taking steps to meaningfully drive that to get to those midterm targets you laid out? Julie Iskow: Sure. We have been working towards those targets and just improving productivity across the organization. We did roll it out in Investor Day, but we've have these plans. We've been working across the organization, whether it's automation efficiency, AI. We've been bringing in new roles across the organization, people who have been there and done that at scale. We have strong leadership across the organization, some of which is new. We've talked for a long time about having a blend of those people in the organization who've been here are evolving. We've been talking about them going out with -- understanding the customers, understanding our industry understanding our markets and then mixing that with the people who have been there and done that at scale. So it is not a new motion for us. The dual focus on growth and productivity that we did talk about at Investor Day has been a focus for us and will continue to be to drive shareholder value. Operator: This will conclude our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Third Quarter 2025 Hamilton Insurance Group Limited Conference Call. [Operator Instructions] I will now hand the conference over to Darian Niforatos, Vice President, Investor Relations and Finance. Darian, please go ahead. Darian Niforatos: Thanks, operator. Hi, everyone, and welcome to the Hamilton Insurance Group third quarter 2025 earnings conference call. The Hamilton executives leading today's call are Pina Albo, Group Chief Executive Officer; and Craig Howie, Group Chief Financial Officer. We are also joined by other members of the Hamilton management team. Before we begin, note that Hamilton financial disclosures, including our earnings release, contain important information regarding forward-looking statements. Management comments regarding potential future developments are subject to the risks and uncertainties as detailed. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I'll hand it over to Pina. Giuseppina Albo: Thank you, Darian, and welcome to everyone joining us today. I'm pleased to report that Hamilton had another very strong quarter with $136 million of net income, representing an annualized return on average equity of 21%. This impressive result started with strong performance from our core activity, namely underwriting, where we reported a combined ratio of 87.8% and underwriting income of $64 million in the quarter. These results are a direct consequence of the balanced and diversified portfolio that we have curated over the years as well as our disciplined underwriting approach. Investment income of $98 million was also significant this quarter with contributions from both our Two Sigma Hamilton Fund and our fixed income portfolios. So in short, both our underwriting and investment played a part in our excellent results this quarter. Before providing more commentary on our performance and reflections on the market in general, I want to speak to some of our recent management appointments. Hamilton continues to shine as a true magnet for top-tier talent. In addition to developing and promoting from within our ranks, we continue to attract exceptional leaders from outside the organization. On the latter note, we were thrilled to welcome Mike Mulray as Chief Underwriting Officer at Hamilton Select. Mike brings over 25 years of underwriting expertise and strong market relationships, which will prove opportune as we continue to grow our U.S. E&S platform. With respect to drawing from our bench strength, we are also delighted to announce the well-deserved promotion of Susan Steinhoff to Chief Underwriting Officer of Hamilton Re effective January 1, 2026. Susan has more than 20 years of industry experience and is one of the longest-serving underwriters at Hamilton, having joined the company in 2014. Turning now to some of our highlights for the third quarter. Hamilton continues to deliver strong top line growth with gross premiums written increasing by 26% in the quarter. While the market is experiencing some pressure in pockets, it is still an attractive place to do business for disciplined and discerning underwriters who know how to navigate it and pick the most attractive spots. Our diversified portfolio has allowed us to flex across insurance and reinsurance and multiple lines of business in response to market realities. This means we were able to grow where rates, terms and conditions were still attractive and backed away from business where this was not the case. Let me walk you through this dynamic in each of our 3 underwriting platforms to illustrate the point. Starting with Bermuda. Our Bermuda segment grew 40% this quarter, driven by casualty and, to a lesser extent, specialty reinsurance classes. The increase in casualty reinsurance this quarter was a combination of access to new market opportunities, a larger renewal moving from Q2 to Q3 as well as the benefit of expanded participations on select renewals written earlier in the year. The majority of our growth was attributed to general liability and multiline classes, which we write predominantly on a proportional basis and which have been getting the benefit of strong underlying rate improvements. Regarding specialty reinsurance, we continue to see momentum in our new credit, bond and political risk lines where risk-adjusted returns are attractive. Turning now to the property insurance book we write in Bermuda on the other hand, we did see increased competition on larger property accounts after several years of compounding increases. Consistent with our disciplined underwriting culture, we were very selective and consequently wrote less of this business. That said, we do still see risks in this space that provide attractive underwriting margins, so we continue to support those accounts. Moving to our International segment, which houses Hamilton Global Specialty and Hamilton Select, gross premiums written grew 17% in the quarter. Starting with Hamilton Global Specialty, which includes our Lloyd's operation, gross premiums written were up 16% with a select part of our property insurance book leading the charge. More specifically, consistent with the approach taken in Bermuda, we have been more selective on larger property accounts, but we're able to grow on the back of new distribution channels that focus on smaller property risks, which are subject to less competition and where risk-adjusted returns remain attractive. We also grew in select specialty and casualty classes such as mergers and acquisitions, marine cargo, political risks and fine art and species, where our specialized teams were able to achieve attractive margins. On the flip side and consistent with our disciplined underwriting culture, we reduced our writing in lines experiencing increased pricing pressure such as political violence and some areas of professional lines. Turning next to our U.S. E&S platform, Hamilton Select. It grew 26% this quarter, led by 50% growth in our casualty lines. We continue to see healthy submission flows at Hamilton Select and a favorable momentum in our casualty segments, especially excess casualty, general casualty and small business classes where rates and terms remain attractive. On the other hand, and consistent with our adherence to cycle management, we reduced our writings in some areas of professional lines where rates were less attractive. Looking out to the foreseeable future, I'd like to share a few high-level thoughts on the market environment in general, starting with U.S. E&S insurance, which accounts for a significant portion of our insurance portfolio. As you have heard from others, the growth and attractiveness of the U.S. E&S market has given rise to increased interest and competition, which we also expect going forward. Starting with property E&S insurance, we expect small to mid-market accounts to see increased competition but hold up better than large accounts. Large accounts are expected to continue to experience pricing pressure. But as we demonstrated, we are not afraid to be responsible and back away in order to safeguard the profitability of our book. Casualty E&S business is expected to continue to show momentum with attractive rate increases persisting, albeit at a slower clip. The majority of our E&S book consists of casualty and specialty classes, which is good news for us. Also worthy of note is the fact that our domestic E&S carrier, Hamilton Select, is focused predominantly on small to midsized hard-to-place niche business where we differentiate ourselves with our expertise, tailored solutions and responsiveness. In summary, while the U.S. E&S market is expected to experience more competition, it is a nuanced market. Given our established and recognized expertise, our strong underwriting culture and market relationships, it remains a market where we see opportunity for attractive growth, albeit at a more moderate pace than in previous quarters. I'll now turn briefly to the reinsurance market, particularly the upcoming January 1 renewals. We expect the upcoming January 1 reinsurance renewals to be more of the same. Regarding property cat reinsurance, we expect supply to outpace demand and some cedents to retain more business. Consequently, we're expecting rate pressure similar to what we have seen in the course of 2025, especially on upper layers of property cat programs. However, given the significant rate increases, which started with the 2023 market reset, we believe that absolute pricing levels will remain attractive and terms, conditions and attachment points to remain intact. Consequently, we expect to continue supporting and in some cases, even increasing our participations for our key clients. As for casualty reinsurance, our expectations are more differentiated. In general, we expect casualty books with poorer performance to see commission decreases, while commissions on better performing books are expected to remain flat. Having increased our portfolio in recent years with targeted clients, predominantly on the back of our AM Best upgrade, we expect our growth in casualty going forward to be more moderate. We have now had the benefit of the upgrade for over a year and our assumptions in both pricing and reserving provide prudent guardrails for this class. The specialty reinsurance market involves a mixed bag of products, but since historical performance has been good overall, we expect many peers and some new entrants to target growth in their specialty portfolios. We have an established offering with clients we have been supporting for years and expect to continue to support them going forward, given that we have relationships with many of them that span multiple classes. In addition to having a well-balanced portfolio with a broad product offering, Hamilton is viewed as a reliable and creative partner by our clients and brokers. Our ability to provide solutions, especially when others retrench, has helped us grow at the right time and in the right lines and remains a key differentiator to our success. Our upgraded rating puts us on par with many of our larger peers and our responsiveness and underwriting culture allows us to compete responsibly and write the business we want. In closing, I'm proud of our team's performance, their ability to navigate this transitioning market and the resilience we have demonstrated as a group. We have a talented team of professionals with years of experience and are building a business for the long run. In times like these, our underwriters know when to lean in and when to back away so that we can continue delivering market-leading bottom line results and a consistently healthy growth in book value per share. I am extraordinarily proud to be part of Hamilton, an organization that is nimble, acts responsibly and knows how to capitalize on opportunities throughout market cycles. With that, I'll turn the call over to Craig for a detailed review of our financial results. Craig Howie: Thank you, Pina, and hello, everyone. Hamilton had another strong quarter of financial results with net income of $136 million, equal to $1.32 per diluted share, producing an annualized return on average equity of 21%. We had operating income of $123 million, equal to $1.20 per diluted share. producing an annualized operating return on average equity of 19%. We also increased book value per share by 6% in the quarter and 18% year-to-date to a record $27.06. These results compare favorably to net income of $78 million or $0.74 per diluted share, an annualized return on average equity of 14% and operating income of $17 million or $0.16 per diluted share and an annualized operating return on average equity of 3% in the third quarter of 2024. For our underwriting results, Hamilton continues to grow its top line at an impressive double-digit rate. Our 2025 year-to-date gross premiums written increased to $2.3 billion compared to $1.9 billion this time last year, an increase of 20%. All 3 of our operating platforms, Hamilton Global Specialty, Hamilton Select and Hamilton Re were able to strategically grow in the lines of business that were most attractive while shrinking those lines that did not meet our underwriting targets. In terms of our underwriting performance, our year-to-date combined ratio was 95.2%. Now for some more detail on our quarterly underwriting figures. Hamilton had underwriting income of $64 million for the third quarter compared to underwriting income of $29 million in the third quarter last year. The group combined ratio was 87.8% compared to 93.6% in the third quarter of 2024. In the third quarter, the loss ratio decreased 7.7 points to 53.3% compared to 61.0% in the prior period. The decrease was primarily driven by no catastrophe losses in the quarter compared to 8.5 points of catastrophe losses during the same period last year. This was partially offset by an increase in the current year attritional loss ratio, which was 55.4% compared to 53.2% in the prior period. The increase was driven by a change in business mix toward casualty reinsurance and a specific large loss in our Bermuda segment, which I'll cover shortly in my segment comments. We had favorable prior year attritional development of 2.1 points in the quarter, driven by the property and specialty classes. This compares to 0.7 points of favorable development in the third quarter last year. The expense ratio increased 1.9 points to 34.5% compared to 32.6% in the third quarter last year. The increase was mainly driven by higher acquisition expenses related to business mix changes and higher other underwriting expenses, primarily related to an accrual for variable performance-based compensation costs. As always, I'd encourage you to use the full year 2024 attritional loss and expense ratios as an indication for where we expect the current book to perform. Next, I'll go through our third quarter results by reporting segment. Let's start with the International segment, which includes our specialty insurance businesses, Hamilton Global Specialty and Hamilton Select. Year-to-date gross premiums written in 2025 grew to $1.1 billion, up from $1.0 billion, an increase of 14%. This was primarily driven by growth in all classes, meaning our property, specialty and casualty classes. Moving to some quarterly figures. In the third quarter, International had underwriting income of $12 million and a combined ratio of 95.4% compared to underwriting income of $5 million and a combined ratio of 97.6% in the third quarter last year. The improvement in the combined ratio was primarily related to the loss ratio decreasing by 4.7 points due to no catastrophe losses in the quarter, partially offset by the expense ratio. The prior year attritional loss ratio was favorable by 2.2 points. This was driven by favorable development in the property class. The expense ratio increased 2.5 points to 42.3% compared to 39.8% in the third quarter last year. The increase was primarily driven by the other underwriting expense ratio due to an accrual for variable performance-based compensation costs, foreign exchange and a decrease in third-party management fee income. As a reminder, effective July 1, 2025, we ceased managing third-party syndicates for fee income. I'll now turn to the Bermuda segment, which houses Hamilton Re and Hamilton Re U.S., the entities that predominantly write our reinsurance business. Year-to-date gross premiums written in 2025 grew to $1.2 billion, up from $0.9 billion, an increase of 26%. The increase was primarily driven by new and existing business in casualty and property reinsurance classes, including nonrecurring reinstatement premiums related to the California wildfires. In the third quarter of 2025, Bermuda had underwriting income of $52 million and a combined ratio of 80.7% compared to underwriting income of $24 million and a combined ratio of 89.4% in the third quarter last year. The improvement in the combined ratio was primarily related to no catastrophe losses in the quarter, partially offset by an increase in the current year attritional loss ratio and the acquisition expense ratio. The Bermuda current year attritional loss ratio increased 4.6 points to 55.6% in the third quarter compared to 51.0% in the third quarter last year due to a change in business mix, including more casualty reinsurance business and due to one large loss related to the Martinez refinery fire. In the third quarter, the industry loss estimate for this event nearly doubled from the original March estimate, adding 2.8 points to the attritional loss ratio in the third quarter. The Bermuda prior year attritional loss ratio was favorable by 2.1 points. This was primarily driven by favorable development in the specialty and property reinsurance classes. The Bermuda expense ratio increased by 2.0 points to 27.2% compared to 25.2% in the third quarter of 2024. This was driven by an increase in the acquisition cost ratio due to a change in business mix, partially offset by a decrease in the other underwriting expense ratio. Similar to my comment about group ratios, I'd encourage you to use the full year 2024 attritional loss and expense ratios for the segments as a guide for how we expect the current segment books to perform. Now turning to investment income. Total net investment income for the third quarter was $98 million compared to investment income of $83 million in the third quarter of 2024. The fixed income portfolio, short-term investments and cash produced a gain of $43 million for the quarter compared to a gain of $94 million in the third quarter of 2024. As a reminder, this includes the realized and unrealized gains and losses that Hamilton reports through net income as part of our trading investment portfolio. The fixed income portfolio had a return of 1.4% in the quarter or $39 million and a new money yield of 4.2% on investments purchased this quarter. The duration of the portfolio was 3.3 years. The average yield to maturity on this portfolio was 4.1%. The average credit quality of the portfolio remains strong at Aa3. The Two Sigma Hamilton Fund produced a $54 million gain or 2.6% for the third quarter of 2025. The fund had a net return of 13.0% through the first 9 months of 2025. The latest estimate we have for the Two Sigma Hamilton Fund year-to-date performance was 14% through October 31, 2025, or an increase of 1% in October. At this stage, the fund is ahead of achieving our planned target of 10% for the full year. The Two Sigma Hamilton Fund made up about 37% of our total investments, including cash investments at September 30 compared to 39% at December 31, 2024. Now turning to capital management. In 2024, we announced a $150 million share repurchase authorization by the Hamilton Board of Directors. During the third quarter of 2025, we were able to repurchase $40 million of shares. All shares purchased were accretive to shareholders, book value per share, earnings per share and return on equity. The Board has recently authorized an additional $150 million in share repurchases so that in total, we now have $186 million remaining. With that, we're able to continue repurchasing shares and growing the business, all while maintaining our strong capital position even during times of uncertainty. Next, I have some comments on our strong balance sheet. Total assets were $9.2 billion at September 30, 2025, up 18% from $7.8 billion at year-end 2024. Total investments in cash were $5.7 billion at September 30, an increase of 19% from $4.8 billion at year-end 2024. Shareholders' equity for the group was $2.7 billion at the end of the third quarter, which was a 14% increase from year-end 2024. Our book value per share was $27.06 at September 30, 2025, up 18% from year-end 2024. Thank you. And with that, we'll open the call for your questions. Operator: [Operator Instructions] Your first question comes from the line of Hristian Getsov with Wells Fargo. Hristian Getsov: Okay. My first question is on the Bermuda underlying loss ratio. So if I exclude the refinery fire, so it ticked up about 1.8 points year-over-year. And I understand in part that's a little bit driven by mix towards casualty. But I guess as we go into '26 in casualty, just given what they're seeing in terms of rate versus kind of the rest of the book, particularly property, like how should we think about that underlying margin trending as we kind of see that mix shift continue? Craig Howie: This is Craig. We certainly see that the same exact thing that you're seeing is that is a mix of business. That's what's driving that loss pick. So again, because of mix of business, you're going to see that change in the loss ratio. You'll also see the change in the acquisition expense ratio. What I would say to you is it really depends on the continuous change in the mix of business, but we still continue to write a diversified book of business, and we continue to grow property as well as specialty in the same book. So what I would say is continue to look at it in the same realm that you're looking at it on a year-to-date basis for this year, not necessarily on a quarterly basis. Hristian Getsov: Got it. And then in terms of -- can you guys maybe provide a little bit color on changes you're seeing in loss trends, particularly within your casualty insurance and reinsurance portfolio versus prior quarters? And maybe if you could provide some further color on how you're managing those exposures. I mean we understand that line is getting good rate, but it's obviously for a good reason just given what you're seeing with social inflation. But like what's kind of your process in managing those exposures away from just generally keeping limits a little bit lower? Giuseppina Albo: Yes. Why don't I take that? We have seen some growth both in our reinsurance portfolio and also to a lesser extent in our insurance portfolio on the casualty classes. From the reinsurance portfolio, let's remember, we started from a very, very low base of casualty. And although we've had growth, that growth has been in recent years when the rates have improved. We have a very strong feedback loop across pricing -- underwriting, pricing and reserving. And those are the guardrails that we operate in when we are looking to onboard this kind of business. We still feel comfortable that the rate increases that we are seeing in casualty are keeping place with a trend. So -- and that actually same view transcends to our casualty insurance book. If you look just at Hamilton Select, we have a significant growth in casualty insurance in our Select operations. Remember, however, that is a very specific book of hard-to-place niche business. And there, we get to tailor the coverages and set pricing terms. And there, we also see attractive increases in casualty pricing, and that's what makes us comfortable to write this business. Just one note, just to back up from just a moment to remember, we're an underwriting shop. So we have this ability to lean in when the leaning is good and back away when it's less the case. So if I look just across property, when property increased back in the reset, our -- we leaned into property and grew our book on a group basis by 60%. On the casualty side, again, starting from a low base, when casualty pricing started getting better, we leaned into casualty and grew our casualty business from about 2022 onwards by around 80%. However, that was always done in the context of a well-balanced portfolio. So if you look at our total casualty writing today versus 2022, it's more or less the same as a percentage of our portfolio. That's how we manage this business. Operator: Your next question comes from the line of Daniel Cohen with BMO. Daniel Cohen: I think I'll start in the Bermuda casualty growth, just unpacking this number. Can you maybe quantify the larger renewal moving from 2Q to 3Q, so we can get a normalized sense of that impact? And also if there was a meaningful AM Best contribution that you'd like to call out as we think of growth getting more moderate in this line? Giuseppina Albo: Sure. Why don't I start with that one? Maybe just by way of background again, the AM Best upgrade was a gamechanger for this organization, and it came at a very opportune time and increased opportunities for us across several lines of business, including casualty. It was also a very important validation of how far Hamilton has evolved as a company. So that's by way of background on AM Best. I'm going to let Craig to dive in more detail on the numbers here. So Craig, over to you. Craig Howie: Thanks, Pina. We continue to see new and renewal business since the upgrade, and we continue to see top line premium based on our written patterns coming through our financials, some of which is attributable to the rating upgrade from AM Best. As you're aware, a large portion of this business is pro rata casualty reinsurance business. So when you look at that, the way it's booked on a GAAP basis, GAAP accounting basis throughout the year, you can take an example, if we wrote $40 million of business at January 1, you would expect to see $10 million come through each quarter on a pro rata basis. Having said that, we saw about $50 million recorded in the third quarter. We expect to see a similar amount come through again in the fourth quarter. And after that, it would be difficult probably to attribute either any renewal business strictly to the rating upgrade compared to our ongoing client relationships. And then, the other thing that you asked about was specifically the renewal that changed from period to period. We had a renewal that changed from the second quarter renewal to a third quarter renewal, and that was about $20 million of the growth in Bermuda this quarter, again, in the casualty line. Daniel Cohen: And then switching gears to Hamilton Select. I think you said 26% growth there and still healthy submission flows, but that is quite the decel from the first half of '25. Is that just you pulling back from professional lines? Or are rates impacting that step down as well? Giuseppina Albo: Sorry, I'll take that one. That growth of 26% this quarter for Select it involved a 50% growth in casualty, where we're seeing the most opportunity. It involves writing less of some business that we thought was not attractively priced. But that growth, that 26% growth is completely in line with our plans. Daniel Cohen: Okay. And if I could sneak one more in on just the fee income, so we get a better sense of that after the Lloyd's MGA moving out. Is this quarter the right run rate for that number? Or should we be thinking about that going to 0 over time, just in international? Giuseppina Albo: Okay. I'll kick off here, Dan. Maybe just by way of background, and then I'm going to have Craig talk about the modeling part. We derive fee income from our -- the consortia business that we write out of London. Now this is business -- these are business arrangements, where others have recognized our expertise in certain classes and allow us to write on their behalf. In other words, they're leveraging our core competency, which is underwriting, and we're driving fee income from that. The same is the case for our third-party capital operation where we also derive fee income. The third-party syndicate management was part of our 2019 acquisition and the decision to cease managing that third-party syndicates was made because unlike underwriting, it's not a core -- not seen as core to our operations, and that is why we ceased that. But Craig, why don't I pass to you for general how to model fee income? Craig Howie: I think as Pina said, on the international side, Dan, that was your specific question. I think what you should expect going forward is about $2 million per quarter. On the Bermuda side, as you may recall, for our iOS platform, A, [indiscernible] we booked or plan for about $0.5 million per quarter. So for the full group, about $2.5 million per quarter. That's a baseline. That's before any performance-based fees, which are a little bit harder to plan for. So about $2.5 million per quarter for the group. Operator: Your next question comes from the line of Bob Hung with Morgan Stanley. Unknown Analyst: This is Sid on for Bob. Going back to Hamilton Select, you guys mentioned the new Chief Underwriting Officer you guys hired. Can you just give some color on like what are the objectives for the business going forward and how we should think about growth and underwriting profitability there? Giuseppina Albo: Sure, Bob. I'll take that one. We're actually thrilled to have onboarded Mike to our Hamilton Select operations. Many of us have interacted with Mike in, for years, in different capacities, and Craig worked directly with him when he was at Everest. So he's a known quantity to this group. And just as a reminder, Hamilton Select, the operation he's joining, the book there is purely U.S. E&S. We do not write admitted business. And Select's objectives in that class are no different than the objectives of our other underwriting platforms, and they start with producing sustainable underwriting profitability. So in the context of our underwriting strategy, our disciplined underwriting culture and our reserve philosophy, we're confident that Hamilton Select is going to continue to thrive and are, again, thrilled to have Mike on board. Unknown Analyst: And then kind of just looking a little bit more broadly, I was wondering what you guys are seeing in the like MGA market space and any competition there? Any color you can give would be helpful. Giuseppina Albo: Yes. Certainly, as you've seen or heard from others in the market, some of those MGAs are providing increased competition in the U.S. insurance market. Just as a reminder, we only have a limited amount of MGA relationships, and they're predominantly out of our London operations. And these are relationships that we've had for several years, so tried and tested. We do not give away the pen. For example, at Hamilton Select, that is all our own underwriting, but we do see some irresponsible behavior in the market with those players out there. We don't let them hold our pen. Operator: Your next question comes from the line of [ Patrick Marshall ] with Citi. Unknown Analyst: Just a quick question on your disclosure around the decreased duration in your portfolio and how it relates to your increase in casualty? And how should we think about kind of where the property -- where your portfolio will move if your casualty mix goes forward -- increases going forward? Giuseppina Albo: Go ahead, Craig. Craig Howie: Patrick, this is Craig. So first of all, the duration of the overall fixed income portfolio only just -- it basically just ticked down from 3.4 years to 3.3 years. It's really more of a rounding. But I agree with you, as we go longer in the portfolio or business mix change more towards casualty. But what you just heard Pina say is our mix really hasn't changed overall. Our book is still fully diversified and the amount of casualty business we're writing now compared to just 3 years ago is about the same mix in our book. So I really don't see a major change in the overall duration of the entire fixed income portfolio. Unknown Analyst: And then one follow-on. Can you offer any color on the nature of the large losses noted in the press release? Craig Howie: Sure, Patrick. The large loss that we had mentioned in the press release was part of my prepared comments in the call as well. It was related to the Martinez refinery fire. That was a first quarter event. The initial loss estimates of that event were in the $300 million to $800 million range for an industry loss. What we saw in September is that industry loss nearly doubled. And as a result, we revised our estimate in the third quarter for that event. We didn't see any really other -- any significant large losses in the quarter and any other exposure that we had was manageable and included within our attritional loss picks. That was the largest loss. And again, it was about 2.8 points in the Bermuda segment and about 2.2 points on the group. Operator: [Operator Instructions] Your next question comes from the line of Tommy McJoynt from KBW. Thomas Mcjoynt-Griffith: With the rate softening and really heightened competition in property lines and in light of the strong opportunity set that it sounds like you still see in casualty and specialty, would you be surprised if property written premium declined in 2026? Giuseppina Albo: Hi, Tommy, Pina here. I'll take that. So let's start with property cat. We do expect to see, as I mentioned in the call, some more competition on property cat in the upper layers. But let's not forget where we started from, right? Rates went up dramatically since the 2023 reset. Terms, conditions and attachment points also improved. And while we're seeing some downward pressure on the cat rates in recent renewals, certainly, they're nowhere near the increases we achieved since 2023. So the way we look at it is, is that business still producing an attractive risk-adjusted return? And if it is, we will continue to write it. And if we have some opportunity, we might even increase our writing of property cat on select clients. In the insurance space, I think what you're going to see is what I said earlier on the larger accounts, those larger shared and layer accounts on the insurance side, we're expecting to see increased competition because they also enjoy back-to-back increases. So that drew attention. You can probably see us reducing there. But on the property insurance side, we have a couple, as I mentioned, of new initiatives in the U.S. E&S space where we're targeting the smaller to midsized property risks, which are still getting attractively priced, and you can see some growth continuing there. Does that answer your question? Thomas Mcjoynt-Griffith: Yes, that does. And then switching over, looking at the expense ratio and perhaps more specifically the acquisition cost ratio, you attributed the increase year-over-year to the business mix shift as casualty reinsurance has seen outsized growth. Because there is the lag between written and earned, how much more and how many more quarters should we expect the acquisition cost ratio to continue increasing year-over-year? Or is there a terminal acquisition cost ratio that you should get to with the current business mix? Craig Howie: Tommy, this is Craig. What I would say to you is, again, if you look at where we are on a year-to-date basis compared to where we were for a full year last year, you're seeing a slight uptick, again, because of more casualty business, because of more pro rata business that we've been writing this year. But it's not a huge change. So instead of looking at quarter-to-quarter where you might see some lumpiness. Again, if you look at year-to-date numbers compared to the full year last year, you're just going to see a slight uptick on those acquisition expenses, again, because of the mix of business. So it will continue to come in as we write more business. But as Tina just said about property on that previous question, if we continue to write property, that will keep that ratio down as well. Operator: Your next question is a follow-up from Daniel Cohen with BMO. Daniel Cohen: Just one quick one on. Do you have an early estimate of your exposure to the cats quarter-to-date just on Jamaica and maybe yesterday's Louisville plane tragedy? Craig Howie: Daniel, this is Craig. A little too early to talk about the plane tragedy from yesterday. I know it's -- it was a plane crash that crushed into a couple of commercial buildings, but a little too early to know about that loss. As far as Hurricane Melissa goes through the Caribbean, we don't have much exposure on that type of a loss that would go through that environment, although it was a very devastating loss and a lot of loss of lives, the industry loss estimate for property and other things for insurance losses is not that great, and we don't expect to have much exposure there at all. Operator: There are no further questions at this time. I will now turn the call back to Pina Albo for closing remarks. Giuseppina Albo: Well, I just want to thank everybody who took the time to join us today to discuss our excellent results for the quarter, and we look forward to speaking to you again with our year-end results in due course. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Rosa Stensen: Hello, and welcome to Huddly's Q3 Presentation. My name is Rosa Stensen, and with me is Abhi Banik, our CFO. We report a revenue of NOK 45 million for the quarter, NOK 147 million year-to-date. This is reflecting a 50% growth year-on-year. The gross margin in the quarter is 45%. In the quarter, we continued to deliver on our key strategic goal, increasing the strategic partner revenue stream, and we proudly announced a new partnership with our Danish friends, Jabra. Huddly C1, our next-gen AI-driven videobar, started to ship to end customers this quarter. When it comes to the market outlook, despite the strong growth year-to-date, we do see increased market uncertainty, mainly in North America, and this is impacting our channel business. In the quarter, we continued to deliver on our business plan. On the strategic partner side, we both increased revenue and signed Jabra as new strategic partner. On the product side, we started shipping Huddly C1, our next-gen AI-driven videobar. And we continue as well to work with strict cost controls. As we mentioned in our Q2 presentation, we are actively working to increase the strategic partner revenue for Huddly. As part of that, we are very proud of the new partnership with Jabra. Jabra is part of GN Store Nord, a listed company on the Danish Stock Exchange and has a strong global presence. The partnership will have a key focus on enabling the strength of both companies. Whilst Huddly has very strong technical capabilities in large rooms, Jabra enables Huddly products on the Android ecosystem. Further, with Jabra's strong global presence, Jabra is well positioned to support Huddly to expand its footprint, particularly in the APAC region. Our current growth rate is driven by our strategic partner revenue. With our new partners coming on stream as well as more new partnerships in the pipeline, we expect the growth momentum to continue. As part of our second priority in our business plan, we continue to deliver on our product road map, latest with the shipment of our Huddly C1 videobar as well as this week's announcement of the spatial awareness for Crew. We continuously improve our products with software updates. We do this by utilizing the same hardware. For C1, in addition to the improvements already received. This means that as of early 2026, it will become part of the Huddly Crew platform, allowing our customers to extend the videobar with additional Crew multi-camera functionality. In the quarter, we continued the Huddly C1 and Huddly Crew go-to-market roadshow, this, together with Lenovo and Microsoft. In the quarter, we went to multiple locations in the U.S. And in Q4, we will continue the efforts. Here, demonstrated with some of the planned cities in Europe. And nothing makes me more happy than our happy customers. And one of those are British Telecom. British Telecom is a company with 85,000 employees worldwide. They have been part of our customer early field trials and have ordered and installed a large amount of Huddly C1 and Huddly Crew. If you want to see the full user story, go to our web page at huddly.com. Asia Pacific represents approximately 30% of the worldwide market in video conferencing, and Huddly has started to gradually increase its market presence in that region. In Q3 and early Q4, we signed two new distribution agreements for our channel business. We were also present with Barco, both at InfoComm, India and GITEX in Dubai. And we also believe that together with Shure and Jabra, we will increase further our presence in that market. Whereas Huddly in Q3 continues to deliver on its business plan and showing significant growth, there are uncertainties in the market that are out of our control. Year-to-date, 57% of our revenue comes from North America, which faces a general uncertainty that is impacting our channel business. This is partly a result of negatively affected investment sentiment in certain sectors. This is amplified by the government shutdown. This results in delays, for example, in federal purchasing. Similar situation is seen in Canada, a market Huddly has had a good presence in. Canada as well as the U.S. have not approved the federal budgets. And when it comes to the U.S. tariff, specifically, Huddly continues to manage these, and the risk profile remains the same as outlined in the Q2 presentation. North America has historically been a very important market for Huddly, and we are well positioned to continue our expansion there when the market stabilizes. And with that, I will give the word over to Abhi, who will take you through the financial part of this presentation. Abhijit Banik: Thank you very much, Rosa. So I will now, in this part of the presentation, go further down into the financial details of the Q3 '25 presentation. Let me first start off with revenue. Revenue in Q3 was NOK 45 million, which is a 75% increase versus the same quarter last year. This is mainly driven by strong growth in strategic partner sales, as has been already explained in this presentation. We expect that to continue to grow in the coming quarters as we expect gradual ramp-up of revenue and volumes from both new and existing partners, and we have additional partners in the pipeline. Sales to channel in Q3 '25 increased by 8% compared to Q3 '24, while year-to-date growth showed a strong 40% year-on-year increase. If you look at the graph, you can see that there is a decline between Q2 and Q3 2025. And the main reason for that is, number one, due to increased uncertainty in the U.S. market. Number two, we did a stock up of goods to U.S. distributors worth approximately NOK 8 million in Q2. And finally, there is a general seasonality in our business, where typically the third quarter of the year generally has a relative softness during the year. Let me move on to gross margin. Gross margin for the third quarter was 45%, which is up from 43% from previous quarter. On a year-to-date basis, the gross margin was 47%. This is within the business plan range of 45% to 50%, and we expect that to continue going forward in the next few quarters. Looking at the summarized P&L, I already discussed the revenue, which then translates into increased gross profit as well. Gross profit on a year-to-date basis increased by 65% in '25 versus same period 2024. And if you look at the operating expenses, you can see that this is as per our business priorities in the business to have a strict cost control. We have reduced OpEx in Q3. You can see that in this table, there is a slight increase on a year-to-date basis. However, that is related to noncash items, which were affected in the first quarter of the year. So if you take out those effects, it was also a reduction on a year-to-date basis. So this is as a result of the cost saving program that we implemented in the first half of 2025, and we are seeing the results from that. Consequently, both in Q3 and on a year-to-date basis, there is a significant reduction in losses, and we are improving our results. Capitalized R&D in 2025 Q3 was approximately NOK 20 million, which is consistent with historical levels. So we are really investing for the future in this company and our road map, which we are investing in, is what is going to support future revenue growth. We have 56 engineers in the company, approximately 45 of them work with AI, machine learning and software, and this is a very important part of our differentiation strategy. Previous investments in the company have enabled tangible results such as the shipment of the C1 videobar in August in addition to the software upgrades and updates that we were made to the existing product range. We expect investments to continue going forward as we are investing into defending our leading technological position in the market. I'd like now to wrap up this part of the presentation with the cash flow statement. Cash end of September 2025 was approximately NOK 85 million, which is an increase from NOK 52 million at the start of the quarter. Operational cash flow was positive, which is a significant improvement from previous quarters. That is mainly due to increased gross profit, but also change in working capital, which you can see more in details in the cash flow statement in the report. Investments, that was -- what we discussed in the previous slide, was approximately NOK 20 million in the quarter. And if we move into the financing part, we did an equity raise in Q3. We raised NOK 61 million in gross proceeds through a private placement. And we did an additional subsequent offering after Q3, which will then be recognized in the Q4 cash flow statement, and that is representing approximately NOK 7.7 million in additional cash. And that wraps up the financial part of the presentation and the overall presentation for this Q3 '25 quarter announcement, and we will now open up for questions from the audience. Rosa Stensen: Hello, and welcome to the Q&A session. So now together with us is Jon Øyvind. Thank you for joining us. I see we have already received some questions. So we will just dive right into it. First question, so how does your alliance with Jabra contribute to sales? That's a good question. So first of all, Jabra is a Danish company. And with kind of the combined Nordic heritage, we feel like Jabra is more than a sales machine for Huddly. It's a partnership with a very strong roots in kind of the Nordic heritage, both when it comes to the culture, but also the design language of our products and et cetera. So Jabra's relationship with Huddly is a direct distribution. So Huddly will supply Jabra directly with the products that Jabra will take to the market through their go-to-market channels. And we couldn't be more happy than having Jabra as one of our partners as they are very strong globally and are leading in our industry. And there is a question, your cash burn is still high. Do you expect another capital raise going forward? I think this one is, Jon Øyvind, then aimed to you. Jon Øyvind Eriksen: Yes. We see that both the revenue and profitability of the company is improving quarter-on-quarter. And the Board doesn't plan for any new capital raise. Rosa Stensen: And then there is another question that basically asks the same. I will read the question. You can either complement or stay with the same answer. So it is, given the year-to-date burn of approximately -- the cash burn of NOK 91 million, excluding financing and free cash balance of NOK 70.3 million. Is it likely the company will require additional financing before reaching a projected cash flow positive position in '26, especially in light of the 20% -- 21% revenue decline versus last quarter and ongoing market uncertainty in North American market? Jon Øyvind Eriksen: It is true that we see fluctuating revenue from quarter-to-quarter. And there are also reasons for that. Some of them are part of the natural cycle. Some is related to government shutdown in -- and not having the budget approved in Canada. But we still maintain the target that we have set out in the business plan, and the Board doesn't plan for a new capital raise. Rosa Stensen: Then there is a question based on the shutdown in the U.S. How will this affect the Q4 expectations? So this is back to Jon Øyvind a bit the same as you answered just now with regards to -- we see there is a market uncertainty in the U.S. However, as Jon Øyvind said, the Board maintains its previous communication with regards to those expectations. Anything to add to that? Jon Øyvind Eriksen: No, it's -- except from that, it is very difficult to predict how the political solution is going to be in the U.S. market, but we are certain that at some stage, the government situation in U.S. will normalize. Rosa Stensen: And then there's a question about, can you explain how you plan to increase market share in the Asia Pacific region? So I will take this one. So if we go to the second last page of the presentation in the operational part of the presentation, we explained that we have in the quarter, Q3, but also early Q4, signed two new distribution agreements in the region, one particularly in India, where Huddly has not had a direct distribution to before, and the other one in Australia where Huddly had some presence. In addition to that, we are going together with our partners such as Shure, Barco and Jabra who have a strong presence in that market. So we believe that going together with our partners, but also strengthening our channel in that region will start to gradually increase our market presence there. Then there's a question, good to see your increase in sales strategic channel. However, NOK 90 million is small, and progress is slow. Please expand on how you will reach a number that is meaningful for the company. So this goes back to the kind of the main pillars of our business plan as outlined in Page 2 in the presentation. So the key strategic priority for Huddly on increasing the revenue is to attract and sign and activate new strategic partners. And as you see also in the presentation, we have now signed, in a 12-month period, Shure for direct distribution, Barco with a go-to-market agreement and then Jabra, latest in September, for direct distribution. We believe, also with historical numbers from Huddly, that going together with these partners will allow us to increase the revenue and accelerate that increase compared to what we will see normally in the channel business. And then, is Google and Crestron still strategic partners? And that, I can happily say, yes, we still work with Google and Crestron. Which products are gaining traction? How is Huddly Crew sales going? This is this, actually, I'm very happy to say that Huddly Crew has become our flagship product, not only when it comes to, it's unique in the market and latest now, bringing the spatial awareness. Usually, most people don't know exactly what that means, but that means that our cameras now can understand the relation to each other, but also can map the room in 3D, which gives us a lot of information to expand its functionality, but also accuracy in how it works. This is something that the market also has understood, and Huddly Crew is now representing a very meaningful portion of our total balance and absolutely can say is our definite flagship product. Why is the ramp so slow? Any visibility on how to accelerate before you run out of cash again? So as presented previously, we are working actively to increase our strategic partner revenue for Huddly. And throughout the year, that has been ramping up gradually, and we do expect that ramp-up to -- and momentum to continue. Then there is a question about what are your technological competitive advantage compared to other players such as Cisco. Not to kind of go into any other specific competitors, but Huddly Crew has a unique position in the market based on the fact that it's built -- the architecture of Huddly Crew is built from the scratch with AI in mind. So it's an AI-enabled architecture and the same goes with C1. That means that we can provide experiences and solutions on a completely different price point because we utilize way less hardware, for example. And this also gives a lot of flexibility in the installation and makes the installation much quicker and therefore, more affordable, allowing the multi-camera to grow into a mainstream market and not being only reserved for the specific few boardrooms. So we do believe that we have quite a technological competitive advantage still with Crew, and the market is giving us that feedback as well. Then there is a question about, what do you expect from the sales in strategic channel in 6 to 12 months per quarter? Abhi, this is -- one for you. Abhijit Banik: Yes. So we have already communicated our business plan with expectations in this year and next year. And we don't provide a specific number and breakdown, but we can say that we are keeping that communication as we have communicated before. Rosa Stensen: And then I think -- let's see if there are coming any more questions. Yes. Then there is one last question here. Can you explain your product road map from 2026 and onwards? So in 2024, we entered the market with Huddly Crew. And now in 2025, we have started shipping Huddly's first audio-video combined product. Further, we have been enhancing Huddly Crew. As of last -- this week, we announced the spatial awareness of Huddly Crew. Those two products together will, as of start of '26, become part of the same platform. So you can mix and match Huddly Crew and C1, and they will work together seamlessly, allowing people to having a full audio/video multi-camera solution from Huddly. Going forward, we will work towards enabling then the audio and video experience into more scenarios and more rooms. Obviously, everything done on AI and with the new technology of machine learning and how we do that. Okay. Then I thank you guys for all joining us today. And if you have any further questions, you can always reach us at ir@huddly.com. Thank you.
Operator: Thank you for standing by. Welcome to the Xperi Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Sam Levenson from Arbor Advisory Group. Sam, please go ahead. Samuel Levenson: Good afternoon, and thank you for joining us as Xperi reports its third quarter 2025 financial results. With me on today's call are Jon Kirchner, our Chief Executive Officer; and Robert Andersen, Chief Financial Officer. In addition to today's earnings release, there is an earnings presentation on our Investor Relations website at investor.xperi.com. We encourage you to download the presentation and follow along with today's commentary. Before we begin, I would like to provide a few reminders. First, I would like to note that unless otherwise stated, all comparisons are to the same period in the prior year. Second, today's discussion contains forward-looking statements about our anticipated business and financial performance that are predictions, projections or other statements about future events, which are based on management's current expectations and beliefs and therefore, subject to risks, uncertainties and changes in circumstances. For more information on the risks and uncertainties that could cause our actual results to differ materially from what we discuss today, please refer to the Risk Factors and MD&A sections in our SEC filings, including our most recent Form 10-K for the year ended December 31, 2024, and our Form 10-Q for the quarter ended September 30, 2025, to be filed with the SEC. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after this call. Third, we refer to certain non-GAAP financial measures, which are detailed in the earnings release and accompanied by reconciliations to their most directly comparable GAAP measures, which can be found in the Investor Relations section of our website. And last, a replay of this conference call will be available on our website shortly after the conclusion of this call. Now I'll turn the call over to Xperi's CEO, Jon Kirchner. Jon Kirchner: Thank you, Sam, and thank you, everyone, for joining us on our third quarter 2025 earnings call. For those new to our story, we're still learning about our business, I'll start this call with a brief overview of the company and our long-term goals. Xperi is a global software and services company that delivers products through our well-known brands, including TiVo, DTS and HD Radio. Our established and profitable core businesses, which include HD Radio, the digital radio standard in the United States, Pay TV program guides and audio licensing solutions in home and automotive have enabled us to build a strategic, connected and synergistic platform for media monetization. We believe media monetization represents a large and attractive market opportunity. And after investment over the past several years, our growth strategies as an independent media platform are reaching an inflection point. To put that in perspective, it's important to recognize the progress we've made against the ambitious strategic goals we outlined a few years ago. Today, we have either accomplished or are on a path to realize each of our strategic goals, which collectively represent a pivot for our business and creates a platform that has significant potential to grow and create long-term value. Now let me provide an overview of the progress we made during the quarter against this year's goals, progress that continues to give us confidence that we are reaching a key inflection point as a business. For media platform footprint, our most critical growth area, we are extremely pleased with the ongoing partner rollout of our TiVo One CTV advertising platform into the U.S. and European markets. We achieved 30% sequential growth to finish with 4.8 million monthly active users at quarter end. The continued growth of our footprint is instrumental for us to reach larger scale in the U.S. and the larger European countries as we work to expand monetization of the installed base. We also continue to engage new industry partners to help monetize our growing TiVo One user base. In the connected car market, our platform footprint also continued to grow, reaching over 13 million vehicles installed with AutoStage at quarter end. Importantly, as we have now built meaningful scale, we have initiated collaboration with leading audio media companies to monetize this unique and highly valuable footprint. In our Pay TV business, our video over broadband subscriber count grew 32% year-over-year to reach 3.2 million subscriber households. We signed important renewals with customers during the quarter that validate the market commitment to our video over broadband technologies and services. Turning to our summary financial results for the quarter. We recorded consolidated revenue of $112 million. As expected, revenue was lower than the prior year period, which had included a large minimum guarantee arrangement with Panasonic in our Pay TV business. In the consumer electronics and connected car markets, we achieved year-over-year growth as planned. Our non-GAAP adjusted operating expenses decreased approximately 20% as compared to the prior year. The decrease was due primarily to our continued focus on cost transformation and from the divestiture of the Perceive business in October of last year. Our focus on cost transformation, investment alignment and improving profitability and cash flow generation has been an ongoing effort at the company. Concurrently with today's earnings release, we announced a workforce reduction of 250 employees spanning the entire business. For the third quarter, we posted $0.28 of non-GAAP earnings per share, achieved positive operating cash flow of $8 million and recorded our second consecutive quarter of positive free cash flow at $2 million. Turning now to the Media Platform business. I noted earlier that we have reached 4.8 million monthly active users on the TiVo One platform, a key indicator for our business performance and one that continued to increase over the first month of the fourth quarter. Notably, more than 75% of this footprint is located in the U.S. and the 5 largest countries in Europe. Consumer and retailer feedback on TVs with the TiVo OS operating system continues to be very positive, and TiVo's powered by TiVo are available at a range of sizes and price points. For example, a number of recent retailer promotions in the U.K. have highlighted aggressive low pricing for TVs that feature TiVo OS, which we expect will further expand our footprint in that market. Also, in addition to Sharp, a second brand partner is in production and expected to deliver TVs powered by TiVo to certain U.S. retailers before year-end. We expect U.S. distribution of smart TVs powered by TiVo to scale next year and represent national coverage by the second half of 2026. We are also pleased to announce our 10th TiVo OS TV partnership with the signing of a European brand for a leading Asia-based original device manufacturer. This further validates the strong OEM interest in our cost-effective built-for TV independent platform across a range of partners. We believe large OEMs without their own operating system, leading retail house brands and ODM producers all see unique value in being able to brand the experience, retain their first-party engagement data and participate in long-term monetization. Given the significant progress we've made in establishing footprint for our TiVo One advertising platform across many brands, we believe now would be an appropriate time to start reporting another key performance indicator, average revenue per user for TiVo One or ARPU. Our definition for ARPU is consistent with industry practice, and we calculate it by dividing the trailing 4 quarters of monetization revenue within the Media Platform business by the average number of TiVo One monthly active users during that same period. Our monetization revenue includes all advertising and data monetization revenue from the TiVo One platform and from other parts of our media platform business. Our calculated ARPU for TiVo One at the end of the quarter was $8.75, which is approaching the $10 goal we are working toward as we exit 2025 and a metric that over time, we expect to continue to grow to north of $20. ARPU growth is not expected to be linear as it is impacted by not only monetization revenue, but changes in our underlying footprint and in what quarters more unit growth comes online. To help further our goal of growing ARPU for TiVo One in the periods ahead, we recently signed multiple monetization partnerships, including agreements with Titan ads, a CTV industry leader across key EU markets; Kargo, a leading CTV ad reseller in the United States; and comScore, a U.S.-based media measurement leader. Moving to Connected Car. We continue to grow our footprint for DTS AutoStage and had more than 13 million vehicles using this unique platform at quarter end, the vast majority of which are in North America. While this initial footprint is focused primarily on audio and data solutions, we also secured 2 new video-based AutoStage OEM programs in the quarter, one in Europe and one in Asia. Over the past 2 weeks, we announced and launched an updated version of the DTS AutoStage broadcaster portal, the world's first global in-car radio audience measurement platform. This gives radio broadcasters insights into listening patterns, allows stations to fine-tune programming in near real time and delivers advertisers accurate measurement of the audience engagement across 250 designated market areas. This level of measurement has traditionally only been available on digital streaming platforms and enables radio stations to deliver higher value to advertisers. The technology and scale of the platform has been years in development. We have now initiated commercial discussions around measurement and data licensing with leading broadcasters and media companies to very strong interest across the industry. Separately, as AutoStage has reached significant scale, we also initiated collaboration with leading audio media companies in the U.S. and U.K. to launch targeted advertising trials on the platform. We expect these ultimate partnerships will form the basis of additional revenue streams for advertising and data. In terms of HD Radio expansion, several new radio stations went on the air with HD Radio digital broadcasting. New vehicle models were launched by companies such as Audi, Hyundai, Tesla, Mercedes-Benz and Lexus during the quarter. Notably, we also signed a significant multiyear HD Radio contract with a large Asia-based Tier 1 supplier, which is expected to help HD Radio continue to grow with Japanese car brands. Moving to our Pay TV business. In the third quarter, IPTV subscribers increased 32% year-over-year, reaching 3.2 million households. Revenue was up 18% year-over-year from a mix of subscriber growth in the U.S. and Latin America. We renewed the agreement with NCTC, the National Content and Technology Cooperative, covering over 70 operators in the U.S. This agreement guarantees IPTV subscriber commitments for 4 more years and encourages operators to launch and scale broadband TV. During the quarter, we continued to see strong interest from video over broadband operators to extend their video offerings with new, more cost-effective OTT video service bundles. As a result, by quarter end, over 40 operators had committed to our TiVo broadband product and over 100,000 households had activated. We secured a multiyear renewal with Mitchell Seaforth Cable TV, or MSC, a key partnership that impacts multiple operators in Canada and which is expected to drive our continued subscriber growth there. Lastly, at the beginning of October, we exited the DVR hardware business under the TiVo brand, closing one innovative and industry-changing chapter in the company's history. The TiVo brand will continue to empower consumers to find, watch and enjoy the content they love on innovative video over broadband and smart TV solutions. Let me next cover highlights in our consumer electronics business. During the quarter, we renewed a multiyear contract with Vestel to deploy DTS audio solutions across its TV brands. Vestel is the largest television manufacturer in Europe and an important customer and partner to Xperi given their volumes across many brands. In our IMAX Enhanced initiative, a partnership with IMAX that brings the signature IMAX experience into the living room, we expanded our contract with Sony Pictures to release hundreds of additional titles in the IMAX Enhanced format, coupled with DTS:X immersive audio. These titles will be available for direct distribution through free ad-supporting streaming television. We believe providing free access to the IMAX Enhanced experience offers unique value for consumers and will help our program licensing partners further differentiate their IMAX Enhanced products. We also expanded the IMAX Enhanced program in the home projector category through new agreements with Optoma and Epson. To wrap up what we've discussed today, our strategic progress is evident against the growth goals we set for the year. Within Media platform, we expect to finish the year above 5 million monthly active users on our TiVo One platform. Further, we've achieved our goal of signing 2 additional partners to reach a total of 10 TiVo OS partners. The ARPU that we announced today of $8.75 brings us closer to our year-end goal of $10. And importantly, we've made progress in securing advertising partnerships that we expect will enable us to monetize our expanding and valuable footprint. For Pay TV, we've had considerable success in activating TiVo One through updates in North America on video over broadband devices. This effort helps us build scale in the U.S. market to further our monetization efforts. We also achieved our goal of over 3 million subscriber households in our IPTV footprint. Within Connected Car, we've surpassed 13 million vehicles with AutoStage and expect this large and unique footprint to continue growing as new cars enter the market. Also, we've started collaborations with leading audio media companies in the U.S. and the U.K. to launch targeted advertising trials on the AutoStage platform. In summary, we're confident this strategic progress sets us up for long-term growth, improved profitability and increased cash flow. Let me now turn the call over to Robert to discuss our financial results. Robert? Robert Andersen: Thanks, Jon. I will start by reviewing the revenue results for the quarter. When excluding the impact of the Perceive divestiture, overall revenue was lower by $20 million compared to last year as expected due to a large multiyear minimum guarantee agreement with Panasonic recorded in the prior year period. Looking at each of our primary markets, Pay TV was lower than last year by $32 million or 39% due primarily to last year's Panasonic agreement. Excluding all minimum guarantee agreements from the prior year period, Pay TV would have decreased on a percentage basis in the high single digits, consistent with the overall market. For IPTV, revenue grew approximately $4 million or 18% as subscribers continue to grow at a brisk pace, particularly in Latin America. For the consumer electronics market, excluding the impact of the Perceive divestiture, revenue grew by $3 million or 20% due to a higher level of new agreements this year, along with higher revenue on a per unit basis from audio technologies and game consoles. In Connected Car, revenue was up by $9 million or 36% due to a higher level of long-term arrangements in this year's number, including the significant Asia-based program that Jon mentioned earlier. Revenue in media platform was approximately flat on a year-over-year basis. Turning to the income statement. Our year-over-year revenue increased by approximately $2 million, driven by higher costs related to long-term arrangements recorded in the quarter. Non-GAAP adjusted operating expense decreased by $16 million or approximately 20% primarily due to reduced personnel expense as a result of our ongoing business transformation efforts and also from last year's divestiture of Perceive at the beginning of the fourth quarter. Our adjusted EBITDA was $23 million, a 21% adjusted EBITDA margin, down from last year's $31 million as our expense decrease was more than offset by the lower revenue year-over-year. Our non-GAAP earnings per share was $0.28 compared to the $0.51 we posted in the third quarter last year. From a balance sheet perspective, we finished the quarter with $97 million of cash and cash equivalents, up $2 million from last quarter due to the positive free cash flow of $2 million generated in the quarter. Notably, operating cash flow was approximately $8 million in the quarter, an increase of over $12 million from the same quarter last year due primarily to the absence this year of transaction costs related to the Perceive divestiture and other restructuring costs that occurred last year. Turning now to our financial outlook. I'd like to cover 2 topics that are related to our outlook. First, minimum guarantee arrangements with customers; and second, the workforce reduction that we announced today. Beginning with minimum guarantee arrangements, which, for simplicity, I'll refer to as MGs. We enter into MGs with our customers to lock in certainty of value, ensure usage of the technology over multiple years and product cycles and to lower the company's service costs. As discussed on previous calls, the accounting standard for MGs creates difficult revenue comparisons on a quarterly basis since revenue is required to be recognized when the agreement is signed. The amount of revenue is generally recorded as an unbilled receivable on the balance sheet and cash is collected over the term of the agreement. Arrangements average 3 years in length and cash is received when customers are billed quarterly over the duration. We have entered into MGs over many years for our audio technologies within consumer electronics and have more recently seen customer interest in MGs in Pay TV and Connected Car as they offer customers benefits in product planning, supply chain management and pricing. As a percentage of revenue, MGs comprised just over 20% of total revenue in 2024 and are expected to be in the low 20% range for 2025. Importantly, these MGs are term-based arrangements that are typically renewed when the contract expires. For example, over the past 2 years, approximately 90% of the annualized dollar value of expiring contracts has been a -- MG contracts has been renewed. As such, we consider MG contracts to be ordinary course of business and reoccurring revenue. While MGs may cause comparability issues from one quarter to the next, we believe the locking in of key customers, revenue and predictable cash flows, all with a high probability of renewal has significant strategic value for our business. Over the next 2 years, as our business continues to move toward greater monetization and advertising revenue, we expect MGs to decrease as a percentage of overall revenue. On the second topic, we announced concurrently with today's release that we are reducing our workforce by approximately 250 people across the company. This action will impact all business and functional areas and represents approximately 15% of our workforce. We view this as an important step to improve profitability and cash flow generation while enabling continued investment in our primary growth areas. We expect to incur a onetime expense of between $16 million to $18 million of restructuring and related charges, primarily for employee severance and related costs and substantially all of which will be completed by the end of the first half of 2026. We expect that these reductions once completed, will generate savings of $30 million to $35 million on an annualized basis. These expense reductions are intended to help offset an expected revenue mix shift as our media platform expands in 2026, which we expect will initially have higher cost of sales than other parts of our business. Turning now to our outlook for 2025. We are reiterating our annual revenue guidance range of $440 million to $460 million and our adjusted EBITDA margin of 15% to 17%. While we expect to incur certain cash charges associated with the restructuring of our workforce, we also expect some cash savings in the quarter as employees depart. As such, we are not changing our outlook for operating cash flow, which is still expected to be neutral, plus or minus $10 million. Looking ahead, while we are not providing 2026 guidance at this point, our preliminary view is broadly consistent with consensus estimates for next year. We plan to share a more formal outlook for 2026 when we report our fourth quarter results. That concludes our prepared remarks. Let's now open up the call for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Matthew Galinko with Maxim Group. Matthew Galinko: Can you maybe touch on the pieces that drive the initially lower gross margin in the media platform business that scales. And sort of how long do you expect to kind of operate at a lower margin before you reach kind of your terminal or a mature margin? Jon Kirchner: Well, I think there's a couple of things going on. There is a semi-fixed cost of operating a platform as you start to grow that business. And so that will hit things harder initially. But as you build scale, your marginal advertising dollars will obviously come through at higher margin. There are also various deals that we have done pretty customarily that help us ensure there's plenty of content on the platform and whatnot and other market, what I'll call market incentives that as revenue starts to emerge within that business, some of those costs will be recognized. So I think it's elements like that, but we have a very strong belief that over time, as you certainly build significantly more revenue scale that you should -- you will see margin acceleration in that business. Matthew Galinko: Got it. And I guess as a follow-up, as you begin to deliver targeted ads to automotive, do you expect a similar kind of individual fixed cost basis that you need to clear before contributing at a higher margin level? Or is that kind of all amortized through the same fixed costs as you do kind of on the traditional side? Jon Kirchner: I mean some of -- I would say it's more of the latter. It's kind of part and parcel to the platform we've been working on for some time. And I think the way to think about the opportunity there is that we are unlocking a level of measurement that currently does not exist in radio broadcast. And the interest around being able to run targeting and measurement in that space is very high. It's obviously a sizable business and has been for a long time. But what we've been able to do now is we've finished some of the platform development work, and we've also seen the scale get to the point where we can offer, I think, a very compelling solution to various partners, whether it be for data or for advertising, I think we are -- and this was part of the -- I think we're turning the corner into a really interesting next chapter as we look ahead over the next 12 to 24 months. And this is something that we've been working towards for some time, part of the broader vision, but it is great to see it coming together. Operator: And the next question comes from the line of Steve Frankel with Rosenblatt. Steven Frankel: Jon, congratulations on the progress and starting to scale the business. And maybe help me with a couple of numbers for starters, I appreciate the TiVo MAU progress, but maybe tell us where that was last year in the third and fourth quarters so we can gauge it going forward. Jon Kirchner: That's a good question. I don't have that exact number off the top of my head. Is your question from a geographic standpoint, Steve, or total MAUs. Steven Frankel: Total MAUs. Jon Kirchner: Much, much smaller. It has grown significantly. So in the low millions. Robert Andersen: Very low millions. Steven Frankel: And what was -- you know what ARPU was last quarter. So the $875 million compares to what was the most recent data point that you gave out on that. Robert Andersen: It's not one we have at our fingertips here, but I think it's fair to say that it would be probably pretty similar number. It just -- this happens when you do a 12-month look back when you're calculating the average revenue per user and your denominator actually ends up being pretty small. So we're looking at all of our monetization revenue as a business from both TiVo One and from other parts of our business. Jon Kirchner: And I think the expectation, Steve, is that as you start to see more monetization happening, particularly as you look into '26 and beyond, you'll start to see that number move northward. Although, as we said, it won't necessarily be linear because there's 2 things going on in that calculation, the speed or the speed at which stuff is coming online in any given quarter relative to various monetization-related deals you may be doing in any particular given quarter. Steven Frankel: Okay. Let me take a different tack then. TiVo One is scaling up nicely. What is the critical mass you need to have meaningful ad revenue generated on that platform? Are we halfway there? Jon Kirchner: Let me kind of answer, I think, the bigger question, and then I'll maybe come back to another one. The answer is we expect to see material progress on the platform we have and based on the visibility that we have into '26 footprint growth, we expect that to occur in '26. So we feel very good about that. The question of how much do you need to have, generally speaking, scale is important to advertisers and the scale number is kind of different based on markets. So it's different for the U.K. than it is for Germany or the U.S. for that matter. But that -- but one of the things that we are doing very proactively to address the fact that in places where scale may not fully exist immediately or even in the near term where people, let's call it, some advertisers might ideally want it, that is pursuing partnerships where people can bring other footprint in conjunction with our inventory and successfully sell it. And I think, as we've said, we've announced a number of partnerships that I think do 2 things. It helps provide some of that scale, obviously, helps get our inventory into various selling pipelines without having to take lots of extra time to build out those pipelines as well from an ad sales perspective. But I think more than anything, it speaks to the fact that there is real interest in the industry in our inventory and footprint. And as these partners who obviously deal in this space and have for some time are keen to engage with us to enter those partnerships and take it forward in conjunction with us. So we're not outsourcing everything we're doing on the platform. It's we're finding strategic partners in different ways and places so that we can augment and accelerate the revenue growth efforts. Steven Frankel: Okay. And then it seems very exciting that you're making progress with AutoStage and early discussions around monetizing that. Do you think that revenue becomes material kind of exiting 2026? Or we ought to think about 2027 when that platform is a monetization machine. Jon Kirchner: I think the trial, Steve, will play out through '26, and I certainly expect to see revenue off the platform in '26, but I think it's going to be more material in '27. Operator: And the next question comes from the line of Hamed Khorsand with BWS Financial. Hamed Khorsand: Could you just talk a little bit more about these minimum guarantees and how it's becoming -- you're saying it's going to be more than 20% of 2025 revenue. Is that because of the competitive necessity that you have to provide such deals? Jon Kirchner: I think there's multiple things going on, Hamed, and I think Robert touched on some of them in the script. You've got partners, in many cases, interested in trying to have very clear kind of windows on how they think about what their -- what technology they're including in their platforms. They obviously manage their supply chains also, in some cases, looking for greater certainty and not having to deal with potential renegotiations. And on the flip side, we are in a similar place where we look out, and there's certainly some uncertainty in the market in these spaces. And to the extent that we can lock in our technology into various platforms for longer periods of time, lowers our service cost, gives us greater predictability. And I think the key point about them is that they're not one and done. They're just -- it's kind of -- it's a slightly different, more committed structure to our technology and our solutions -- the only thing that's different about it is the accounting standards require you to recognize the revenue a little bit differently than you would on a pure as-you-go type licensing reporting basis. So I think there's clear benefits on both sides and obviously, visibility on both sides being one of the key ones. Hamed Khorsand: Was minimum guarantee a reason why the Connected Car revenue jumped this quarter? Robert Andersen: Yes. We had a higher level of minimum guarantees this quarter than we had last year. Hamed Khorsand: Okay. And my last question is, when would you see platform revenue stabilize? It seems like it's quite volatile quarter-over-quarter. Robert Andersen: Can you define what you mean by platform? Hamed Khorsand: Well, the media platform, sorry. The media revenue, yes. Jon Kirchner: Yes, I think as you start to see meaningful growth in '26, you'll see less volatility, which has to do with some of the existing, what I'll call, underlying parts of that number. So it will take on more stability over time as the number grows. Robert Andersen: I think if I can add on there, given that we recognize our advertising and as we synonymously call it, monetization in media platform for the TiVo One growth that -- we expect that to be a grower next year and going forward. Operator: And we have no further questions at this time. I would like to turn it back to Jon Kirchner for closing remarks. Jon Kirchner: Thanks, operator. We're pleased with the meaningful progress we've made in achieving nearly all of our 2025 strategic goals ahead of schedule. I want to thank the entire Xperi team for their continued focus and execution as we work to deliver long-term value for our shareholders. We look forward to sharing further updates on our year-end call. Thanks, everyone, for joining us today. Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Consensus Q3 2025 Earnings Call. My name is Paul, and I will be the operator assisting you today. [Operator Instructions] On this call from Consensus will be Scott Turicchi, CEO; Jim Malone, CFO; Johnny Hecker, CRO and Executive Vice President of Operations; and Adam Varon, Senior Vice President of Finance. I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus. Thank you. You may begin. Adam Varon: Good afternoon, and welcome to the Consensus investor call to discuss our Q3 2025 financial results, other key information and our Q4 2025 quarterly guidance. Joining me today are Scott Turicchi, CEO; Johnny Hecker, CRO and EVP of Operations; and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an update on operational progress since our Q2 2025 investor call, then Jim will provide Q3 2025 financial results and our Q4 2025 guidance range. After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you on the procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to our forward-looking statements and risk factors on Slide 2 of our investor presentation. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would cause actual results to materially differ from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our regulatory filings, including our annual 10-K and quarterly 10-Q SEC filings. Now let me turn the call over to Scott for his opening remarks. R. Turicchi: Thank you, Adam. We had another solid quarter in Q3 with a slight increase in revenue over Q3 2024. Our corporate channel continued to lead the way with another 6% plus growth quarter despite there being a difficult comparable presented by Q3 2024. This was led once again by record usage from our customers and a record quarterly amount of net adds from our eFax Protect service. In addition, the VA also hit record revenue for the quarter. SoHo revenue was in line with our expectations and showed an improvement in its rate of decline from Q2 2025. Adjusted EBITDA was slightly ahead of our expectations and generated a 52.8% adjusted EBITDA margin. In the quarter, we added key personnel that we outlined in our original guidance in February, and we expect to continue to hire in Q4. As a result, due to these hires and seasonal cash costs associated with the year-end audit, we would expect a lower adjusted EBITDA margin in Q4 than we experienced in Q3. Free cash flow in the quarter was an exceptional amount of $44.4 million, up 32% from $33.6 million in Q3 of 2024. This was due in large part to the adjusted EBITDA conversion to free cash flow, coupled with an outstanding rate of collections, especially in our corporate channel, which has driven our total DSOs down to 25 days for the company as a whole. As a reminder, we pay our interest on the bond semiannually in Q4. And as a result, we do not expect the quarter to generate much, if any, free cash flow. However, based on our nine-month free cash flow, we would expect the free cash flow for the year to be in excess of $95 million, which is ahead of our original expectations. On October 15, we drew approximately $200 million of our credit facility and retired a like amount of the 6% notes. We have issued a call notice for the remaining $34 million, which will be funded with a further draw of $20 million from the credit facility and $14 million from our cash balances. This will reduce our total indebtedness from the original $805 million to $569 million and will put us very close to our target of 3x gross debt to adjusted EBITDA. In addition, the interest rate on the new debt will be 5.65% or 35 basis points below the cost of the notes that we are retiring. We will continue to look for opportunistic repurchases of both our debt and equity. I will now turn the call over to Johnny to provide more operational details. Johnny Hecker: Thank you, Scott, and hello, everyone. During my remarks, I will focus on our key performance indicators, such as revenue and customer metrics, and we'll discuss the go-to-market strategies for our corporate and SoHo business channels. I will also provide operational updates and share several key highlights from the quarter. Our corporate channel continues to demonstrate strong execution and sustained positive momentum. In Q3 2025, revenue reached a record $56.3 million, a 6.1% increase over $53.1 million in Q3 of 2024 and a sequential increase from the $55.3 million in revenue we reported in Q2 2025. As we noted last quarter, Q3 2024 was a particularly strong comparable, which makes this continued 6% plus year-over-year growth even more encouraging. This growth is driven by the sustained expansion and increased usage within our upper enterprise accounts and the continued momentum in our public sector business, complemented by stable growth in advanced products and strong performance in our corporate e-commerce channels. This reaffirms our corporate go-to-market strategy and lays the foundation for our future go-to-market, which I will address later in my remarks. I am pleased to announce that our trailing 12-month revenue retention rate stands at 101.9%. This is stable from 102% in the previous quarter, again, confidently meeting our greater than 100% target, up from 99.8% in Q3 2024. Our corporate customer base expanded to a new record of approximately 65,000 at the close of Q3. This represents an increase of over 12% from 58,000 in Q3 of last year and a sequential increase from approximately 63,000 at the close of Q2. The primary driver for this growth remains our eFax Protect offering, which expanded by approximately 6,700 new customers this quarter, contributing to our SMB cohort. Corporate ARPA was $293 for the quarter compared to $301 in the prior quarter and $310 in Q3 of last year. This expected trend is a direct result of two counterbalancing factors: the successful expansion of our smaller SMB cohort, which includes our eFax Protect product at an ARPA of around $50, balanced by strong high-value performance from our large enterprise clients. Importantly, we are proud to report strong sustained growth in our corporate ARPA net of eFax Protect for several quarters now, which demonstrates the underlying strength and growing value of our core enterprise customer base. Our corporate performance this quarter continued to trend from recent quarters, demonstrating sustained success at all levels of the market. We're effectively pairing robust revenue growth at high retention rates from our enterprise clients with steady customer base expansion in the SMB cohort. This balanced approach to growth proves our ability to execute across the entire customer continuum and provide significant stability to our business, which is evident by a continued expansion on two key metrics in our eFax network: the number of participants or endpoints and the volume of data we process across the network. Turning to the public sector, I want to make a clear distinction. Our main revenue driver in this vertical, the VA, saw its rollout and usage remain unphased by the government shutdown. The VA continues to set new all-time high records for usage, a clear proof of deepening adoption that has persisted even during the shutdown. Separately, since achieving our official FedRAMP High impact certification, we have built a solid pipeline among other government agencies and nongovernment organizations. We're successfully winning and onboarding new customers onto the ECFax product. While the temporary government shutdown has led to some delayed decision-making, we see this as a short-term timing impact on the conversion pace, and it does not affect our positive outlook for this new pipeline. Moving on to our SoHo business. We recorded Q3 revenue of $31.5 million, representing a strategic planned year-over-year decrease of 9.2% from $34.7 million in Q3 2024. This is a slight sequential decrease from $32.4 million in Q2 2025, reflecting our continued strategic focus on optimizing profitability and maximizing the efficiency of our advertising investments in this channel. The global SoHo account base declined from approximately 682,000 in the prior quarter to approximately 661,000 during Q3. SoHo ARPA for Q3 2025 was $15.56 compared to $15.62 in Q2 2025 and $15.38 in Q3 of last year. Our SoHo cancellation rate in Q3 2025 was 3.71%, down from 3.84% in the previous quarter. As I explained in our Q2 call, our SoHo customer acquisition strategy led to an unusual spike in ads last quarter, which temporarily influenced the cancel rate in both Q2 and Q3. Since then, our customer acquisition has reverted to a more normal pattern. Yet like all businesses that rely on digital marketing, we are actively navigating the recent changes in the search environment. This has created a near-term headwind contributing to a slight decline in organic sign-ups in Q3, which we believe will continue in Q4. We are already executing a multistep plan to recover from these impacts. While we continue to manage profitability with discipline, we are determined to return our paid ads numbers to the mid-50s, which we expect several months to fully realize. One key factor in this plan is to emphasize one of our greatest assets, our trademarked and redesigned eFax brand. This strategic focus on eFax follows a year-long intensive brand study. From day 1, more than 30 years ago, eFax was a pioneer and leader in digital transformation, and we have invested heavily in this brand over decades. With the brand refresh, we now better leverage that established market trust proven by millions of visitors to our web assets every month to unify our advanced solutions. It allows us to bring our entire go-to-market portfolio from cloud fax to interoperability and AI under one familiar name, clarifying our evolution from a simple fax service to a comprehensive platform for secure data exchange and digital transformation. Consensus Cloud Solutions, which has also received a brand refresh, will remain the company's NASDAQ-listed brand for investor continuity and as a universal home for employees. To summarize, we are very pleased with the quarter's performance and remain highly confident in our outlook. We will continue on our go-to-market path, which has proven to be very effective. Health care remains at the center of our strategy, complemented by strong execution on our automated e-commerce channel for the down market. We are expanding our efforts in the corporate SMB and upper enterprise market, which has extended into the public sector. We expect our SoHo business to continue on its trajectory with a clear focus on profitability. Before handing the call over, I want to express my sincere thanks to our employees for their hard work and dedication this past quarter. My gratitude also extends to our customers and partners for their ongoing trust and collaboration. We have delivered another excellent quarter, and we are focused on building on this momentum. With that, I'm handing over to our CFO, Jim Malone, who will now provide a detailed update on our financial performance and outlook. Jim? James Malone: Thank you, Johnny, and good afternoon, everyone. In our press release and on this call today, we are discussing Q3 2025 results and guidance for Q4 2025. We expect to file our 10-Q by close of business today. Moving to corporate. Beginning with our corporate business results, Q3 2025 was another strong quarter for corporate with record revenue of $56.3 million, an increase of $3.2 million or 6.1% versus the prior year quarter. As Johnny just mentioned, Q3 2024 was a particularly strong comparable quarter, which makes the continued 6% plus corporate growth even more meaningful. Our record of Q3 2025 corporate revenue delivered a trailing 12-month revenue retention rate of approximately 102%, up from 99.8% from the prior comparable period and stable sequentially. Our corporate customer base expanded to approximately 65,000 in Q3 2025 versus 63,000 in Q2 2025 and 58,000 in the prior comparable period. Corporate ARPA was $293 versus $301 in Q2 2025 and $310 in Q3 2024. This trend is in line with our expectations and an expanding customer base in the lower SMB cohort, primarily due to record eFax Protect paid ads, which generated an approximate $50 ARPA. As Johnny stated, corporate ARPA net of eFax Protect has experienced sustained growth for several quarters, demonstrating strong performance from our core enterprise customer base. Moving to SoHo. Q3 2025 revenue of $31.5 million compared to $34.7 million, representing a strategic plan decline of $3.2 million or 9.2% from the prior comparable period and a slowing decline from the Q2 2025 comparable year-over-year period of 9.4% Q3 2025 ARPA of $15.56 had an improvement from the prior year comparable period of $0.18 and was in line sequentially. The total cancel rate improved sequentially to 3.71% from 3.84% in Q2 2025. Moving to consolidated results. $87.8 million. Revenue was consistent with the prior year comparable period. Adjusted EBITDA of $46.4 million is a decrease of $0.6 million or 1.2% versus Q3 2024, primarily driven by planned headcount additions. We delivered a healthy 52.8% adjusted EBITDA margin or approximately 60 basis points favorable to the midpoint of our Q3 2025 guidance range. Q3 2025 adjusted net income of $26.6 million is a decrease of $0.2 million or 0.8% versus Q3 2024, primarily driven by lower interest expense and depreciation and amortization, offset in part by lower adjusted EBITDA and higher income tax. Adjusted EPS of $1.38 was unchanged from the prior year comparable period. Q3 2025 non-GAAP tax rate and share count was 22.3% and 19.3 million shares. Capital allocation, free cash flow. Q3 2025 free cash flow was $44.4 million, an increase of approximately $11 million or 32% versus the prior comparable period, driven primarily by operational performance. Q3 2025 CapEx of $7.2 million, a decrease of $0.8 million or approximately 10% versus the prior year. Cash and cash equivalents. We ended Q3 2025 with cash of approximately $98 million, which is sufficient to fund our operations and repurchases of equity and debt. 6% notes debt retirement. As noted in our 8-K filed on July 14, 2025, we executed a $225 million 3-bank club deal, including standard covenants to retire our 6% notes to October 2026. The loan consists of $150 million delayed draw term loan plus a $75 million revolving credit facility. The interest rate is SOFR plus an applicable margin based on total net leverage ratio. Subsequent to the quarter end, on October 15, 2025, we called $200 million of our 6% notes at par, leaving $34 million outstanding. We utilized our $150 million delayed draw term loan plus $50 million on the revolver. We didn't retire the entire $234 million as our secured lien capacity under our bond indentures was $200 million based upon our June 30, 2025 cash balance. The borrowing cost will be approximately 10 to 35 basis points lower than our current 6% rate. We have notified our trustee, and we will call the remaining balance of the 6% notes, $34 million on or about November 10, with a combination of $14 million balance sheet cash and $20 million of the remaining revolver. Equity repurchases. In February 2025, the Board approved an extension to the previously approved program for another 3 years and up to $67 million. In Q3 2025, we repurchased 121,000 shares for $2.7 million, bringing the total equity purchases to date of approximately 1.8 million shares for approximately $47 million. There were no bond repurchases in Q3 2025. Moving to guidance. We are providing Q4 2025 guidance as follows: revenues between $84.9 million and $88.9 million with $86.9 million at the midpoint. Adjusted EBITDA between $43.1 million and $46 million with $44.5 million at the midpoint. Adjusted EPS of $1.27 to $1.37 with $1.32 at the midpoint. Estimated Q4 2025 share count is approximately 19.4 million shares with a tax rate between 20.5% and 22.5% with 21.5% at the midpoint. Please remember that as previously mentioned, our 2025 guidance and actual results exclude foreign exchange gain or losses on revaluation of intercompany accounts. That concludes my formal remarks. I'd like to turn the call back to the operator for Q&A. Thank you. Operator: [Operator Instructions] And the first question today is coming from David Larsen from BTIG. David Larsen: Congratulations on the good quarter. Can you maybe talk a bit about the VA and corporate sales? And I think I heard you say that the VA had their highest usage rate yet. Just any sort of color there in terms of incremental growth going forward? And just any thoughts there would be helpful. James Malone: Great. Yes, I'll turn it over to Johnny because both the VA... Johnny Hecker: Yes. Thank you, David. Good question. Yes, the VA continues to expand. So, what we're seeing, we're seeing increased usage in the existing base, but we also continue to roll out to new facilities. We still haven't rolled out the solution to the entire base of facilities and sites within the VA. That is an ongoing process. We know it's going to continue throughout 2026 to do that. But we also think there is room for expansion and increased adoption within the existing base. And we see that happening. we see growth within the usage in existing sites, so basically same-store sales, but also with new sites coming on. And as I stated on the call, we do see record highs in usage on weekdays. And overall, the volume is growing as well. So that is very, very encouraging, and we expect that growth to continue into 2026. So, I don't think we've reached the limits with the VA just yet. Go ahead. David Larsen: How many VA sites are you in now? And what is the total potential or on a scale of 1 to 10, 10 being 100% penetrated across all potential VA sites, what number would you put yourself at now? James Malone: Well, I think there's 2 elements to that question. So, one is we're more than 50% in the absolute raw number of sites deployed, but not all sites are equal. So that's one element. But the other element is even in the sites where we are deployed, we do not yet have, in many instances, all of the traffic. And there are some reasons for that, such as incumbent contracts that have to burn off before we'll capture some of that traffic. In some instances, the site didn't fully appreciate all the different ways in which faxes could be either sent or received or outbound is easier to do. So, you've got to port the numbers before you the inbound traffic. So that's why I tag on to what Johnny said, which is we're on the $5 million-plus pace for this year in terms of actual revenue. and we'll meet that goal. We'll go somewhat north of $5 million. And then what we're setting is the exit run rate going into '26. That will give us a book of business based on the number of pages processed on average per business day, peak volumes, et cetera. And then the exercise we're going through now from a budgetary standpoint is what is the timing and what is the pace at which we pick up incremental traffic in the sites where we're already deployed, but don't yet have all of it. So, it's all of those pieces together. But if you don't bind it to a given year, and I understand kind of where you're headed because people are looking at trying to build '26 models. But if you look out over, say, a 2- to 3-year time frame, there leads us to believe there are multiples of revenue available to what we booked in 2025. How many multiples, that's what's still under discussion. David Larsen: So, could the $5 million turn into $10 million or $20 million? James Malone: Yes. But the question is where between $10 million and $20 million. I think $10 million is a highly confident number and it's a number we had talked about when this contract was originally won several years ago. But I think we have good reason to believe it's a higher number than that. The question is how much higher than $10 million. And in order to get confidence in that number, we need to, in conjunction with the VA, do some additional analytical work and then see what is a reasonable time frame over which that traffic can be captured, not all of which is in our control. Some of it has to do with the VA, some has to do with the way they roll things out. And as I said, existing contracts that carried over that need to expire. So, I think it is probably still at least 3 years before realistically we can capture all the traffic, but it could be even more than 3 years. David Larsen: Okay. Great. And then another quick one, if you don't mind. The SoHo year-over-year revenue growth was down 9%. What would you expect that like deceleration rate to be, let's say, in 2027 or 2028, when are we going to see that sort of level off? James Malone: Yes. I think that it's a good question, but it's very difficult to predict. I don't think we can give guidance in that direction 2 years out at this point. We've been talking about it for 1.5 years now and where is that at what point is it going to like reach that steady base and then the decline will go into the low single digits. But it's very difficult to model. There are so many moving parts to this business. I mean we've seen it slow down over time, but I don't think we can give you a clear number on '27 just yet. R. Turicchi: I mean I think look, it's clearly even at the accelerated pace, it's not going to happen in '26, probably depending on where your goal, it's not going to happen in '27. So, it's '28 or later. And the input factors that are relevant to us are as the base ages, how we see that cancel rate come down. You saw it come down sequentially from Q2 to Q3, about 13, 14 basis points. Some of that, as Johnny mentioned in his prepared remarks, is negatively influenced by certain excess customers that were acquired in Q2, which burn off very quickly, but they're very cheap acquisition costs. So, we're actually looking and studying the various cohorts to see where is that stabilized base of cancel as that base ages. So that's one element of the equation. And then the other element is not only how many gross adds you bring in, many new net customers in a given period, but what kind of customers do you bring in. Are they short-lived customers that you can get at a very attractive LTV to CAC, but they may only be around 2, 3, 4 months? Or are they longer customers because there's a whole range of use cases that will dictate the life of the customer. For us, it's really a matter of matching the right expense against their life, not so much whether the life is 4 months or 12 months or 18 months, but what are you paying to get that stream of revenue. So all those things are going in. We will keep crunching those models as we go through our budgeting process, which has commenced, but it's still early stage. David Larsen: Okay. And then just one more quick one. Can you talk a little bit about the advanced products upsells into corporate? Just any color there on the use of AI, RCM acceleration? Johnny Hecker: Yes. I can comment on that, David. It's a couple of things that we saw accelerate in Q3. One of them Clarity adoption and Clarity revenue, which is that AI product that abstracts data turns that unstructured data into structured data. So I've commented on it, I think, on the last call a little bit, but that is one of the key -- was one of the key drivers. And the other one was in combination with that, really our integration engine business, right, where we help customers connect their EHR systems to provide that interoperability. That has also been performing quite well. And the combination of those 2 with the connectivity to our eFax network is what's driving revenue there and what's helping us succeed. Operator: [Operator Instructions] The next question is coming from Gene Mannheimer from Freedom Capital. Gene Mannheimer: Congrats on the good numbers. Question on that SoHo paid adds. I know, Johnny, you talked about that at 50 was the lowest in a while. And just so for my edification, that was due to a spike last quarter around promotional pricing? Or is there also some level of conversion of the SoHo customers to enterprise that was a factor? Johnny Hecker: No, I think what we mentioned, Gene, thanks for the question. Yes, what we mentioned was last quarter, we had a little bit of a spike because of an acquisition channel for new customers that was commercially very interesting for us. But as Scott mentioned earlier, those customers come on at a low price, but they also fall off fairly quickly. So they burn off -- they have a shorter lifetime than regular customers. We did see a little bit of a decline in our paid adds this quarter. There was multiple factors to it. And the one that I mentioned was the change in search that we're seeing a little bit of headwind in the organic traffic, but we have put some measures in place, and we're already seeing some recovery of that. That we're getting additional sign-ups and reverting back to that mid-50 number. I don't think it's going to happen overnight. I don't think we will see -- we will probably not reach that by the end of this quarter. Q4 is usually a slow quarter for SoHo anyways. But we're expecting it in the course of the first few months of the next year to get back to that number. Gene Mannheimer: Okay. Yes, that helps out. And then just my follow-up is on the VA discussion, getting from, say, $10 million in revenue to $20 million or whatever the number happens to be, is that -- can that be accomplished based on the scope of the agreement you have in place today? Or would it involve selling additional products into the VA? Johnny Hecker: That's a good question. I think we are -- right now, we're just talking about the fax platform, right, about the ECFax platform that is FedRAMP High certified. There's obviously potential to upsell other solutions into the VA. They would have to go through a similar process as the Fax platform to be certified on that FedRAMP High platform or environment. I think we've learned a lot, so it wouldn't take us as long as it did for eFax, but what we're talking about right now is really only the Fax platform. We're not adding in any additional products into that growth. So there's additional potential... Within the... That would be under different contract. We have – R. Turicchi: Before we go to more live questions, we've got a question by e-mail. So one has to do with capital allocation and our thoughts really as we look forward to 2026 between retirement of debt and share repurchases. As I noted in my opening remarks, I think both are going to be opportunistic in nature. Right now, there's no mix that we've set between the two as it relates to either cash balances or free cash flow generated in 2026. One of the things that we're going to be looking at is as we get into '27 and we look at the 6.5s and their maturity in October of '28, what is sort of the right level of debt as we think about that refinancing. So that may influence some retirement of debt, which could be a combination of either the continuation of buying the 6.5% in the open market. But as I've noted before, the volume there has been limited because we've taken about $150 million out over the last couple of years. But we do have the ability as we generate cash to take our revolver down. And I think if we're going to prepay or repay any bank debt or credit facility, it would be in the revolver because that we can reborrow. The delayed draw term loan by its terms does have some mandatory prepayments per quarter of slightly under $2 million per quarter. So you will see about a little under $8 million come out next year just for the terms of the delayed draw term loan. But if we do have excess cash and we can't buy bonds and we don't like the stock price, we can't get enough stock, we could pay down the revolver. And then if we have needs in the future, we could reborrow the revolver. So that's kind of how we're thinking about it now. As I mentioned, we're still in the relatively early stage of the budgeting. So things like how much free cash flow and based on our current balances, what kind of capital is available is also going to be a question of the jurisdictional issue of where that cash sits, not only at 12/31/25, but as it's earned over '26. Clearly, there'll be an amount in the U.S., but there are also an amount in foreign jurisdictions. And so we'll have to look about how much of that cash we can bring back home to the U.S. because both stock repurchases and debt retirement, whether it is in the form of the bank debt or the 6.5 require U.S. cash as opposed to foreign cash. Paul, is there no live questions? -- if not, I've got another e-mail question. Operator: There were no other questions from the lines at this time. R. Turicchi: Okay. So the second e-mail question that came in had to do, I think I can interpret this in terms of -- it's stated the marketing-related disruption we mentioned in SoHo, which I think is really what Johnny commented both in his prepared remarks, but also in response to Gene's question, is that this likely disrupt the improvement year-over-year going into Q4 and '26. If you mean the rate of decline, which has been declining, it may very well impact Q4 somewhat. In other words, we've been seeing on a pretty much sequential basis, the rate of decline coming down. So it went from 9.4% to 9.2% from Q2 to Q3. That could trend modestly in Q4. We'll have to see because I think as Johnny mentioned, it's probably going to take up to a few months, which will take us into early '26, possibly through Q1 to get that normalized base back to around 55,000 net adds per quarter. So you could see a little bit of friction in Q4, might carry through to Q1. I haven't done, I say, enough budgeting and enough quarterization of that to know what kind of impact there might be. But I think, yes, you should expect there could be some noise in Q4, possibly in Q1 as well. Paul, we'll open up if there's any further live questions. Operator: There were no further questions from the line. Scott, I will hand it back to you for closing remarks. R. Turicchi: Great. Thank you. Appreciate everybody for joining us today for our Q3 call. We will be at a couple of conferences, I think more catering to the high-yield market than the equity market between now and our next earnings call. So stay tuned for those activities. We will also be putting out a release probably in late January, early February in terms of giving the timing for the Q4 release, at which time we will give full year 2026 guidance. At this point, we would intend, as we've done in the past, to give a range of revenues, adjusted EBITDA and adjusted net earnings per share. So obviously, it will be a call that will look back to '25, report the quarter, the full fiscal year and then what we're seeing as we look forward to 2026. And obviously, if there's any questions that you have between now and then, feel free to reach out and contact Laura or any one of us, and we can either arrange a call or if it's a fairly straightforward question answered by e-mail. Operator: Thank you. And this does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Good afternoon. My name is Michael, and I will be your conference call operator today. At this time, I would like to welcome everyone to the Warrior Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]. This call is being recorded and will be available for replay on the company's website. I would now like to turn the conference over to Brian Chien, Chief Accounting Officer and Controller. Please go ahead. Brian Chien: Good afternoon, and welcome, everyone, to Warrior's Third Quarter 2025 Earnings Conference Call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our third quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-Q for the third quarter ended September 30, 2025, with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes a third quarter supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walter Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer any questions. With that, I will now turn the call over to Walt. Walter Scheller: Thanks, Brian. Hello, everyone, and thanks for taking the time to join us today to discuss our third quarter 2025 results. I'll start by providing an overview of the quarter before Dale reviews our results in additional detail. We're extremely excited to share that our third quarter presented an opportunity for Warrior to showcase its strength in a number of ways. From a strong financial performance to significant operational achievements, we've been driving success in the near term while continuing to improve our long-term position and prospects. We have an exciting future ahead of us, and this is a direct result of our unwavering commitment to operational excellence and the exceptional teamwork and dedication of our employees. First, from an operational achievement perspective, I'm thrilled to announce that in October, we started the Longwall operations at Blue Creek, which are approximately 8 months ahead of schedule. This remarkable accomplishment underscores our team's exceptional execution and reflects our commitment to driving shareholder value with high-value strategic investments. Second, factoring in the earlier startup of Blue Creek longwall, we now expect to produce approximately 1.8 million short tons of high-vol steelmaking coal from the Blue Creek mine, representing an additional 800,000 short tons this year or an 80% increase over our initial 2025 guidance. As a result, we've raised our full year 2025 production volume guidance by approximately 10%. Third, earlier this month, Warrior won the bidding in the federal coal lease sale of 58 million short tons of high-quality steelmaking coal reserves contiguous to our current operations. Subject to the finalization of a binding lease agreement with the Bureau of Land Management, this strategic opportunity is expected to enhance our long-term value proposition by bolstering our reserve base and extending the life of our core mining operations. I'll provide further details on these accomplishments in a few moments. From a financial performance perspective, we delivered a strong performance in the third quarter despite ongoing weak steelmaking coal market conditions. The combination of our high-quality products and strong customer relationships, supported by our variable cost model, generated impressive net income and adjusted EBITDA. We have confidence that our operational successes will continue to drive strong financial performance over the coming quarters. Turning back to Blue Creek. Let me provide you some additional details on this transformational growth project. Achieving a start-up for Blue Creek's longwall operations 8 months earlier than our original time line is almost unheard of in this industry; where projects are usually delayed for years and many millions of dollars over budget, particularly in an inflationary environment. The success of our Blue Creek development was cumulative over the project time line and a testament to our incredibly talented employees and partners. They provided an opportunity for us to demonstrate the strength of our talented workforce and the performance-driven culture of our organization. I want to extend my sincere thanks to all the employees and our partners for their hard work, dedication and resilience to bring this project to fruition, approximately 8 months ahead of schedule while staying on budget. These accomplishments are a direct result of their efforts and continue to drive our success as we execute our long-term growth strategy. The Blue Creek mine features world-class assets, which incorporate the most modern and latest technology available in the mining industry. It was built with the scope and scale to accommodate more than 6 million short tons of annual production of high-quality steelmaking coal and the potential to be the lowest cost mine in the world. In addition, these assets enable Warrior to scale up and expand in the future to a second longwall operation if market requirements dictate such an increase in production. Our team's sense of urgency and high performance enabled us to accelerate the start-up of Blue Creek longwall for a second time. In October, we completed key infrastructure, including the installation of the overland and clean coal belt, along with the remaining modules of the preparation plant and made significant progress on the barge loadout and other key infrastructure components. Financially, we dedicated another $64 million of capital expenditures in the third quarter and $171 million year-to-date on the Blue Creek project. That brings the total project to date capital expenditures to $888 million, which remains on budget. Our total project estimate remains unchanged, ranging from $995 million to $1.075 billion. Looking ahead, we will be laser-focused in the fourth quarter on ramping up longwall production and optimizing the performance of the underground surface infrastructure. While the underground longwall operations have recently commenced, a significant amount of work remains to complete the project, which we expect will occur by the end of the first quarter in 2026. The remaining work includes completing the barge loadout, paving roads, completing storage and shop buildings, additional storage silos and final electrical installations, along with the usual assortment of final project details. The accelerated Blue Creek longwall start-up enables us to increase our guidance for total company production and sales volumes for 2025, as you will have seen in our earnings release. We've raised our Blue Creek production volume by 80% from 1 million short tons to 1.8 million tons. We expect to sell approximately 2/3 of the Blue Creek coal production or approximately 1.2 million tons in 2025. This increase in production from Blue Creek raises our full year outlook for production volume by approximately 10% at the midpoint of the range. This start-up marks another critical inflection point in the development of this world-class asset, representing the start of transition from capital investment to free cash flow generation. Turning to another growth opportunity. We learned in September that we were a successful bidder in the federal coal lease sale administered by the Bureau of Land Management. Once we enter into this lease, the acquisition will expand our footprint strategically with the addition of an estimated 58 million short tons of high-quality steelmaking coal reserves. These reserves are adjacent to existing infrastructure, which will allow for efficient integration into our current operations and capital planning. Also, this acquisition will allow for access to additional reserves that can further the life of both Mine 4 and Blue Creek. The total bid for the leases is approximately $47 million, which will be paid over 5 years. We appreciate the Bureau of Land Management's efficient review that supported the Alabama federal delegation and our local and state government officials in advancing this process. We also appreciate the Department of Interior Secretary, Doug Burgum, and the entire Trump administration for the support of mining on federal lands. While there are several regulatory and administrative steps that remain before Warrior finalizes the lease agreements with the Bureau of Land Management, we are actively engaged with the relevant agencies to ensure timely progress and compliance with all requirements. We expect this process will be completed shortly after the end of the government shutdown. Now let's turn to the steel and steelmaking coal markets during the third quarter, which provides the backdrop for our strong operational and financial results. Our markets faced headwinds from increased Chinese steel exports, subdued global demand and oversupplied seaborne steelmaking coal markets. Nevertheless, our team's focus and resilience enabled us to achieve record quarterly sales volume. The drivers underlying the weakness are the same as they have been for some time. First, exports of low-priced Chinese steel are up over 10% for the first 9 months of the year compared to 2024, which was already a record year for Chinese steel exports. Second, with the exception of India, lackluster global steel demand continued because of trade uncertainty and tepid global economic activity. And third, the seaborne steelmaking coal markets remain under pressure due to strong supply as demonstrated by strong Chinese domestic steelmaking coal production and a slowdown in Chinese imports. While there have been discussions in China of anti-involution and coal production controls combined with mine safety checks and shutdowns, those actions have fallen short in reality, while trade tensions continue to weigh heavily on global market sentiment. In addition, the European Union recently announced plans to protect the EU steel sector from the unfair impact of global steel overcapacity by limiting import volumes and doubling the level of tariffs to 50%. These actions could lead to a recovery of steelmaking coal demand from Europe in the long term, but we do not anticipate a recovery anytime soon. Likewise, the steelmaking coal market remains oversupplied as demonstrated by the prolonged period of weak pricing. According to the World Steel Association monthly report, global pig iron production decreased by 1.5% for the first 9 months of 2025 as compared to the prior year period. Pig iron production in China, which is the world's largest production region decreased by 1.1% for the same period. The rest of the world's pig iron production experienced a decline of 2.5% for the first 9 months of 2025. India remains a bright spot with a growth rate of 7% and is expected to continue growing with new blast furnace capacity expected to come online in the next year. Our strong sales volume was primarily driven by high contractual demand from our customers, combined with the strong performance of our existing mines and the additional commercial sales from our Blue Creek mine. This combination enabled Warrior to achieve a record high quarterly sales volume in the third quarter of 2.4 million short tons compared to 1.9 million in last year's same quarter, representing a 27% increase. We sold 378,000 tons of Blue Creek development steelmaking coal during the third quarter, which were contractual volumes sold primarily into Asia. Our sales by geography for the third quarter break down as follows: 43% into Europe, 38% into Asia and 18% in South America. The spot volume was 11% for the third quarter of 2025, which is primarily sold into Europe. For the full year, our spot volume is expected to be approximately 10% to 15% of total sales volume. Production volume in the third quarter of 2025 was 2.2 million short tons compared to 1.9 million in the same quarter of last year, representing a 17% increase. Our existing mines continue to perform well and the continuous mining units at our Blue Creek mine produced 175,000 short tons during the third quarter, adding to the overall increase in production volume. Blue Creek production was lower than the second quarter as more time was spent on construction and development work for the longevity of the mine and the start-up of the longwall. Our coal inventory levels decreased slightly to 1.1 million tons at the end of September compared to the end of June this year. I'll now ask Dale to address our third quarter results in greater detail. Dale Boyles: Thanks, Walt. Warrior was built to excel in all market conditions with high-quality steelmaking coal assets, a low-cost position globally, possessing a strong balance sheet with ample liquidity and a relentless focus on operational excellence. Each of these attributes were clearly demonstrated in our third quarter results and recent accomplishments. From my vantage point, I believe few companies are able to embark on, and make continued strategic investments of over $1 billion in an organic growth project like Blue Creek without diluting shareholders with equity offerings or additional leverage. For Warrior, our ability to accomplish this is due to our incredibly talented workforce, which enables us to continuously focus on resource development and operational excellence. Turning to market conditions we experienced this past quarter. Our primary index, the (PLV) FOB Australia was relatively stable, averaging $166 per short ton. This average pricing has remained relatively consistent through the first and second quarters of this year. However, during the third quarter, the (PLV) CFR China index price recovered from its low points earlier in the year and averaged $162 per short ton. This average was over $11 per ton higher than the second quarter of this year. Although the arbitrage narrowed by the end of the third quarter, it remained closed most of the third quarter. As for the main second-tier indices, the Australian Low Volatile Hard Coking Coal (LVHCC) index price recovered from its low point in the second quarter and averaged $137 per short ton, while the U.S. East Coast High Volatile A (HVA) index price established a low for the year and averaged $141 per short ton. As a result, we saw the relativity of the LVHCC index price compared to the PLV index price improved from 78% in the second quarter to an average 82% for the third quarter. This narrowing of the spread primarily drove our higher average net selling price in the third quarter compared to the second quarter this year. On the contrary, the U.S. East Coast High-Vol A price Index recorded a decrease in relativity from 92% to 85% during the same period. We achieved a gross price realization of 83% for the third quarter compared to 93% in last year's same quarter, which was a function of relative index pricing, product mix, geography, tariffs and freight rates. The 83% achievement was 3% better than the second quarter of this year. This result was lower than our annual targeted range of 85% to 90%, primarily due to 3 things: First, the LVHCC index price relative to the PLV index price has widened compared to the historical relationship between these indices. Second, we sold a higher mix of High-Vol A product versus premium low-vol product. And third, the higher High-Vol A volume has been sold primarily into the Pacific Basin on a CFR basis, which is net of freight cost. As Walt noted earlier, the steelmaking coal markets continue to be pressured in the third quarter by the same factors. Let me first highlight our third quarter financial achievements compared to the second quarter of 2025. Our third quarter adjusted EBITDA of $71 million was 32% higher than the second quarter this year, primarily due for 2 reasons. First, our sales volumes were 6% higher, including an increase of 139,000 tons of Blue Creek coal with its inherently lower cost structure. And second, our average net selling prices were $6 per ton higher, primarily as a result of the higher High-Vol A pricing relative to PLV pricing of 82% versus 78% in the second quarter. The higher sales volumes, higher average net selling prices and incremental Blue Creek sales volumes contributed to the higher operating cash flows of $67 million or $37 million of higher free cash flow than the second quarter of this year. Our spending for capital expenditures and mine development were a combined $30 million higher in the third quarter compared to the second quarter of this year, primarily related to the investment in Blue Creek. Excluding the Blue Creek capital expenditures and mine development investments in the third quarter, free cash flows were a positive $86 million. Now let us compare the third quarter of the current year to the prior year third quarter results. Warrior recorded net income of $37 million or $0.70 per diluted share compared to net income of $42 million or $0.80 per diluted share in the same quarter of 2024. We reported adjusted EBITDA of $71 million in the third quarter of this year compared to $78 million in the same quarter of last year. Our adjusted EBITDA margin was 22% in the third quarter this year compared to 24% in the same quarter of last year. On a per ton basis, our adjusted EBITDA margin was $30 per short ton for the third quarter this year compared to $42 in last year's third quarter. The decrease in the quarterly results was primarily driven by 21% lower average net selling prices and a 13% higher sales mix of High-Vol A product versus Premium Low-Vol product. These decreases were partially offset by 27% higher sales volume, including lower cost Blue Creek volumes and lower variable costs for transportation and royalties, plus controlling and managing our production costs. Total revenues were $329 million in the third quarter of this year compared to $328 million in the same quarter of last year. The total increase of $1 million was primarily due to the 27% higher sales volume impact of $85 million, offset by the impact of a decrease in average gross selling prices of $81 million and a higher mix of High-Vol A volumes sold of $11 million. In addition, demurrage and other charges were $6 million lower compared to last year's third quarter. This resulted in an average net selling price of $136 per short ton in the third quarter compared to $172 per short ton in the third quarter of last year. Cash cost of sales was $237 million or 74% of mining revenues in the third quarter this year compared to $230 million or 72% of mining revenues in the third quarter of last year. Of the $7 million net increase in cash cost of sales, there was a $61 million increase in costs, which were attributed to the 27% increase in sales volumes, which includes the leverage of low-cost Blue Creek tons. These higher costs were offset partially by $54 million of lower costs that were driven by the lower variable transportation and royalty costs on 13% lower average steelmaking coal price indices. In addition, we rationalized and tightly managed our spending on supplies, repairs, maintenance expenses throughout the operations. Cash cost of sales per short ton, FOB port, was approximately $101 in the third quarter of this year compared to $123 in the same quarter last year. The decrease was primarily related to overall spending at the legacy mines of $11 per ton due to tightly managing our overall spending, lower variable transportation and royalty costs of $8 per ton on lower steelmaking coal prices and $4 per ton from the incremental sales of low-cost Blue Creek tons. While we were able to manage our spending tightly during the third quarter, some cash costs such as repairs and maintenance may be higher in future quarters due to potential unexpected breakdowns that would require investment to restore the equipment to a normal operating status. Our cash cost of production for the third quarter this year was 67% of our total cash cost per short ton compared to 66% in the same quarter last year. Overall, transportation and royalty costs were 33% of our cash cost of sales per short ton in the third quarter this year on lower average net selling prices compared to 34% in the same quarter last year. As a result of the lower average net selling price, our cash margin per short ton was $35 in the third quarter this year compared to $48 in the same quarter last year. SG&A expenses were $17 million and were about $6 million higher than the third quarter of last year, primarily due to higher employee-related expenses. Depreciation and depletion expenses were $44 million, which was higher than the third quarter last year, primarily due to the additional assets placed into service at Blue Creek and the higher sales volume. Our net interest income earned from cash investments was lower due to lower average cash balances and lower rates of return, combined with higher interest expense on newly leased equipment. We recorded an income tax benefit of approximately $14 million on pretax income of $23 million in the third quarter. Our year-to-date effective income tax rate varied from the statutory federal income tax rate of 21%, primarily due to tax benefits recognized for depletion expense, marginal gas well credits, and a foreign derived intangible income deduction, which exceeded forecasted pretax book income. Turning to cash flow. Free cash flow was a negative $20 million due to $105 million in operating cash flows less cash used for capital expenditures and mine development of $125 million. Capital spending totaled $83 million, which included $64 million spent on the Blue Creek project, as previously noted. Mine development costs for the Blue Creek project in the third quarter were $42 million and continue to be below budget as we continue to focus on cost control. Working capital decreased by $31 million during the third quarter, primarily due to lower accounts receivable and higher accrued expenses. Our investment into Blue Creek is generating revenue and contributing positive operating and free cash flow to the overall company. We amended and extended our ABL facility, which increased the commitments available to be borrowed by $27 million to $143 million and extended the maturity date, giving us further financial flexibility and higher liquidity. Our total available liquidity at the end of the third quarter this year was $525 million and consisted of cash and cash equivalents of $336 million, short- and long-term investments of $48 million and $141 million available under our ABL facility. Let me turn to our revised outlook and guidance for the full year 2025. As Walt previously noted and outlined in our earnings release, we have updated and increased our production sales volume guidance for the full year 2025 as a direct result of the early start-up of the longwall operations at Blue Creek. In addition, we lowered our guidance for cash cost of sales per ton, reflecting more recent actual results. While weak steelmaking coal market conditions are expected to persist for the remainder of the year, we remain optimistic about our long-term growth trajectory. I'll now turn it back to Walt for his final comments. Walter Scheller: Thanks, Dale. Looking ahead, we recognize persistent challenges in our customers' markets will continue to be driven by ongoing surplus in Chinese steel exports, heightened global trade tensions and subdued economic activity worldwide. However, we're hopeful that new trade agreements with key global partners will be supportive for our market and will materialize in the near term. Similarly, we expect the steelmaking coal markets to be pressured by additional supply, which is expected to come online over the next few quarters due to a combination of new capacity and the return of certain idle mines. We believe the pricing will remain weak and range-bound and supply rationalization will be necessary to balance market dynamics. While the steelmaking coal markets are expected to continue to be weak in the upcoming quarters, we're excited about the positive accomplishments in our business and with some of our key partners. For example, on October 13, the Alabama State Dock had its official ribbon-cutting ceremony to celebrate the completion of a multiyear project of deepening the draft and widening of the channel at the port. This project is expected to benefit both Warrior and our customers by allowing them to load heavier and larger vessels in the future. In addition, several important machinery and equipment upgrades are being completed at the port over the next few quarters. These upgrades at the port are anticipated to enhance our operations and position the company for long-term success. We appreciate our long-standing partnership with the state. In conclusion, the combination of accelerated Blue Creek production and strategic reserve acquisitions significantly enhance our long-term growth strategy and provide Warrior a strong platform to meet long-term sustained global demand for premium steelmaking coal. Our world-class assets, low-cost position and disciplined capital deployment are a foundational strength. We remain focused on delivering long-term shareholder value through strategic resource development and operational excellence. With that, we'd like to open the call for questions. Operator? Operator: [Operator Instructions] Your first question comes from Katja Jancic with BMO Capital Markets. Katja Jancic: First, congratulations on the early Blue Creek start-up and the quarter. And maybe starting on the Blue Creek, with the early start-up, how should we think about production next year? Walter Scheller: Well, we're still, we're working through our budget right now. But as you know, our plan was not to have started that until midyear. So naturally, that number is going to be enhanced greatly. But we're still working on that. I'm hesitant to give you an exact number on where we'll be. I think it's going to be, a lot of it is going to be market-driven as we get into next year as opposed to operationally driven. But we're working on that right now. Katja Jancic: And then maybe secondly, the CapEx is coming down on the Blue Creek project. Can you remind us how you're thinking about capital allocation? Dale Boyles: Yes, thanks for the question. Well, I think it would be similar to what we've done in the past when we generate the excess free cash flow above the needs of the business, and we will return cash via different methods, which will be the fixed quarterly dividend, which I expect would be higher in the future, supplement that with some cash special dividends and possibly some stock buybacks along the way, selected. Operator: And your next question comes from Nick Giles with B. Riley Securities. Nick Giles: Guys, I really want to commend you on this incredible achievement. I know Tuscaloosa breeds champions; but it's clearly not just football. So, my question was, what does this mean from a hiring perspective? Do you still need incremental workers to ramp up here? And if sales are expected to be market-driven, would you plan to build inventory? Or would you really toggle production just on market conditions? Walter Scheller: Well, I think the first part of your question on how many people do we still need more people. We're okay running at the pace we are right now, and, but we'll continue to hire over the next year easily and probably continuing beyond that. I think next year; we'll be looking at a balance. We'll look at, as I've said before, we really wanted to make sure that we had a certain percentage of the tons tied up before we ramped up. I'm not going to say 4.5 is the number for next year, but I think you're probably going to be closer to that type of a number for Blue Creek. And so, we'll be looking at cash flow. We'll be looking at what's happening in the market. We don't want to build a bunch of inventory, and we don't want to flood the market either. So we're going to be balancing all those factors to make sure we maximize the value for the company. Nick Giles: I appreciate that. And then maybe just looking to the fourth quarter here. I mean, I think if I do the math right, your guidance could imply a 20% increase in sales. Can you just walk us through what, maybe on a mine-by-mine basis, how sales could shift quarter-over-quarter? Dale Boyles: Well, I don't have that breakout by mine. But with what we said is 2/3 of that volume of Blue Creek for the year should be sold this year, 1.2 million tons. And we've sold about half of that so far through the end of the third quarter. So you're going to see a big jump just because of the Blue Creek tons there, Nick. So that's the biggest driver in the fourth quarter. Nick Giles: Got it. Maybe one last one, if I could. It's good to see you were able to tuck in such a significant amount of reserves at a reasonable cost. I think you mentioned this is relevant to Mine 4 and Blue Creek. But my question is, how much does this acquisition influence any potential decision to add another longwall to your operating footprint? How much capital could be required later down the road? I appreciate any color there. Walter Scheller: What I've said in the past is an additional longwall, you're probably looking at incremental capital probably $300 million or so because you're going to have to add 3 CM units, you're going to have to add another longwall. You're going to have to add modules to the preparation plant. So there's a lot of infrastructure and just a lot of build-out that would have to happen. In terms of making that decision, we had enough reserves without the BLM to add a second longwall if we thought the market justified it. This just makes us even more efficient because some of the places where we were going to have to skip around some coal, now we have control of it. So this is going to make us a lower cost, more efficient operation at both Mine 4 and Blue Creek as we roll forward. Operator: And your next question comes from George Eadie with UBS. George Eadie: Really impressive performance here, good set of numbers well done. Can I just follow up on that question before? So another longwall, is it a price decision? Like if you were guaranteed, say, 200 metric benchmark PLV, would you do it like the spreadsheet math, it clearly works when we get to sort of mid-'26 as the first longwall at Blue Creek is ramped up. How would we go about thinking about the decision for another one? Walter Scheller: I think the real, what we need to do is we need to stretch this first longwall as tight as we can and see just what it's capable of. What we said is $6 million I don't know where the top end is for that one longwall and how many CMs it takes you to support that one longwall if you're running it flat out throughout the year. So, the real question is going to be where is that limit? And then beyond that, what's that next longwall get you. So, I think we're years away from making that decision because I think there's still so much headroom on the first longwall. George Eadie: Yes. And then maybe to Dale, you just sort of call out those 3 factors, discounts, more High-Vol A, more Asia sales. How do I triangulate that with the low-vol hard coking index flat quarter-on-quarter? Your realized price was up quarter-on-quarter, like that caught me. Like how do I triangulate that going forward as well, like more Blue Creek sales, more Asia sales? Is it likely that this was just a one-off really strong realized pricing quarter? Or how do I sort of triangulate those factors? Dale Boyles: Well, I don't think it's a one-off quarter. I think if you go back to my remarks, I said is, look, the increase from the second quarter to the third quarter was 2 things: 6% higher sales volume and a net realized price of $6 a ton higher. Well, that $6 a ton came primarily from the increase in the LVHCC during the third quarter. So that relativity rose from 78% in the second quarter to 82%. So that spread narrowed right? So that drove that $6 a ton, which just flowed to the bottom line. Walter Scheller: So, think of it that way, pick your PLV price and then pick your relativity, okay? So just for example, $200 PLV, 80% relativity and you're going to be pretty close. George Eadie: So that relativity, that 82%, that 4% quarter-on-quarter jump is what I was talking about there, sorry, Dale, that caught me off guard, like more high-vol sales more into Asia, like how do we think about that going forward in Q4, I guess, as well? Walter Scheller: Well, we don't break it out by geography on a forward-looking basis, but we do think that in the long term, more volume will go into Asia long term as we ramp up Blue Creek. So that will be a gradual climb over the next year or 2. George Eadie: Yes. And just last one on pricing. Walter Scheller: Yes, I was just going to say one more thing, George, to think about there is customers have their different time schedules throughout the year. So that's why we might sell more into Europe in one quarter versus another quarter. So, it's hard for us to forecast that into the future as to what geography it's going to go into. So, we don't have that preciseness very far out. We know about a quarter ahead, but not too much further out than that. George Eadie: Yes. Okay. And then just what was sort of saying quite bearish sort of met coal prices at the start, that benchmark prices up at $197 and flat starting to now talk quite optimistic the demand outlook ex China. Any sort of color you can give? Walter Scheller: Well, I think I always try to be conservative in my expectations. And that's the way we run our company. And we make sure that we're able to respond to any positive market news, but we make sure we're prepared in the case of any negative market news. I don't, it's hard for me to see a reason why prices will go up or at best, they'll maintain the level they're at now, I think. But it takes one event to cause this price to shift dramatically. But I don't know what that one event is right now. Dale Boyles: Yes. It's hard to see on the demand side, what the catalyst is. So, then you're thinking about the supply side. And as we said in our remarks, earlier, look, there's the Blue Creek coming online next year. There are other mines that are restarting next year. So, you're going to have additional supply coming on that's going to keep that pretty balanced, we think, going forward. So, it's hard to be too optimistic right now about what the next year or 2 looks like. Other than we should perform well because of Blue Creek coming online and it's such a much low-cost structure, we're going to benefit from that. Operator: [Operator Instructions] Your next question comes from Nathan Martin with The Benchmark Company. Nathan Martin: Congratulations on the early longwall startup. I just want to come back to the pricing question quickly. I think maybe what we're trying is how should we think about realizations versus the benchmark kind of going forward as you bring on these additional Blue Creek tons? Do you think you can get back to kind of your targeted 85% to 90% range of the benchmark? Dale Boyles: Well, that's what our target is. So yes, I think we can get there. It just depends on what the markets do. I mean we can't control that. So, my crystal ball says maybe Prices change all the time for different reasons. And it's just, I mean, if you can't predict it, I can't predict it, right, what prices will be tomorrow. So just the realizations are what they are. We're 83%. Our targeted range is 85% to 90%. We're creeping up. It depends on what continues to happen with LVHCC pricing in the Pacific Basin. That will be a big determinant of where we get to. Walter Scheller: I think said another way, we definitely think that we will get back to that 85% to 90%. The question is just when. We can't tell you if that's going to be 2 quarters from now or 1.5 years from now. We don't know when that will occur. Nathan Martin: Makes sense. That's fair. And then as far as Blue Creek sales are concerned, Dale, I think you said that you guys were maybe initially targeting those tons towards Asia. Is that correct? And then how many Blue Creek tons have you guys been able to contract at this point with starting up the longwall early? Dale Boyles: Well, the majority of the sales volume so far, yes, has gone into Asia. And right now, these tons are being shipped to really trials, right, to get confirmation of contracts. So, I don't, it's a little early with the volume that we sold to give a percentage of how much we've contracted because of these trials. So, I don't want to get into that yet. If we have better, and hopefully, we will have better information during our fourth quarter earnings call about that. But right now, it's a little bit too early because we only have about $1.2 million for this year. Nathan Martin: I appreciate that. And then maybe just one final one on the cost side of the equation. Good to see cash cost guidance for this year down again another $5. Just want to make sure, is there any change in your price assumption there that would have impacted that update? And then last quarter, Dale, I think you mentioned you built in some maintenance and repair costs. I think you touched on that briefly in your prepared remarks as well. Is that still the case in that range? Dale Boyles: Yes. That's kind of baked into that range. And really, the price assumption hasn't changed because the PLV has averaged virtually the same amount each and every quarter this year. Operator: And your next question is a follow-up from Nick Giles with B. Riley Securities. Nick Giles: I just wanted to follow up on that last question on the cost side. I think guidance does still imply a slight tick up in the fourth quarter. So I wanted to see if there's anything specific that could drive that or if that's maybe just an added level of conservatism. Dale Boyles: Yes, it's just baking in what if, right? As I said in my prepared remarks, we've been pretty tight on repairs and maintenance all year. Something can break, and we've got to fix it in the fourth quarter, and that's covering those kind of things. And we have a little tick up and we have recently in the last couple of weeks on the prices to $196. So there could be some change there a little bit on the cost. So that's all baked into that range. And we're averaging at, for the year-to-date, we're averaging at the bottom of the range. So a slight tick up would be very, very minor. Operator: At this time, there are no further questions. I will now turn the call over back to Mr. Scheller for any closing comments. Walter Scheller: That concludes our call this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Franklin Covey Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Boyd Roberts, Head of Investor Relations. Please go ahead. Boyd Roberts: Thank you. Hello, everyone, and thank you for joining us today. We appreciate having the opportunity to connect with you. Before we begin, please remember that today's remarks contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, statements that may predict, forecast, indicate or imply future results, performance or achievements and may contain words such as believe, anticipate, expect, estimate, project or words or phrases of similar meaning. These statements reflect management's current judgment and analysis and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, risks relating to macroeconomic conditions, tariffs and other risk factors described in our most recent Form 10-K and other filings made with the SEC. We undertake no obligation to update or revise any forward-looking statements, except as required by law. Now with that out of the way, I'd like to turn it over to Mr. Paul Walker, our Chief Executive Officer and President. Paul Walker: Thanks, Boyd, and good afternoon, everyone, and thank you for joining us. It's great to be with you and to have the opportunity to share our results and an update on the business. We're pleased with our momentum and that our fiscal '25 full year revenue and adjusted EBITDA results came in right in line with what we expected when we provided guidance in our Q3 call. We're also pleased that while much of fiscal '25 was a period of transition and organizational transformation, beginning in the fourth quarter and as we turn to fiscal '26, we're now in a period of execution and a return to growth. In a few minutes, Jessi will share more detail about our fiscal '25 results and our fiscal '26 guidance. Before we go there, I just wanted to share a couple of thoughts with you. And the first is that we're off to a strong start in the first quarter, particularly in our Enterprise North America business, where we're experiencing the acceleration in invoice growth we expected to see from investment in and implementation of our go-to-market sales transformation. A few points of evidence of this acceleration in Enterprise North America include we're having a strong contracting quarter in Q1 and expect to achieve strong growth in our invoiced amounts in the first quarter. A portion of this meaningful increase in invoiced amounts is being driven by strong new logo growth across the first 2 months of this Q1 of this new fiscal year, where the number of new logos sold and the associated revenue is pacing above prior year. Similarly, our services booking pace through the first 2 months this year is off to a very strong start, with services booked in Enterprise North America up double digits over the prior year. This is an indication of the importance of the outcomes we're helping our clients achieve and is an important leading indicator of future reported revenue growth. This acceleration in North America, coupled with the fact that we anticipate our education business to have a strong year, indicates that we expect invoiced amounts for the company, which declined last year to return to meaningful growth in fiscal '26. A portion of this meaningful growth in invoiced amounts will translate into reported revenue in fiscal '26 and an even greater portion will translate into even greater reported growth in fiscal '27, which will also flow through to strong growth in adjusted EBITDA and free cash flow. The objective of our investments in our go-to-market transformation was always to accelerate growth in revenue, adjusted EBITDA and free cash flow beyond the levels we'd achieved in our previous model. And this is still very much our objective. While we took a step back in fiscal '25, primarily due to external factors we could not foresee at the time we made our investments, we're back on the road to growth and expect this to be reflected in our fiscal '26 results and even more so in fiscal '27. Strategically, we're planning for something very clear and very important, to be the partner of choice for leaders pursuing breakthrough results, results that depend not only on great strategy, but also on how people work together to deliver it. Every organization faces these challenges, whether the goal is faster growth, integrating cultures after an acquisition, improving customer experience or transforming culture, success depends on institutionalizing the right behaviors and practices across leaders and teams. We help leaders make the link between behavior and performance tangible, measurable and scalable. That's what drives breakthrough results. This work doesn't get easier in uncertain times. It becomes more essential. AI is transforming how work gets done, but it also makes human capabilities, judgment, trust and collaboration more critical than ever. The ability of people to stay aligned, focused and accountable while working together with high trust and execution remains the ultimate differentiator. Our role is to help organizations achieve their most important goals by strengthening collective behavior, raising the level and the consistency of how people lead, collaborate and execute and scaling what already works well in pockets across entire organizations. As you can see shown on Slide 4, in pursuit of this objective, we're focused on 2 key priorities. The first is to be the leader in combining world-class content, technology and services to deliver breakthrough impact for our clients. And the second priority is to transform and accelerate our go-to-market approach to win more larger and more strategic new logos and to expand and retain existing ones. I'd like to just take a couple of minutes here and go into each of these priorities in a little bit more detail. First, as it relates to building world-class solutions, a few years ago, we asked what would it take to accelerate our ability to be the partner of choice for leaders pursuing breakthrough performance. Our answer led to 4 key initiatives. First, we sharpened our focus on helping organizations address mission-critical challenges. As you can see shown on Slide 5, the market in which we operate ranges from content providers to true performance partners. Our strategic focus is on the latter as a performance partner, the space where large-scale behavior change delivers measurable business results. That focus is reflected in flagship solutions like the 4 Disciplines of Execution, Helping Clients Succeed, the Leader in Me and our leadership suite of offerings. Focused here, we see AI not as a threat, but as a very important enabler. Many of the largest companies in the world across a variety of industries who are themselves pouring millions, if not billions of dollars into building AI capabilities throughout their organizations are at the very same time turning to Franklin Covey every day to help them navigate the vital leader and people elements of alignment, trust, change and execution. For example, we're currently partnering with one of the largest technology companies in the world, a leader in AI, who engaged us to work with one of the key teams in their organization to speed their progress in making sure they stay at the forefront of the AI race. For this organization, speed will make all the difference. And while they have the best AI engineering capability in the world, their speed is impacted by the level of trust, alignment and collaboration they're able to achieve. These are among the very breakthrough behaviors Franklin Covey excels at helping leaders address, and we're partnering with those organizations to implement our speed of trust solution. Leading in the current environment is perhaps more difficult than it's ever been, and Franklin Covey is a trusted partner to leaders around the world. Last March, we held our first ever virtual Impact Conference, and we were pleased to have 20,000 people registered to attend. Building on the success of that first conference yesterday, we kicked off this year's Impact Conference and are pleased to have not 20,000, but 30,000 leaders and individuals joining for sessions throughout this week focused on disruption, trust, AI and leadership. Second, we continue to invest in proven high-impact content and services. Our trusted frameworks like the 7 Habits, the Speed of Trust, the 4 Disciplines of Execution, Leader in Me and a host of others continue to deliver measurable client outcomes. Our average Net Promoter Scores are very high. And when I say very high, they're in the 70s and for some of our offerings in the 80s. These solutions have generated billions in cumulative revenue and immense value for our clients. Third, we leverage technology to scale performance. Our impact platform integrates content, services and technology to deliver solutions globally in multiple languages and at every level. We followed a similar model in education where Leader in Me now serves more than 8,000 schools worldwide. Importantly, we're now embedding AI across all of our offerings, providing real-time coaching, feedback and reinforcement. For example, in our Helping Clients Succeed sales transformation solution, AI now supports sales professionals with live deal coaching and objection handling to improve win rates. We view the combination of our best-in-class content, our expert facilitation and coaching services and AI as a powerful combination of capabilities to help our clients accelerate leadership, culture and execution results. And fourth, we rebuild our business model to support long-term client partnerships. We created the All Access Pass and built a deep ecosystem of implementation strategists, consultants and coaches dedicated to lasting partner for life relationships. The second key priority that I'll just talk about for a minute here is that of transforming the way we go to market to win more strategic clients and to expand our work with existing ones. Over the past 3 quarters, we completed this transformation, reorganizing our sales and client success teams around 2 clear goals: first, landing new strategic clients; and second, expanding relationships with those we already serve. This structure is now fully in place, and it's delivering strong early results across 3 areas. The first area is around new client wins. New client growth is up both in volume and deal size with higher services attachment driven by clients who desire collective behavior change and a partnership with us to help them do that. For example, in the fourth quarter, we won a new client. It's a global ingredient processing manufacturer. This resulted in approximately $250,000 contract that's comprised of around $50,000 in subscription revenue and $200,000 in subscription services. This client is partnering with us to equip their leaders to lead through a high degree of change and to drive performance during a period of rapid expansion for them in their business. And they not only want access to our content and tools and frameworks, but to our expert coaches and facilitators as well to really drive and cement the behavior change that they're seeking to achieve. The second area and evidence of acceleration is around client retention and expansion. More clients are extending subscriptions, adding services and broadening their reach. Even in a more difficult environment where some clients have had to adjust over this past year, the overall size of their subscription, and we did lose a couple of clients we talked about last quarter, including a couple of government contracts. We continue to achieve the same high percentage of overall client retention that we've been able to achieve over many years, providing a very strong base for expansion both in terms of subscription seats and services this year into that existing client base. And the third area is our subscription services attachment. I mentioned this briefly, but I'll just touch on it again. Despite tighter client budgets, enterprise services attachment overall was a strong 53% in fiscal '25. And as I mentioned a minute ago, it was an even stronger 56% in North America this last year. And through the first 2 months of this year, as I mentioned, North America services bookings are up double digits year-over-year, which is a leading indicator of future services revenue. While fiscal '25 results didn't turn out like we expected at the beginning of the year, due to DOGE related government slowdowns, midyear tariff uncertainty and short-term effects of our own transformation. The lead metrics are strong, and our momentum accelerated through year-end and continues into the first quarter of fiscal '26, setting us up for strong invoice growth in fiscal '26 that, as I mentioned, will lead to growth in fiscal '26 and even more reported growth in fiscal '27. Shifting gears to Education. We're pleased with the continued strength of our Education business. Despite a difficult and uncertain education environment this past year, where we saw the Department of Ed threaten closure and shrink in size and where large amounts of federal Title dollars were initially available, then pulled back and then only restored very late in our fiscal year. We're pleased that Education reported revenue growth for the year overall that our Education subscription revenue grew 13% in the fourth quarter and 10% for the full year, that our balance of deferred revenue increased 13%, establishing a strong foundation for accelerated growth in fiscal '26. And that we were able to bring on 624 new schools and the school retention remained a very high 84%, which was equal to the year before, which we felt quite good about in the environment. Just a closing perspective here before I turn the time over to Jessi. As we enter fiscal '26, I feel confident in both our progress and our direction. I'm pleased with the progress our teams are making, and I'm grateful for the clients who continue to trust us. And I'm confident that the strategy we've been pursuing will continue to create value in the years ahead. I'd now like to turn the time over to Jessi, and she'll share more detail on our results in the fourth quarter and for the full year and also lay out our guidance for fiscal '26. Jessica Betjemann: Thanks, Paul, and good afternoon, everyone. Franklin Covey continues to see healthy demand for our products and services in the fourth quarter despite the ongoing macroeconomic and industry headwinds. And as Paul discussed, the strategic investments we've undertaken to transform our go-to-market strategy are gaining traction. As shown on Slide 6, our fiscal year 2025 results were in line with our most recent guidance provided on our third quarter earnings call on both revenue and adjusted EBITDA. Fiscal 2025 was a year of transition and transformation. I'd like to take a step back and provide a reminder of the events that took place this year that impacted our financial performance. At the beginning of the fiscal year, we laid out a strategic go-to-market transformation plan for the Enterprise North America segment, which required significant SG&A investment that would result in an approximate $50 million decline in year-over-year EBITDA but enable significant future growth -- revenue growth starting back in the back half of the year and beyond. As we implemented these growth investments, several unanticipated macroeconomic factors unfolded starting in January, including threatened or enacted tariffs that created significant business environment uncertainty for our clients, specific actions to cut U.S. federal government spending, ongoing geopolitical tensions and a general weakening of economic conditions, both domestically and internationally. In response to the economic uncertainty, many of our current and prospective clients sought to reduce their spending to maintain their profitability, which led to delayed decision-making and decreased contract expansion. The government's actions also disrupted the Department of Education and Title funds available to districts and schools across the country. All of the preceding events adversely impacted our business and financial results across both divisions for the fiscal year from our original expectations. Despite these headwinds, however, we have retained the vast majority of our client base and now with the bulk of our transformation investments coming to completion and those efforts beginning to bear fruit, we expect fiscal 2026 to be a year of focused execution where our adjusted EBITDA and more importantly, our free cash flow will return to growth this year and accelerate thereafter. In my remarks today, I'll start by providing some highlights for the fiscal year and walk through our fourth quarter financial performance. Then I'll turn to our balance sheet and capital allocation priorities. And finally, I will provide context around our fiscal year 2026 outlook. Franklin Covey generated total reported revenue of $267.1 million or $267.3 million in constant currency, which was within our guidance range. Reflecting the macroeconomic factors I just summarized, revenue was down 7% from the prior year due to a 10% decline in the Enterprise Division, which was partially offset by a 1% increase in the Education Division. A summary of our consolidated financial results is on Slide 7 in the earnings presentation. As we expected and captured in the guidance we shared in the third quarter, total revenue for the fourth quarter of fiscal 2025 was down 15%. Of this, revenue in the Enterprise Division was down approximately 22%, reflecting the government actions and macroeconomic environment. In addition, there was a $6.2 million IP contract with a large client in the fourth quarter of last year that did not repeat this year, although this client is still an ongoing client today. The Education Division was flat in the fourth quarter compared with the prior year, reflecting disruption in the Department of Education and associated Title funds, which delayed new school purchases in the spring and early summer, which we expect to recapture in fiscal 2026. Consolidated subscription revenue recognized for the year was flat year-over-year at $147.9 million. Importantly, the foundation for increased future growth remains solid and is evidenced by the 3% year-over-year increase in our consolidated deferred revenue balance to $111.7 million, which will be recognized as reported revenue in the coming quarters. Unbilled deferred revenue contracted for the year increased 7% to $48.4 million, with the total balance declining 3% to $72.8 million, reflecting the lower beginning balance at the start of the year. Gross margin for fiscal 2025 was 76.2% compared to 77% in fiscal year 2024. This reflected increased product amortization costs and softened margins in our international direct offices due to lower sales. Gross margins for the fourth quarter were 75.5% compared to 78.1% in the prior year as a result of lower margins in Enterprise North America from the recognition of the IP portion of the large contract last year that did not repeat in our non-subscription-related business, lower margins in the international direct office and also lower margins in Education as a result of shifts in product mix. Operating, selling, general and administrative expenses for fiscal '25 were $174.8 million compared with $165.8 million in the prior year, reflecting the increased associate costs from the hiring of new sales and sales support personnel, marketing and product-related costs in connection with the rollout of the go-to-market transformation in our North America segment. Offsetting these investments were the cost reductions we made in the third quarter, which resulted in $7 million in SG&A savings for the year and an annualized run rate savings of $8 million in fiscal year '26 that will be partially offset by normal investment levels this year. Adjusted EBITDA was $28.8 million or $29 million in constant currency, in line with our guidance of $28 million to $33 million. In the fourth quarter, adjusted EBITDA was $11.7 million compared to $22.9 million in the previous year, reflecting the lower revenue, gross margin and higher SG&A expenses I previously mentioned. Cash flow from operating activities were $29 million for the year compared to $60.3 million in the previous year. The decrease was driven primarily by a $20 million decrease in net income stemming from lower revenues, planned increases in spending to fuel the Enterprise North America go-to-market transformation, increased restructuring and headquarter moving costs as well as $7 million in unfavorable changes in working capital, including the impact of higher cash paid for taxes. We also had a $5 million increase in CapEx for building construction costs, and all of this resulted in free cash flow for the year of $12.1 million compared to $48.9 million generated in fiscal 2024. I'll turn now to a discussion of our business divisions. For fiscal '25, our Enterprise Division generated 70% of the company's overall revenue with Education Division generating 28% of the company's revenue. Fiscal '25 Enterprise Division revenue was $188.1 million compared to $208.1 million in the prior year. As mentioned previously, Enterprise revenue was heavily affected by canceled U.S. federal government contracts, geopolitical trade tensions and as a result, ongoing macroeconomic uncertainty. The challenging business environment adversely impacted the value of new logo sales and expansion revenue, both domestically and internationally during the second half of the year. As shown on Slide 8, the North America segment revenue was $147.6 million, a 10% decrease from the prior year. Fourth quarter Enterprise Division revenue was $45.7 million, down 22% versus the prior year, with North America being down 24% compared to the prior year. Our North America sales accounted for 79% of our Enterprise Division sales in fiscal year '25. It is important to note that 60% of the Enterprise Division's decline for the year was driven by declines in direct office non-subscription and services revenue, and half of that was attributable to the $6.2 million North America IP contract that I previously referenced. This is an indication that our core subscription-related business is still fundamentally strong, declining by 5% year-over-year, reflecting the macroeconomic factors previously discussed. Adjusted EBITDA for the North America segment decreased to $27.4 million for fiscal 2025 compared to $46.6 million last year due to lower revenue and increased SG&A expenses tied to our planned go-to-market investments. Our fourth quarter adjusted EBITDA in North America was $7.6 million compared to $16.2 million in the prior year and again, mainly driven by the large IP deal recognized in the fourth quarter of the prior year. Our balance of billed deferred subscription revenue in North America was $46.7 million at the end of the fourth quarter, down 5% from the prior year and unbilled deferred revenue was $67.6 million, down 1% compared to last year. Importantly, the number of North America's All Access Passes contracted for multiyear periods increased to 57% in the fourth quarter, and the contracted amounts represented by multiyear contracts remained strong at 60%. Turning to the international direct operations. As shown on Slide 9, revenue for our international direct operations, which accounts for approximately 16% of our total Enterprise Division revenue in fiscal '25 was $29.3 million, which is now -- which was down from $33.3 million in the prior year as a result of our business in Asia and the U.K. decreasing due to challenging business conditions as a result of geopolitical and trade tensions. Revenue in the fourth quarter from these offices was $7.4 million compared to $8.8 million generated in the fourth quarter of the prior year. Adjusted EBITDA for the international direct operations segment was a loss of $0.4 million in fiscal '25 compared to a positive $3.4 million generated in the prior year. This loss was primarily driven by the decreased revenue, whereby the segment was not able to absorb all of the cost allocations distributed to them. Adjusted EBITDA in the fourth quarter was $0.5 million, which was down from the $1 million generated in the prior year. Our international licensee revenue, which accounts for approximately 6% of our total Enterprise division revenue in fiscal '25 was $11.1 million, down 3% compared to the prior year. International licensee revenue for the fourth quarter was $2.4 million, which was essentially flat with the previous year. Adjusted EBITDA for the international license segment was $5.5 million for fiscal '25 and $1 million for the fourth quarter, both slightly down compared with the prior year. Turning now to our Education Division, as shown on Slide 10. Education Division revenue in fiscal '25 was $74.6 million, which was 1% higher than the prior year as lower material sales were offset by increased coaching and consulting revenue. The lower material revenue was primarily due to a new statewide initiative in the second half of fiscal '24 that included a significant amount of training materials in the initial phases of the program. Revenue for the fourth quarter of this year was $24.4 million, which was slightly higher than prior year. Education subscription revenue increased 10% in fiscal '25 to $45.9 million. Combined subscription and subscription services revenue was $69.4 million, up 4% versus the prior year. Education subscription and subscription revenue in the fourth quarter was $23.3 million, up 3% compared to the fourth quarter in the prior year. Adjusted EBITDA for the Education Division in fiscal ' 25 decreased to $8.2 million compared to $9.8 million last year, reflecting increased SG&A for associate expenses. Adjusted EBITDA for the fourth quarter was $6.2 million compared to $7 million in the prior year. Education's balance of billed deferred subscription revenue increased 13% to $54.6 million, establishing a strong foundation for continued growth in fiscal '26. We are seeing good momentum in our Education Division, particularly in the number of large state and district level opportunities we are actively pursuing. This pipeline strength, together with the base of more than 8,000 schools globally at the end of August, gives us confidence in the demand for the kind of outcomes our Leader in Me solution delivers. I would now like to spend a few minutes discussing our balance sheet and capital allocation priorities. We continue to pursue a balanced capital allocation strategy focused on 3 primary areas that are aligned with our strategic goals. First, maintaining adequate liquidity. Our business continues to produce reliable cash flow and our liquidity remains strong at over $94 million at the end of the fourth quarter with $31.7 million cash on hand and no drawdowns on the company's $62.5 million credit facility. Second, investing for growth. We will continue to invest in strategic opportunities to drive improved market positioning, accelerated profitable growth and financial value, such as continued spend in product innovation, business transformation initiatives and opportunistic acquisitions. And finally, returning capital to shareholders as appropriate is our third priority. In the fourth quarter, we purchased approximately 168,000 shares in the open market at a cost of $3.3 million. For the full year, we purchased approximately 791,000 shares in the open market at a cost of $20.4 million. On August 11, 2025, the Board of Directors approved a replenishment of the previous authorized plan to purchase up to $50 million of common stock. On August 14, we initiated a 10b5-1 plan to purchase $10 million of our common stock. This plan was completed in the first quarter of fiscal '26. We remain committed to being disciplined stewards of capital while staying focused on driving long-term value creation. Now turning to our financial outlook for fiscal '26. The company's projections reflect the positive momentum we are seeing and expecting in both the Enterprise and Education Divisions, balanced with a disciplined view of the risks and opportunities ahead as we continue to execute in an uncertain macro environment. We expect to achieve solid growth in invoiced amounts this year. However, net reported revenue growth this year will be constrained in comparison, driven by the lower deferred revenue generated in fiscal '25 and the conversion lag of invoiced to reported revenue in the year as a portion of the invoiced growth will go onto the balance sheet as deferred revenue. As shown in Slide 11, we currently expect fiscal '26 revenue in the range of $265 million to $275 million. We currently anticipate fiscal '26 adjusted EBITDA in the range of $28 million to $33 million, capturing the benefit of our cost reduction efforts, including additional restructuring actions taken this quarter while maintaining flexibility to manage through continued macro uncertainty. We expect both revenue and adjusted EBITDA to be weighted towards the back half of the year. We anticipate approximately 45% to 50% of fiscal year revenue will be recognized in the first half, reflecting normal seasonality, especially in the Education Division and the timing of client delivery. For adjusted EBITDA, we expect approximately 30% to 35% to be generated in the first half, with margin expansion expected as cost savings and operating leverage build through the back half of the year. Given the volatility we experienced in fiscal '25 and the continued challenging market environment, we would like to execute our strategic and operational plans in the current and upcoming near-term quarters before providing specific longer-term guidance. However, while most of the projected strong growth in invoiced amounts this year will not translate to high reported revenue growth in fiscal year '26 itself, we anticipate this will result in meaningful top line growth in fiscal '27. With the bulk of our transformation investments coming to completion and the expected increase in operating leverage, we believe the company will deliver strong EBITDA and free cash flow growth with improved margins and free cash flow conversion in fiscal '27 and thereafter. We have strong conviction in our strategy and long-term plan, and we're confident in the company's ability to deliver sustainable growth. Our optimism is grounded in strong client retention, expanding demand for leadership development and breakthrough organizational performance services across both Enterprise and Education Divisions, and the continued strength and resiliency of our business model. As mentioned at the start of my remarks, we view fiscal '26 as a year of execution and the return to growth and fiscal '27 as a year of acceleration and compounding growth in revenue, adjusted EBITDA and free cash flow. We remain fully committed to creating long-term value for our shareholders and clients. Before I pass it back to Paul, I would like to thank the entire Franklin Covey team for their hard work and dedication to our business and for providing unparalleled services to our clients. Paul, now I'll turn it back to you. Paul Walker: Thanks, Jessi, for that review of the year and for laying out the guidance. Thanks all of you for joining today. We'll now look forward to asking the operator to open the line and taking your questions. Operator: [Operator Instructions] And our first question comes from Jeff Martin of ROTH Capital Partners. Jeff Martin: I apologize I was late on the call, so some of these questions might be redundant to what you've already had in your prepared remarks. But I was just curious if you could give us a sense of kind of how the decision-making environment has evolved the last several months here. And then also an update on how your sales transformation has performed in the past quarter relative to expectations. I'll just -- I'll cut it off there. I have a couple of more questions on top of that. Paul Walker: Okay. Great. As far as the decision-making environment goes, I would characterize it this way. I would say that we launched last year and at the time we talked at this time last year, we were kind of on the eve of the new administration. And after we got done reporting the year-end, the year before, we started to see then some of the uncertainty show up in the market as the new administration came in and started to enact some of the policies and decisions they made. And that created a fair bit of turbulence during a good bulk of last fiscal year. We talked about that a lot. I won't go back and dwell on that. But the reason I start there is to then kind of contrast that with where we are today. I would say that we -- having come through that period of turbulence and uncertainty, I think the team is doing a nice job of navigating that. And while I'm not sitting here today saying that the environment is all of a sudden a lot more certain than it was, there's still uncertainty out there. I think our -- we're dealing with that uncertainty better today than we were certainly November through April, May last year during that period there. And so I would say the environment is -- there's still uncertainty. We're seeing, though, as it trickled down, our clients have kind of moved from a lot of uncertainty to, okay, we've got to keep moving our businesses forward. We saw budgets start to free up and loosen up a little bit, and that's been reflected in. I think that's being reflected now as we move to your second question of how is the transformation going or the sales transformation going. We're really seeing some of the evidence of both that us navigating the uncertainty and maybe a little bit more certainty in some of our clients' decision-making plus then just us now being 3 quarters into this transformation. And you might not have been on the beginning there, but just to quickly recap a couple of things I said. We're seeing some strong indicators that we'll have a good invoiced growth in the first quarter in Enterprise North America. Our new logos count and the size of new logos are up in the first 2 months here in September and October. Our services booking pace is up quite significantly, double digits over what it was a year ago. And so we look at those things as evidence that we're starting to gain some traction here with the go-to-market transformation, and we're doing that in an environment that's not tremendously more certain, but I think for us, we're navigating that environment better than we were certainly back in the December, January, February, March-ish time period. Jeff Martin: Great. And then could you comment on the renewals? Are clients renewing at similar size contracts? Are they contracting a little bit? Are they expanding? What's been your recent? Paul Walker: Yes, great question. So I would start first with, when we look at renewals, we look at renewals on -- through 2 lenses. One is the percentage of clients overall that we retain, which is a client count retention metric. And then we look at the revenue associated with those clients we're retaining. One of the things we're pleased with is that the percentage of overall clients staying with us has remained very consistent and very steady. So we've now been in the all Access Pass game for about 10 years and measuring client retention for 10 years now. And while we don't -- we haven't disclosed that number specifically, I'll just tell you that the percentage rate we're achieving today and that we even -- we achieved throughout this last fiscal year amid all that uncertainty has remained quite consistent with where it was even in the heady years where interest rates were really low and the economy was quite different. So we feel good about that, and we see that as an indicator of, hey, what we're doing with clients is important to them. Now that doesn't mean that there haven't been some clients who amid their own uncertainty this last year, didn't need to rescope the size of their pass. And we did see on the margin, some clients that where they might have purchased for a larger population, brought that back down for a more discrete population for that moment in time. And so that has been happening on one side. On the other side, we're seeing some clients really meaningfully expand very significantly. And so net-net, as we went through fiscal '25, the client retention was about like it had always been. The revenue retention was a little bit lower in fiscal '25, and that's part of what contributed to the decline in invoiced amounts last year we talked about. But we believe that our go-to-market focus, having a whole dedicated team of client partners who now only service those existing accounts and are in looking for expansion opportunities there that over time, we expect to begin to see the expansion outweigh any of the contraction and that this will be -- the retention -- the overall revenue retention revenue percentage we'll get back up into the historical rates we'd always be able to achieve. Jeff Martin: And then one more, if I could. Jessi, could you maybe give us a little bit of help with respect to what you're expecting revenue and EBITDA in Q1? Jessica Betjemann: Yes. So what I indicated was we're not giving specific guidance for Q1. What I indicated was kind of first half, second half type of trajectory. So from a revenue perspective, around 40% to 50% of revenue will come in first half. And the EBITDA would be around 30% to 35% in the first half. So it will be a little bit more back-end weighted in terms of first half of the year versus second half. Operator: And our next question comes from Nehal Chokshi of Northland Capital Markets. Nehal Chokshi: So I believe that you said this twice now, but I just want to make sure I heard it correct, that invoice subscription bookings for North America Enterprise is up year-over-year for basically the first 2 months of the fiscal year. Is that correct? Jessica Betjemann: Yes. Paul Walker: Yes, it is. Yes. Nehal Chokshi: Okay. That's fantastic. And that is off of what was the growth rate in the year ago period that you guys were seeing of that metric? Jessica Betjemann: In the last -- I don't have that for the last 2 months. Nehal Chokshi: For the first 2 months? Jessica Betjemann: Of last year. I don't have that readily available. Nehal Chokshi: Okay. Or maybe just the fiscal first quarter of '25? Jessica Betjemann: For North America? Nehal Chokshi: Yes. Yes. Jessica Betjemann: So the invoiced -- I have -- for total Enterprise Division, the invoiced amounts for the fourth quarter. Nehal Chokshi: First quarter, last year. Jessica Betjemann: First quarter. Paul Walker: Well, first quarter last year, Nehal? Nehal Chokshi: Correct. Paul Walker: Yes, first quarter last year. Jessica Betjemann: We'll have to come back to you on that. I don't have that readily available. Nehal Chokshi: Okay. All right. Well, just the growth that you're seeing is obviously strong evidence that the investments you're making in the hunter and farmer go-to-market model is producing results. Can you refresh us on what was working in the prior quarters? And what's been the incremental as far as working in terms of farmers versus hunters? And I know you call it differently, but sorry. Paul Walker: No, no. It's okay. We totally understand what you're -- yes, the distinction there between hunters and farmers. So I think just stepping back for a second, of course, just -- and I'll do this briefly. But the reason for making the transition in the first place is that we've grown our subscription business nicely over the time we've had All Access Pass. And we recognized for the last number of years that as nicely as we've grown that, there was a lot of potential in the market we weren't getting to, and there was a lot of potential inside the existing clients we had that we also were not getting to. And we recognize we were asking the same sales force to kind of do both to try to go after the potential in the market for net new customers and to expand inside their existing customers. That was the first reason. The second reason to make the transition is consistent with what I shared is we've been on this journey now for a few years to move our overall business to being a more strategic outcomes partner to clients. And so getting the right team in place that could sell at that level to those types of buyers. And so that was the original thesis and the original bet. We feel good about that still today, and we are beginning to see -- started to see the evidence of that last year show up in the pipelines, and we're now seeing the conversion of that pipeline beginning to happen as we -- specifically in gaining steam as we're moving into the first quarter, as I mentioned, we're seeing new logo wins up in the first 2 months. The services booking rates are up, right? So what's happening is Nehal is as we move to a bit more of a strategic buyer focused on more strategic outcomes, not only are we winning logos, but the size of those initial clients are larger because we're attaching a greater amount of services to those new logo wins as well. And I think that's indicative of solving problems that are bigger, that are more strategic where clients value and those buyers, business leaders value not only our great content and tool frameworks, but also the expert services that we can provide those clients. And the combination of those 2 things is rolling through. We're getting good conversion rates on that pipeline. And so for us now, the key measures we're looking at are how do we continue to grow the pipeline of opportunities. Part of what we did is we made a bet last year on standing up a more robust SDR function, kind of a presales function. That's been -- we have now had that for a few quarters, and that's kicking in. And so everything -- we're just moving everything righter and tighter around executing the original strategy that we put in place, and we're seeing that begin to roll through. Jessica Betjemann: Nehal, just coming back to you. I was able to track that number down for you. So the Enterprise Division because we don't report out invoiced amounts for North America, but the total Enterprise Division in Q1 of '25 was $43.7 million. Nehal Chokshi: And that was up how much percent year-over-year in that year ago period? Jessica Betjemann: Well, it was 2025, right? So it was actually down year-over-year. 7% down from the prior year. Yes. Nehal Chokshi: Got it. Okay. Very good. And so what gives you confidence that this growth in invoice subscriptions you're seeing in the first 2 months isn't just simply a year ago easy compare then? Paul Walker: Holly Proctor's here, our President of Enterprise, you want to comment on that? Holly Procter: Yes, sure. The reason why there's confidence here, as you can imagine, we are students right now, especially our large deals. So when we see multi-million -- trillion dollar deals come in, we're students of not just how we want them, but what ingredients inside that deal did we not have in our prior model. And so as we study those deals, there are several things that are pointing to the win that we didn't have in our prior model, where we're confident we likely wouldn't have won that business before. And so I'll give you an example. A large deal that we'll announce in Q1, multimillion dollar multiyear deal was a product of an RFP win. That RFP win was turned around in a handful of days based on systems that we've implemented as part of this structure. We never would have been able to facilitate that type of engagement a year ago. And so as we study these large wins and we see the system starting to work and then more volume going into the system that brings a lot of confidence that this is a trend. Operator: And our next question comes from Alex Paris of Barrington Research. Alexander Paris: Nice finish to what was a really challenging year and nice green shoots of activity in the first 2 months of fiscal 2026. I had a question about guidance also, and I appreciate the color about first half versus second half on both revenues and adjusted EBITDA. But as I look over my historical model, that's kind of the way it always is. You get more revenue and more EBITDA in the second half of the year, typically looking back before the year just ended. But what I also see that happens is between Q1 and Q2 there is a sequential decline in both. I'm wondering if this year, it might be flipped because you're claiming out of that transition. In other words, the revenue that you expect in the first half, would you think that Q2 would be greater than Q1, which is history? Jessica Betjemann: No. I think it will follow more to what we've had in the past. And remember, when the kind of the time period of Q2, you're starting to get into a holiday time period and all that. So you're going to have the normal seasonality that will come into play. So we still will have some of that. Alexander Paris: Okay. So not necessarily a decline in revenue -- sequential decline in revenue from Q1 to Q2. And the same thing for EBITDA. Jessica Betjemann: No, no. I'm saying there will be -- I mean, we would still expect a slight decline in the revenue from Q1 to Q2, similar to prior years. That seasonality is still going to continue. Yes. Alexander Paris: Got you. I was suggesting would it be the opposite of that this year, but you're saying not. Jessica Betjemann: I'm saying, no. Yes. Alexander Paris: I appreciate that. Paul Walker: Alex, part of the reason for that just is that Q2 services with the holidays. There's just fewer services delivered during the -- with December being in the holiday period. And so that always kind of shows up a little bit in the Q1 to Q2. Alexander Paris: Great. And then just a follow-up question on the sales force transformation. Any updates in terms of the size of the sales force between hunters and farmers? I think the last note that I had is you had 44 hunters and around 65 farmers. And then turnover, both voluntary and involuntary turnover in the new sales force. How is that working for you? Paul Walker: Yes. Great question. So the sales force is still very, very close, like very close to the size -- the numbers you just threw out there. I think it's the same. We haven't had any turnover in the sales force. Of course, we turned some of the sales force over last year as part of the transformation. But the folks that we have here and in place now, we have that team. I think that on a go-forward basis, where you'll see growth in the sales force in the periods to come will be on that, particularly on the new logo hunting side, where -- and as we continue to make investments on the marketing side to drive even greater leads of that sales force. That will be the factor that allows us to expand that hunting sales force. And then there's good leverage on the farming side of the sales force as we throw those new accounts over the wall and have them service them through a combination of our client partners and our implementation or our client success team. So same size as we've had, and we do expect we'll grow that. And on Education, it's roughly the same size as well right now. Alexander Paris: Okay. Helpful. And then since you brought it up Education, I was wondering if we can get a little bit more color on Education. We spent a lot of time on North American enterprise because that makes sense. It's a bigger business, and there's big changes happening on that side. But on the Education side, it was a flat year and a flat quarter in terms of revenue and gross income, a decline in adjusted EBITDA in both periods. I get it, there's a lot of disruption in Education, reduction in force. How should we think about fiscal 2026 in Education? I think the comps would be relatively easy, but whatever color you could offer, I'd appreciate. Paul Walker: Yes, Sean is here. Sean, do you want to share perspective? Michael Covey: Yes. Alex. Yes. So looking at this year, we remain quite bullish about the year. Last year was hard because 2 things happened last year. One is we had the ESER COVID relief funds expire, right, in September of '24. That hit us. And then the Department of Education shenanigans of withdrawing Title funds and reinstating them kind of left a hangover effect, where a lot of schools were hesitant to buy, purchase. We probably had 100 to 150 schools that delay we might have got in otherwise. Looking to this year, we feel good about the year and think we can get back into good solid growth like we have been doing for the last decade; for 2 reasons. One is we have -- as you can see in the data, we've got lots of deferred revenue. That grew by 13% last year. It's going to help us. We have that on our balance sheet. It's going to be recognized this year. We also have many large district and state opportunities. We mentioned that we had one big one last year. It will repeat. And so, the pipeline of the bigger opportunities is really strong. Our funding partner that we've shared before remains in place. This is a partner that helps with really hundreds of schools every year. That helps to drive demand. There's still a great need in the marketplace for what we offer. It seems to be increasing all the time, higher test scores since COVID, test scores have dropped a lot. Everybody wants to get them back up. We're good at that. Teacher retention is a big turnover problem right now in schools. We're good at that as well and then mental wellness that we address also. And then finally, I think it's hard to predict the Department of Education and the Trump administration, what they're going to do, but it's likely to get better than last year. I don't see how it could get worse. Of the Title dollars, which is where most -- where Title I is for low-income students, and that is what funds a lot of Leader in Me schools, at least in part. Most experts agree that that's not going to be touched and it's going to be safe. And whether it goes to the states or remains at the federal level remains to be seen, but there's strong support for Title I dollar. So all of that combined, all things considered, we feel good about the upcoming year and feel we can get back to some good solid growth. Operator: And our next question comes from Dave Storms of Stonegate. David Storms: You mentioned in your prepared remarks, Paul, how much AI you're starting to implement into your services. I was hoping you could maybe spend a little more time there and maybe lay out kind of what inning you think we are in when it comes to implementing AI. Paul Walker: Innings for the world, innings for Franklin Covey? No, just teasing. Yes, so I think, obviously, I think the whole world is still in very early innings on AI and trying to exactly predict where all this is going to go is -- but I wouldn't pretend to do that. I will say that where the first, where we're focused and where we see real opportunity with AI is in 2 places, and then I'll get into a little bit more specifics. The 2 areas that we see AI as an important opportunity for Franklin Covey. The first is actually what AI is doing out there with our clients. Increasingly, the deals we're winning and the existing clients we're partnering with, a common circumstance that they want help with is as the more they're implementing AI, the more it's shining a light on some of the human, people, leader, culture, collaboration, aligning people challenges. Those have always been hard parts of leadership, and they don't get easier with because you have AI. And so I think it's actually shining a light on many of the things that we are good at and have been good at for a long time. And so strategically, I think that's an opportunity for us is to really help and we are helping to be a partner in that set of circumstances and in that environment. Second, we've always had what I would -- I think is really, really fantastic content. We talk about world-class content because it is. One of the things we hear from our clients over and over again is that they value the quality of the content, the quality of the principles and frameworks and insights that it's just -- it's differential from others. We also have always had really great -- we call it services, but really what that is, is people who are going in and doing facilitation and coaching and in some places, some consulting, and they're helping schools and organizations implement this powerful content in a way that really does change behavior, change performance and lead to better outcomes. We've always had those 2 legs of the stool. AI is this really new unique third leg of the stool. And we see it as a real accelerator to add to those other 2 legs because it's this wonderful technology that allows people who are trying to change behavior and leaders who are trying to move people, it allows for better visibility into that, better -- a new type of coaching, a new way to reinforce the principles we're teaching. Our AI coach picks up where a human coach leaves off and is able to be there all the time with somebody helping and coaching them through specific situations and circumstances they find themselves in. And our clients can trust that, that what's being coached is coming from this very trusted principle-based reservoir of content. We've trained our AI coach on all of our stuff and clients can really trust that. And so for us, we view it as kind of this important third leg of the stool. And candidly, it wasn't a leg of the stool that was even available a few years ago. Nobody had come up with AI. But now that it's here, we see it as this great third piece. And so as we think about, as I made the comments that we're investing in embedding AI into our solutions, it's kind of with that third leg of the stool in mind, how does it complement our great content and our great services that we already provide our clients, and we're seeing all kinds of ways to do that. I just gave the one example earlier of the -- how it's helping with our -- Helping Clients Succeed sales performance solutions, where now not only being taught great content and learning how to use tools and not only having a great facilitator and coach personally, I've got an AI coach that's with me all the time who can give me real-time feedback on how that last sales call went, how I should position the product better next time? How do I overcome this kind of common objection? How do I get prepared for this next upcoming sales call? Those are the things that really make a difference. And for organizations, if they can improve that behavior by even a marginal amount, 5% or 10% across a large sales force, that trickles down to significantly more won revenue. And so that's just one example, and we're applying that across our leadership content, our 4 Disciplines of Execution solution. We're excited to see how this can come into our Leader in Me offerings as Sean and team are imagining what that looks like. And so I would say innings-wise, we're in the early innings. I think the world is still in the early innings, but we're quickly trying to advance into deeper into the game as quickly as we can. David Storms: Understood. That's great color. One more for me, if I could. Just earlier in the year, there was the government cuts that could be pretty directly tied to some of your results, some of the headwinds that we've seen. Are you seeing anything of this magnitude from the current government shutdown? Paul Walker: No, we're not. When we reported at the end of Q1 last year, so in January, we outlined what the impact we expected to see last year at that time. We don't expect to see anything like that this year. In fact, if anything, that might be -- we get to lap against that last year. Of course, the government shutdown at the moment. But as that government opens back up, we expect that we'll continue to win some business with the government. And actually, on a comp basis, we get a chance to kind of comp against that last year. And that hopefully -- we expect that should work in our favor somewhat this year. Operator: I'm showing no further questions at this time. I'd like to turn it back to Paul Walker for closing remarks. Paul Walker: Thanks, everyone, for joining today. Thanks for your great questions, as always. We appreciate the lengths you go to understand the business. Hopefully, this came through today, but we're pleased and optimistic about as we turn the page into fiscal '26 and what we're seeing happening on the invoice growth side that, that we expect that to trickle through this year into increased growth and really next year as those invoice amounts build up this year. So we're looking forward to that and off to a good start and just hope you all have a wonderful rest of your evening. And again, thanks for being here today. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to Sportradar Group's Third Quarter Earnings Call. [Operator Instructions] I will now hand the conference over to Jim Bombassei, Senior Vice President, Investor Relations and Corporate Finance. Jim, please go ahead. James Bombassei: Thank you, operator. Hello, everyone, and thank you for joining us for Sportradar's earnings call for the third quarter of 2025. Please note that the slides we will reference during this presentation can be accessed via the webcast on our website at investors.sportradar.com and will be posted on our website at the conclusion of this call. A replay of today's call will also be available on our website. After our prepared remarks, we will open the call to questions from analysts and investors. In the interest of time, please limit yourself to one question and one follow-up. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast. For more information, please refer to the risk factors discussed in our annual report on Form 20-F and Form 6-K filed today with the SEC, along with the associated earnings release. We assume no obligation to update any forward-looking statements or information, which speak as of their respective dates. Also, during today's call, we will present IFRS and non-IFRS financial measures and operating metrics. Additional disclosures regarding these measures and metrics, including a reconciliation of IFRS to non-IFRS measures are included in the earnings release, supplemental slides and our filings with the SEC, each of which is posted to our Investor Relations website. We may also discuss certain forward-looking non-IFRS financial measures that cannot be reconciled to the most directly comparable IFRS financial measure without unreasonable efforts. Joining me for today's call are Carsten Koerl, our CEO; and Craig Felenstein, our CFO. And now I'll turn the call over to Carsten. Carsten Koerl: Good morning, everyone, and thank you for joining us today. I'm pleased to announce another quarter of strong execution and performance. Our results further underscore our scale and position as a mission-critical partner deeply embedded in the global sports ecosystem. We achieved record quarter 3 revenues of EUR 292 million and strong flow-through with 29% growth in adjusted EBITDA and a record adjusted EBITDA margin of 29%. So far, this year, we have generated EUR 149 million of free cash flow, representing very strong conversion of 72%. In addition, we are raising our full year '25 guidance with the closing of our IMG Arena acquisition and providing our initial thoughts for '26. underscoring our accelerating growth and value creation. Given the strong momentum we see going forward and the opportunity to create significant shareholder value, our Board of Directors authorized increasing our share repurchase program by EUR 100 million, raising the total program to a size of EUR 300 million. As we discussed at our Investor Day, we are uniquely positioned to capitalize on the rapid expansion of the global sports betting market, given our scale and the depth and breadth of our content, we are driving higher take rates by growing our products and content, penetrating across our loyal client base as we continue to accelerate innovation and bring next-generation products to the market. IMG Arena fits squarely into this growth strategy. First, we would like to welcome our new colleagues and partners from around the world. IMG Arena is a highly strategic acquisition, which aligns with our core business and will fuel our next leg of growth. It further strengthens the competitive position as the scaled leader at the intersection of sports, media and betting, bringing a wealth of premium content and complements and enhances our already robust global portfolio and capabilities. As a reminder, this transaction is unique in that we are not making any payments to Endeavor, but instead are benefiting from financial consideration totaling approximately EUR 225 million. This acquisition is expected to accelerate our growth while being accretive to our adjusted EBITDA margins and free cash flow from conversion, which Craig will provide more details on shortly. This deal makes a major milestones and create significant additional opportunities for our company, enhancing our content distribution and further fueling product development. We will seamlessly integrate and monetize these rights across our highly scalable technology platform and client network, encompassing strategic relationships with over 70 rights holders, approximately 70% of these rights are spread across the 3 most betting sports, soccer, tennis and basketball. This acquisition helps fueling our flywheel, adding more must-have content and data, which in turn powers more as generation, grows NPS trading liquidity and scales our video streams. Our teams have been hard at work and now that we have closed on the deal, they have hit the ground running to manage a smooth integration and maximize revenue synergies in both the short and the long-term. While some synergies will be realized quickly, others might take more time to fully realize. When it comes to global sports coverage, we are the clear leader, and this is further enhanced with IMG. With a portfolio of over 1 million matches annually, our major partnerships are locked in long-term, providing us with a great visibility on our right costs. We just completed the first season of our extended and expanded partnership with Major League Baseball, and we saw strong performance for the season with revenues exceeding original projections. We recently renewed and extended our deal with the Spanish Football Federation to sell the international media rights for the Spanish Super Cup until 2032. This agreement ensures we keep control of global broadcast sales for the tournament well into the next decade and gives us continuing as the Spanish Football Federation exclusive international media rights partner. As we fine-tune our leading rights portfolio, we continue to drive innovation across our business, creating more cross-selling and upselling opportunities with our clients and partners. In terms of product development, we are leading to shift towards more personalized and interactive experiences. We are delivering next-generation products that shape how fans view bet and connect with the player on the field. A great example of how we are doing this is through our deepening partnership with the NBA. 4Sight Streaming, first introduced last season, has been upgraded with new features, including live shot probability, enhanced motion graphics and real-time player highlights. These updates deliver deeper storytelling and more contextual data-rich visualizations that boost engagement. One of our most exciting recent AI breakthroughs is the development of a generative foundation model for basketball, a first of its kind in sport. The model is based on a large transformer architecture, which we trained using billions of 3D body post data points from thousands of NBA matches, allowing the model to understand player movement, decision-making and game flow-through at an unprecedented level of details. This foundation model now powers predictive insights in real time, such as the expected points in the current possession, probability of the ball handler scoring in the next few seconds or how each player actions affect the teams' points per possession. These insights enhance our 4Sight Streaming product, bringing richer, more interactive visualizations to live broadcasters. In addition, this technology opened new frontiers in coaching and performance analytics, quantifying the value of every past block and shot. We see this foundation model powering our next generation of products, including coaching and scouting analytics, realistic simulating betting products, advanced visualizations for media and broadcast and more advanced AI engines for sport video games. Now turning to our managed trading services. This product continues to be a differentiator for us and a key value proposition for our clients. Turnover for the quarter was up 25% year-over-year. And on a trailing 12-month basis, we managed approximately EUR 48 billion on behalf of our clients, making us a top bookmaker globally. Our proven AI-driven trading and risk management capabilities, combined with the diversity of sports on our MTS platform enabled us to achieve a margin of over 11% for our clients during the quarter. Given the scale of our trading volume and the number of betting tickets we are managing, this gives us a clear competitive advantage, enabling us to better manage risk than the major operators. In 2026, this client group will be a clear focus for upselling and cross-selling our MTS capabilities. We also continue to make significant progress in our marketing services business. In particular, our ads business delivered record volumes on our DSP this quarter, reflecting growth demanding for our data-driven advertising solutions. We saw robust performance across multiple channels, including our affiliate business, underscoring the strong ROI of our campaigns and the scalability of our marketing platform. As discussed last quarter, we are seeing a clear trend in today's fragmented media environment with clients increasingly turning to Sportradar to enhance fan engagement across mobile streaming and connected TV platforms. Betting is no longer viewed as a stand-alone experience, but instead as an integral part of how fans engage with sport. As fan behavior becomes more interactive and sports viewership continues through transition from linear to digital and mobile streaming, our media and technology clients are looking to leverage our capabilities to drive deeper engagement and greater value across multiple channels. We have recently signed deals with a number of media platforms, including leading U.S. regional sports networks and several top national broadcasters to integrate our data APIs, streaming products and advanced analytics, delivering deeper storytelling and more contextual data-rich visualizations that boost engagement. As an example of this in our new partnership with DAZN, the global sports entertainment platform offering live and on-demand coverage across a wide range of sports and leagues. This deal makes another milestone in scaling our media business globally as we now provide DAZN the data and broadcast services across soccer, basketball, tennis, golf, American football and baseball. Our technology will power on-screen graphics, deliver real-time stats and elevate storytelling across DAZN's platforms. We also have extended and expanded our partnerships with Google and Yahoo!, providing live game day sports analytics for Google and expanding our relationships as a primary provider for sports data for both Yahoo Sports and Yahoo Fantasy. And we are excited about the customized version of our 4Sight technology we developed together with NBC for Peacock called Performance View. Debiting last night for Peacock streamed NBA games, Performance View gives fans a new way to experience the action. Performance View adds on-screen layer of data that illustrates deep analytics such as where a player is likely to score from next, helping fans understand what might happen before it occurs on the call. Now switching to a topic that has been on investor minds recently, I will touch on prediction markets. We saw prediction markets emerge in sports betting nearly 25 years ago, but their share has been limited historically given the low liquidity and the challenge pricing more complex bets, including in-game wages. The emerging market situation in the U.S. is a bit different given the current uncertainty regarding state versus federal regulation. We have seen recent moves made by certain of our league partners and clients, and we are in active discussions with them. We will work closely with our partners and clients while ensuring that we comply with applicable laws and regulatory requirements. Should the market continue to develop in the way that aligns with those standards, we see the potential for prediction markets to complement our existing business and create incremental opportunity for Sportradar. In closing, we are excited about the continued momentum we are seeing in our business and the significant strides we are making leveraging our technology and capabilities to lead the industry. Our global scale, which will be further enhanced with IMG Arena, provides us with an opportunity to continue to innovate and drive value creation. We are confident in our growth strategy and the significant opportunities that lie ahead, and we remain laser-focused on driving long-term value for our clients, partners and shareholders. Thank you. And I will now turn over to Craig, who will discuss our financial results in greater detail. Craig Felenstein: Thanks, Carsten, and thank you, everyone, for joining us this morning. Sportradar's strong third quarter results once again demonstrate the value of the unique position we have built at the intersection of the sports, media and betting industries. The relationships we have developed and nurtured with clients and partners over more than 2 decades is driving durable and consistent revenue growth. And when combined with our stable and predictable cost base, we are generating record adjusted EBITDA margins and significant free cash flow. Sportradar is leveraging our best-in-class product suite across our leading global distribution network to deliver increasing value to our league, media and sportsbook partners. And as Carsten mentioned, the closing of the IMG Arena acquisition further strengthens our competitive position as the mission-critical partner to the sports industry. I will provide more color on the expected contribution from IMG later in my remarks as it accelerates our growth while being accretive to our margin and cash flow profile. Turning to the quarter. Sportradar delivered revenues of EUR 292 million, an increase of EUR 37 million or 14% as compared with the third quarter a year ago. This growth was driven by higher uptake from our existing partners, continued strong U.S. market growth and strong trading results from our managed trading services business. We continue to outperform market growth by deepening our client relationships through cross-selling and upselling our diverse portfolio of offerings as demonstrated by our customer net retention rate of 114%. As we have discussed previously, foreign currency movements, most notably due to the U.S. dollar relative to the EUR o, continue to be a headwind and revenue growth in the third quarter would have been 17% on a constant currency basis. Looking at the individual product groupings, we delivered broad-based growth across both our betting technology and solutions products as well as our sports content, technology and services. Betting technology and solutions revenue of EUR 233 million grew 11% versus the third quarter a year ago, primarily driven by 19% growth in managed betting services, led by the sustained momentum at managed trading services from increased turnover with higher volumes from our existing customer base and trading activity from new clients as well as increased overall trading margins. Betting and gaming content delivered 8% growth during the quarter despite foreign currency headwinds, including sustained momentum in our streaming and betting engagement products due to growth in audiovisual revenues from both existing and new customers. Odds and live data products also continued to perform well, led by additional client uptake and continued U.S. market expansion. Turning to our other product group. Sports content, technology and services delivered strong results this past quarter, with revenues of EUR 59 million, increasing 31% year-on-year. Growth was led by marketing and media services, which was up 33%, primarily from increased uptake from existing and new technology and media customers and from contributions related to our expanded affiliate marketing capabilities. Contributions from integrity services more than doubled due to the uptake of products and services from our lead partners, and we delivered 10% growth versus a year ago from sports performance due primarily to price increases. Geographically, our growth continues to be broad-based with U.S. revenue up 21% and Rest of World revenue up 13% in the third quarter. U.S. revenues were 23% of our revenue mix as we continue to capitalize on the continued rapid market growth and the growing demand for our breadth of content and innovative product solutions. Aside from the impact of foreign currency on U.S. revenue, please note that our U.S. revenue mix is typically lowest in the third quarter due to the NBA and NHL off seasons. The strong revenue growth across our product portfolio translated into significant adjusted EBITDA growth in the third quarter with adjusted EBITDA of EUR 85 million, increasing 29% year-on-year. Our continued focus on cost efficiencies, combined with our predictable and stable sports rights costs enabled us to deliver significant operating leverage with our adjusted EBITDA margin expanding over 300 basis points year-on-year to a record 29% as we continue to be diligent across our cost infrastructure. Looking at the individual cost buckets this past quarter; I will be speaking to adjusted expenses to provide a breakdown of the expenses that impact adjusted EBITDA. We have detailed in the earnings release and the financial section of the earnings presentation, the bridge from IFRS amounts. This past quarter, sports rights expense increased 15% year-on-year to EUR 73 million, due primarily to the continued success of our ATP content as well as our renewed Major League Baseball partnership. We will remain disciplined and strategic with regards to any additional rights we acquire. And with all of our major rights deals locked in the long-term, including the majority of the premium rights we have acquired from IMG, we have significant visibility on sports rights costs moving forward. This visibility gives us confidence in our ability to drive operating leverage across our sports portfolio as we capitalize on the value of our high-demand sports portfolio and the premium products we have developed for our global customer base. Turning to people. Adjusted personnel expenses were EUR 72 million in the quarter, up only 4% year-on-year, driven primarily by increased headcount to support growth opportunities. Importantly, our adjusted personnel expenses continued to decline as a percentage of revenue, down 260 basis points versus Q3 last year as we closely manage headcount to ensure we are focusing our talent and resources on the most profitable growth opportunities while unlocking additional operating leverage. Adjusted purchase services were EUR 42 million in the quarter, up 14% year-on-year, primarily driven by increased cloud costs to support growth initiatives as well as higher traffic and affiliate costs related to the expansion of our marketing services business. Adjusted other operating expenses of EUR 22 million in the quarter were up 4% year-on-year, declining as a percentage of revenue. While we have achieved considerable operating leverage already this year, we continue to see meaningful opportunity to deliver sustained margin expansion over the long-term given the inherent scale we have in our business and our long-term cost visibility. As we drive further revenue opportunities and integrate IMG Arena, we will continue to closely manage our cost structure and realize the benefits of sports rights being amortized on a straight-line basis over the life of these contracts, delivering more of every dollar of revenue to our bottom line. Looking at the full P&L, we generated a profit of EUR 22 million in the third quarter versus a profit of EUR 37 million reported in the third quarter a year ago as our strong operating results were more than offset by a EUR 22 million lower unrealized foreign currency gain given FX movements, primarily associated with our U.S. dollar-denominated sports rights. Turning to the balance sheet. We continue to be in a strong liquidity position, closing the quarter with EUR 360 million in cash and cash equivalents and no debt outstanding. During the first 9 months of the year, we generated EUR 149 million of free cash flow, a free cash flow conversion rate of 72% compared to free cash flow of EUR 122 million in the first 9 months of 2024. The increase in free cash flow was driven by strong operating cash flow, partially offset by higher sports rights payments. Cash and cash equivalents increased EUR 12 million since the end of 2024 as the strong free cash flow generation was partially offset by the repurchase of 3 million shares for EUR 65.5 million as part of the secondary offering during the second quarter. Looking forward, we continue to anticipate strong free cash flow growth for the full year and a conversion rate above last year's rate of 53%. Turning to capital allocation. Given the significant momentum in the business and the value we are creating, the Board has approved a EUR 100 million increase to our share repurchase program, bringing the total authorization to EUR 300 million. To date, we have repurchased approximately EUR 86 million of stock under the program at an average per share price of $17.96. It is important to note that while we continue to see value in our shares, given our strong and durable growth and expectations for significant operating margin and cash flow expansion going forward, our capital allocation priority remains investing in expanding the long-term growth potential of the company and we will weigh returning capital to shareholders versus additional organic and M&A investment opportunities in both the short and long-term. Moving to our full year expectations for 2025. Given the acquisition of IMG Arena as well as the sustained operating momentum we are seeing across our business, we are raising our full year guidance. We now anticipate revenues of at least EUR 1.290 billion, representing year-over-year growth of at least 17% and adjusted EBITDA of at least EUR 290 million, representing growth of at least 30% versus 2024. This strong EBITDA growth translates to nearly 240 basis points of adjusted EBITDA margin expansion in 2025. While our upgraded guidance does reflect initial contributions from IMG, please note that given the timing of the acquisition close, the majority of the meaningful revenue and cost synergies we anticipate as we integrate IMG's portfolio of rights will be recognized in 2026. Given that timing, we are providing our initial thoughts for 2026, where you can see the potential benefits of the acquisition. We currently anticipate 2026 revenue growth, including IMG, to accelerate to 23% to 25% range on a constant currency basis. Please note that foreign currency will be a headwind at current rates, and we will update you on this impact when we provide formal guidance for 2026 on our year-end earnings call. As we mentioned when the acquisition was announced, we expect the IMG acquisition to be accretive to our adjusted EBITDA margins and current expectations for the consolidated company is an additional 250 basis points of margin expansion in 2026. Our strong year-to-date performance, combined with the addition of the IMG Arena sports rights portfolio, positions us for substantial growth in 2025 and beyond. We are well placed to capture opportunities in an expanding global market, deliver greater value to our clients and partners and drive increasing shareholder returns as we drive sustained revenue growth, expand our operating leverage and generate robust free cash flow. Thank you for your time this morning. And now Carsten and I will be happy to answer any questions you may have. Operator: [Operator Instructions] Your first question comes from the line of Robin Farley with UBS. Robin Farley: I wanted to just clarify on your full year '25 EBITDA raise. The release says that you're including IMG Arena, but is it fair to say that the -- just given that it's only 2 months, I don't know if there's anything to break out how much of the increase was IMG Arena versus your organic business? Just wanted to clarify. Craig Felenstein: Sure. Thanks, Robin. We appreciate the question. So, when you think about the raise in guidance for 2025, from a revenue perspective, the majority of that increase relates to the inclusion of IMG into the 2025 full year forecast, offset by a little bit of foreign currency impact on the overall base business versus our original expectations. When you think about it from an EBITDA perspective, given the strong margin expansion that we delivered in the third quarter, we are continuing to raise our expectations for the full year, including IMG. When you think about IMG overall, what we indicated when we announced the deal earlier this year was that we expect it to be margin accretive to our overall margins. The majority of that will take place, obviously, over the course of the next 12 months, but we do expect upon close that it will definitely be margin accretive at least in the first 3 months following acquisition. So, there is some contribution from an EBITDA perspective with regards to IMG in Q4. Robin Farley: So, some contribution, but it sounds like IMG might be the majority of the revenue increase, but the majority of EBITDA increase is from the rest of your business. Is that the right way to interpret that? Craig Felenstein: That's correct. Operator: Your next question comes from the line of Jason Tilchen with Canaccord. Jason Tilchen: A little bit of a follow-up on IMG. I'm just wondering now that the deal is closed, if you could share a little bit more about how conversations with some of your existing clients have gone regarding potentially including some of the additional rights in the products that they're taking and when you expect that to sort of more meaningfully show up in terms of the financial results in fiscal '26? Carsten Koerl: Jason, Carsten here. So, as you know, the deal has closed on Monday. And before from an antitrust perspective, we couldn't interact with the right holders and also with IMG directly. So, it's very early days. But of course, it's interesting and both of the big leagues here in the U.S. have reached out. PGA have reached out, Major League Soccer have reached out, and we start now discussions. It's an interesting space from a product perspective. It's still very early days, but we are more than optimistic that we can build here some innovations, which will even materialize in '26. So, the spirit is very good. Integration is good for tennis. That is more business as usual. We have now 3 slams. And here, the work is more to look on the ones which are early renewal. So, the U.S. Open, they are in 5 years. So that is more business as usual for us. We focus here more on Wimbledon and Roland-Garros, but we have already a perfect product portfolio, and we can ingest this data. We focus really on the 3 top sports, soccer, basketball and tennis. And this integration is relatively simple for us because that data goes into a machine, which we already have built it. The difference to IMG is we learned now they have 90 to 100 clients. We have around about 800. So, this content is flowing in our global distribution engine. And some of the content is already getting into the ready products for some of the sports like Golf, for example, we see very interesting and exciting opportunities. Jason Tilchen: And maybe just a follow-up for Craig. In the context of Carsten's response there, talking about sort of the magnitude of 7 to 8x increase in the number of clients you can sell these products into. Is it fair to say that the guidance that you've given for fiscal '26 in terms of the acceleration of growth related to IMG is primarily with regards to their core existing client base and not related to sort of some of the upselling leveraging your global distribution network? Craig Felenstein: No, I would answer that a little bit differently from a financial perspective. I would say that's true for 2025. When you look at the increase that we're looking at for the current year related to IMG, that's predominantly related to their existing business. But when you look over the course of the next 12 months, including what I indicated for 2026, we would expect there to be some significant uptake from our existing clients. So, you'll see that throughout the year, and it should build throughout the year. So, when we talk about our expectations for 2026, we are expecting some significant revenue synergies across our existing business given the relationships that we have and the new content that we've just obtained. Operator: Your next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Ryan Sigdahl: I want to start with integrity services, up triple digits this quarter. Obviously, a lot of news headlines, MBA, allegations, et cetera. But curious kind of if you're seeing an increased uptake. And given you have a market-leading product there, is this helping kind of from a feature in your negotiations with leagues within the many value-added things you're providing to them. But curious if this is moving up that stream. Carsten Koerl: Ryan, Carsten here. We are very proud of our integrity service and what we can do for both regulators and law enforcement agencies and the leagues. So, integrity and protection of the game is the highest interest for all the stakeholders. From our perspective, that's something which is enabling us to do the business in the betting markets, which we are doing and to expand our footprint here. Integrity is not really a service which is driving strong profits for us. The commitment here is it is a very strong enabler for going on our betting services. But we are using more and more technology. It's more and more GenAI where we are getting more and more precise on seeing inconsistencies, which is helpful for our partners. You mentioned NBA with the current things, what happens there, but it happens also in baseball and many other sports. So, we are getting more and more accurate on this, which helps sport in a very general way. So that's the commitment from an integrity perspective. Ryan Sigdahl: And just as a follow-up, curious from a customer-friendly soccer results that we've heard from many of your customers in September. Did you guys see that impacting your MPS business? And if you did, if you're able to quantify it? Carsten Koerl: Yes, we see some impact when you have only favorites winning in soccer. And as a reminder, more than 70% of our revenues are outside of the U.S. and soccer is the main betting sport. So, in start of the season, when we see favorites winning, that is from a risk management perspective, more difficult to manage. We see a very limited impact on this in our NPS, and you see the strong growth numbers. But it's, of course, not really supportive from a bookmaker perspective. It's only the favorites are winning. As a small reminder, yesterday was a different day, and we saw a couple of surprises. So, this is leveling out very, very quickly. But the first quarter was a bit weaker because of this from a trading result. Operator: [Operator Instructions] Your next question comes from the line of David Katz with Jefferies. David Katz: In a different direction, Carsten, I've heard some conversation from you in meetings with investors, et cetera, around iGaming. If you could give us some updated thoughts on how you see the opportunity set for you globally for Sportradar in iGaming and how we can start to think about that maybe hitting the model over time? Carsten Koerl: Well, like stated in the last quarter, that's for us at the moment, test period. So, we are doing this in Brazil, and we see it holistic. So, we are starting with the client acquisition. We have the ad service for this. Sport is a perfect instrument here. Once the client acquisition is done, it falls into the sports betting universe. Here, we have all the products from pure data feeds up to risk management or the full platform. We can channel switch that client based on AI and get them into the iGaming space, provide them the right product, measure the stimulation and the churn and have retention tools in between with the visualization. So that's a 360 holistic approach, which we test successfully in Brazil. There is a clear focus that once we are feeling strong enough with this product, we are looking into very scalable markets. The U.S. is such a sample. It's a very scalable market, where we believe we have to work on the portfolio that we are competitive, and we do this as we speak. From an iGaming perspective, we think there is -- it's a natural element for us because our clients usually have both licenses if they can operate in territories which license iGaming and sports betting. We have the connection to the clients. We have the technology and the platform and the approach. So, we feel very strong about iGaming to integrate this in our portfolio. David Katz: And just as a follow-up, thinking about whether at some point that could be -- require some capital to ramp? Or is that sort of minimal or not something we should think about? Carsten Koerl: David, we are looking in both. So, we are looking into organic investments, and we do this into our teams to build the right games. And we are looking into the market. Is there something which is attractive for us to follow on this strategy. But it follows our general guidance in saying what we do in M&A must be accretive to our margin, which is a tough hurdle to go, but we are looking actively to expand this service, and both are an option, the organic and the M&A expansion. Operator: Your next question comes from the line of Shaun Kelley. Shaun Kelley: I wanted to go back to the topic of prediction markets, if we could. Carsten or Craig, can we just talk about -- there's obviously a big announcement between some of these prediction markets and the NHL, which is a major partner of yours. So, can you talk about, first of all, the participation of Sportradar in that deal, if there was any? And then, I mean, second, much bigger picture, just what's the primary use case for the customers as it would relate to sort of the prediction market side of this, whereas with traditional house back books, obviously, I think we know how you participate with those customers. But here, the interface seems a little different. And what would be the sort of primary value prop or selling proposition to a very different landscape as you kind of think about these markets? And maybe, Carsten, if you could just draw on your experience from Betfair and sort of how that landscape work, that might be useful. Carsten Koerl: Shaun, I was expecting that question from a prediction market perspective. So, give me a bit more time because it's an interesting topic, I think, for all of us. In principle, we see here 3 stakeholders, and we are in a unique position because we are connected to all of them. First stakeholder is, of course, sport leagues and the teams. I had in the last 48 hours meetings with 3 commissioners about this to get their view on the situation. And the view is differentiated from some of them, they are saying the most important for us is -- and that's unique -- that's uniting all of them is the responsible gaming and the integrity of the game. So, they want to guarantee this. That's the main interest from sport. And of course, you might guess it. There is also a financial interest from sport to say if we organize these measures, we want to have a participation. And now we are coming to what is the official data used. And is there an official data used to settle what happens on the prediction market. And here, we see different views from NHL, MLB and MBA. I don't want to go here too much into the details, but you mentioned that there was a press statement from NHL. So, you see yourself that there is a different interpretation of this. But what is uniting all of them is responsible gaming integrity is on top of mind. It needs a clear rule set, and this rule set currently is not there. Second, states and regulators, their interest is player protection, and their interests are clear rules on this and license operators have to follow and comply to these rules in the territory of those states. And there is a tax interest from the stakeholders. I think this is a pretty straight play and very, very clear. Online sportsbooks, and I had meetings in the last 24 hours with 2 CEOs here, see the situation that they want to have equal competition. So, if it comes to acting in states which are at the moment not issuing gaming and gambling and sports betting licenses and they can't compete in those states, that is an issue for them. There is the illegal sports betting argument saying, if you're not licensed and if you operate in states where we can't operate, we classify this as illegal sports betting. So that's the situation. I think it would be good for all of us to lean back and see can we unite this interest from the different stakeholder groups into something which creates a framework of operation, which is a fair balance, and which is satisfying the needs of the player protection and the responsible gaming and the integrity of the sports. I'm totally certain that we will see this. There is a lot of movement in this space, but there are a lot of arguments uniting all those parties. So that is the ecosystem. As you hear, we are actively connecting. We are actively involved in this debate. I think it needs top management to be in here. From our perspective, it's an opportunity. Of course, we want to help those markets if we see that those clarifications are done and if we see that all the stakeholders are satisfied, we are ready to participate in this market. That's where it stands. Our historical learning here is Betfair is more than 25 years in the market. It didn't gain a dominant share in this market in the 25 years. But there's a reason why Betfair is doing some good businesses here. We're talking single digit from the GGR view on a global basis, which Betfair or exchanges have. So, it's a relatively small amount. We think it will be the same in the United States. It's more limited to less games. NFL is a premium sample for this, where the liquidity is high and you get relatively quickly a matching for what you want to bet on. If we speak about financial market transaction, relatively quickly, a matching offer for this. So that is the mechanism. If you have a few matches, works perfectly. It doesn't work for live betting. We see a huge live betting trend worldwide, 70% of the matches or the bets, which are wagered are live. So, from this perspective, that's not the right instrument according to our view. But for something which is high volume, that makes a lot of sense, but it needs a clear regulation. It needs clarity who is acting on the exchange, what are the rules of control? And it, of course, needs the player protection. It needs the protection for money laundering, and it needs a protection that sport is involved into this if it comes to the integrity of the game. So that's what we see. I hope I answered your questions. Shaun Kelley: That's perfect. And just a very quick follow-up. Have you been approached? And is there a use case for market makers? And have you been approached by those as potential customers of Sportradar? Carsten Koerl: Yes, we have been approached, and we are discussing this. That's the reason why I said we are ready to go here once the framework is the right framework that we can start to act. But the market maker is playing a main role here. The market maker needs high-quality data, and the market maker needs more or less 0 latency. Very important for them. We have all these services, and we can provide it to them. Operator: Your next question comes from the line of Barry Jonas with Truist. Barry Jonas: Can you just give us an update on what percent of OSB handle came from in-play in the quarter and how you see that ramping going forward? Carsten Koerl: Yes. Barry, as you know, we are not reporting constantly on this handled, but the number is roughly the same like in the last quarter. Comparing it to what we see on our MTS global business, which is roughly 70% handled from online sportsbooks for live, we see here in the U.S. roughly 50%, but the trend is picking up that we get a higher conversion on live betting. Barry Jonas: And then just as a follow-up, I believe you have a big sports right contract with UEFA up in early '27. When should we expect renewal discussions to commence? And are there opportunities to expand that contract any further? Carsten Koerl: We are in active discussions like we are with all our league partners. UEFA is a special case. They are sitting in Switzerland. We are based in Switzerland. I'm in frequent contact with UEFA. Looking now to the opportunities you heard in the call before that we launched yesterday with NBC, the performance view, which was on air. That is something which we do now also for soccer. This is a thing which is very interesting for UEFA because what we can do is we predict the next pixel. And then going forward, we can simulate what might happen in the next 4, 5 in the NBA case, 7 seconds. And these are products where UEFA sees a big use case if it comes to their global distribution and broadcast partners. So, these are things which we're actively discussing, and it involves, of course, the tracking data and the deeper data. So, these are developments which UEFA is more than interested in. And of course, we are more than interested to get deeper embedded in the value creation of this league. Operator: Your next question comes from the line of Clark Lampen with BTIG. William Lampen: I've got 2 questions. The first is going to be on IMG. You provided a framework for 2026 inclusive of the business and contributions. But I wanted to see if you could give us maybe a little bit more detail qualitatively around sort of what's assumed next year from an integration standpoint and a revenue synergy capture standpoint. Does it take a while, I guess, to have the sort of client-by-client discussions and negotiations that result in those synergies unlocks, i.e., should we imagine that, that is a bigger opportunity for 2027 rather than 2026 because that's -- there's a time component there that you can't really compress. And then as we think about the overall SRAD customer base, right now, you guys have close to 2,000 customers around 200 strategic and enterprise. Are the majority of those customers, I guess, sort of even beyond the first 200 addressable, I guess, from an incremental revenue standpoint? Or how should we think about how far and wide, I guess, the distribution of this could go? Craig Felenstein: Sure. Thanks, Clark. So, when you think about the revenue synergies, they will take some time to ramp over the course of 2026. But as I mentioned, we are now out there starting to talk to those clients immediately. Once the deal closed, we were out there having those discussions already on Monday. And we understand that when you look at the kind of content that we're acquiring, specifically soccer, tennis and basketball. These are some of the most highly demanded sports from a gaming perspective. So, a lot of the clients that we have globally will be looking for these almost instantaneously. When you think about some of the other, what I would call, synergy opportunities, certainly, we've identified items on the cost side that we're looking at that will take some time to ultimately come to fruition over the course of 2026, but the vast majority of this will be on the revenue side. The one thing I will note is that the majority of their customers, the customers that IMG had are customers of ours. So, for those clients, those clients already have a lot of these products and services, where we have the ability to upsell and cross-sell is the other 700 to 800 or so clients that we have globally on the gaming side of the house. And we have already started those discussions, and you'll see that, like I said, ramp up throughout 2026. William Lampen: Maybe just as a very quick follow-up, the 8% betting and gaming content growth that we saw this quarter, you guys called out a 250 basis points FX drag. Was that -- if we were to think about ex-FX growth for betting and gaming content, should we think about a similar FX drag on that portion of your business? Or was it more elevated or sort of less elevated or less significant for any reason? Craig Felenstein: Yes. We obviously don't guide by individual line item or talk to too much specifics with regards to the makeup of individual line items. But what I will say is your thesis is correct. When you look at the FX impact, the impact on that line item is very consistent with what it would be across the entire company in totality from a percentage perspective. So, when you're looking at growth in that segment or that product grouping, it certainly would be into the double digits without foreign currency. And when you look at that versus how it was trending in Q1 and Q2, it's very consistent performance throughout the course of the year. So, we're seeing nice, sustained momentum in our, what I would say is core businesses. Operator: Your next question comes from the line of Michael Hickey with Benchmark. Michael Hickey: Carsten, Craig, Jim, congrats guys on a great quarter, great guide as well. Carsten, you kind of nailed the predictions market piece. We appreciate that. Your experience certainly shows through. You did say you're in active discussions with all the key stakeholders here. Just in terms of timing from those discussions, should we start to see some flow-through here in '25? Or do you think the divide and the debate is deep enough that '26 is more likely? And then data integrity, obviously, is focal here. But also, curious what you're doing on the advertising side. Obviously, the market is going to heat up. Some of your operator partners are coming in, Polymarket is coming in. And so, it seems like on the media side, you might have some incremental opportunities as well. Carsten Koerl: We do. And Michael, the media side is not problematic. And we have some business already with [ Kulti ] in this perspective, it comes to client acquisition and to advertising services. So, this is something which is a nice opportunity. There's relatively high spend from those participants because it's a new market entry, and that is a less problematic service. And we are in very active discussions here to develop then also the tailor-fit product for these client groups, but we have already some services there. Michael Hickey: And then, Carsten, I think what I heard you say is when you sort of examine and live through the Betfair situation in the U.K. and you reflect on that experience in the U.S., what I think I heard you say or translated was that in regulated markets, you wouldn't expect much share from the prediction markets versus the traditional operators. I just want to confirm that I heard you correctly on that. And then the second piece, I think the big unlock here besides the incremental business you can drive from the prediction side would be that the prediction markets continue to scale, and they motivate unregulated states like Texas, California, maybe altogether half the U.S. population to accelerate legalization of traditional sports betting. Obviously, that's where the majority of your core business is. I'm just sort of curious your confidence or not that, that could actually be a catalyst for legalization and the opportunity for you. Carsten Koerl: So, let's go first on the share and the prediction markets. The nature of the business here is that you have a market maker in between and you have various levels of prices, which you can buy, and which needs then a match. So usually see 5 levels, 6 levels of the market. And if you want to lay up, let's say, $10,000, you might need to wait until you have the matching with the different levels and you might need to make compromises. So, the way how this transaction is done is significantly more complicated than sports betting. The beauty of sports betting is you can price literally everything because the bookmaker on the other side is holding then the risk, which is enabling a beautiful business for us with the MTS services. But that's the beauty of sports betting. You can price everything. You can do this live. You can price parlays up to whatever, 20x. So that's something which is not possible from the model of exchanges and prediction markets. But prediction markets are super-efficient. If it comes to 1 or 2 or 5 matches, limited number of matches, where you have a lot of liquidity that this matching goes very quickly. For example, a Super Bowl or some NFL matches. If you talk about 3,000 matches from MLB or NBA or 4,000 from NHL, that is spread much thinner, and it gets much less interesting because you do not have that liquidity to match it. So, this is what we observed for 25 years with Betfair and what Betfair observed by themselves. So, there is a very good use case if you speak about a limited number of matches where there is a high interest and it's a very sharp pricing, usually attracting more high rollers, which want to have bigger stakes for a lower commission. So, we see exactly that use case also in the U.S., and we saw already in the last couple of weeks that this is working very good. Now in your second part of the statement, you said that I'm hinting into Texas and California, which I didn't do, but I'm happy to speak about this. Yes, of course, in the talks which I have with the stakeholders, some of them said it might be an accelerator for Texas and California because what we see is a huge proportion of what goes into the prediction market comes out of those 2 states, super states, which are roughly 30% of the GDPR of the U.S. economy, if I'm not mistaken. So that is interesting. And yes, from a regulatory perspective, we see that there is more interest now out of those 2 states to understand what might be happening in a regulation perspective when this comes to play. So, I think you are not mistaken to say that this is putting a bit more pressure on regulation, which we all expected to come a bit later. Maybe that is accelerating now. So at least that's what we are recognizing. James Bombassei: Operator, we have time for one more question. Operator: Your next question comes from the line of Jordan Bender with Citizens Bank. Jordan Bender: I want to address some of the noise around the business with your exposure to certain markets, whether they're gray or beyond that. Are you able to discuss your view on this exposure? And internally, how do you make sure your data isn't ending up in markets they shouldn't be ending up in? Carsten Koerl: Jordan, Carsten here. Can you please define what is gray market for you? Jordan Bender: I guess, unregulated, untaxed, I guess some of us or you guys maybe have seen some of the reports out there that -- Carsten Koerl: Thank you for the clarification. So, we have a 4-level process. So, we are only working with licensed operators. And we have contracts which are enabling those operators only to work in the territory where they are licensed in. That's the first one. Second, we have a global compliance team, which is making an intensive KYC with every operator, and we are insisting on this that we control it. Number 3, we have an internal audit, which is looking to IP infringements. We are trying to see it in our data feeds mistakes, which we can identify and then assemble where is our content popping up. And if there is a case, where our content is popping up in markets which are not licensed, which are not covered by the contracts. Of course, we are going on those operators. That happens for a handful of cases every year, and we are monitoring this very closely. Number 4, we have league partners, which are from us requesting a vetting process. NBA and NHL is such a samples. So, for every operator who gets this content, that is a separate vetting process with the league, which is coming on top of the levels 1 to 3, which we have there. Jordan Bender: And Craig, it's the second quarter in a row that you've talked about adding headcount. The company restructured 2 years ago. So, can you maybe specifically kind of opine on where you're adding some of this talent and where you see the need for more talent? Craig Felenstein: Yes. Thanks, Jordan. So, I would say it's less about us adding talent, and it's more about using existing talent more efficiently. When you look at the personnel cost growth that we had in the third quarter, it was somewhere in the low to mid-single digits. It's obviously a step down from what you've seen historically. And that's just an example of us using our existing headcount in more efficient ways. So, we'll continue to look for ways to do that. When we put people to work or we end up adding any new headcount, we always look at what are they working on and what's the return on what they're working on. And if they're working on things that, frankly, have not taken a lot of hold, then we'll move them to projects, which have higher return parameters around them. And you're seeing that across the business. You'll continue to see that diligence in Q4, and we expect that to continue into 2026 as well. So, the days of us adding somewhere in the mid- to high teens people every single year because we're a technology company are behind us, and we're going to put our heads to work in the places that matter most. James Bombassei: We want to thank everyone for joining us for our third quarter earnings call. Now I'll turn it back to the operator. Operator: Thank you. This is all the time we have today for questions. I will now turn the call back to Jim Bombassei for closing remarks. James Bombassei: Everyone will be around for your questions throughout the day. I appreciate you joining the call. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Hello, ladies and gentlemen, and thank you for standing by. Welcome to RD Saude's Third Quarter of 2025 Earnings Call. The slide deck can be found at the company's Investor Relations website at ri.rdsaude.com.br. This conference replay will also be made available later at the website. [Operator Instructions] Before we begin, we would like to inform you that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the company's management's beliefs and assumptions as well as on information currently available to the company. Forward-looking statements do not guarantee performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that overall economic conditions, the industry's conditions and other operating factors may affect the company's future results and lead to results that differ materially from those expressed in such forward-looking statements. Today with us are Mr. Renato Raduan, CEO; and Flavio Correa, Head of Investor Relations and Corporate Affairs. I'd like to turn the conference over to Mr. Raduan. You may proceed. Renato Raduan: Good morning, everybody, and welcome to our third quarter 2025 earnings call. It is an honor to join you this morning to give you more details of our numbers and help you interpret them. And Flavio, first of all, good morning to you. Flavio de Correia: Hello. Good morning, Renato. Renato Raduan: Flavio will be here to address your questions and give you more details as well. Well, first of all, I'd like to apologize because our release was published a little bit later than expected. So sorry for that. And now let's talk about the third quarter's results. Before talking about the highlights, I need to tell you that we are very happy about this quarter. I remember that in the fourth quarter last year and the first quarter this year, I was transparent and humble and said to you that the results were lower than our expectations. And I told you that we are going to turn the key in the second quarter. And now I have to tell you that we have solid results and we are very proud of that. There are 3 factors that led us to solid results in the third quarter. First of all, we went back to the sales top line level. We were at a 12% growth and we told you at the time that we needed to go back to 14%. Right, Flavio? And now we are at 15.5% in the core business, the retail business. So that is the first factor that we are very happy about in the third quarter. And the second factor is the management of expenses. I believe that the market was positively surprised when we adjusted the costs in the second quarter, but people were afraid that the costs would go up again in the third quarter, but we managed to keep the same levels as the second quarter. We have a very healthy level of expenses in the third quarter and we need to be proud of that as well. And the third factor, the most impressive one is a 7.5% EBITDA margin in the consolidated results. If you look at the track record for a third quarter, it should be about 6.9% to 7%. Last year, it had been 7.5% exceptionally due to nonrecurring one-off events. And if you were to exclude them, it would have been 6.9% to 7%. So the top line grew, costs were under control and the structural EBITDA margin came to 7.5%, which is very solid, very consistent. And now I'd like to delve deeper into the results. First, operational results. We finished the quarter with 3,453 units, 88 openings and 6 closures. Over the past 12 months, the expansion is at about 330 openings. But more important than that is quality. Our IRR is very healthy in the new stores. So this is one of the drivers that is keeping us moving ahead. And now we are almost at the level of 3,500 units in operation. We reached 51 million active customers, 25% of the Brazilian population in the last 12 months. And we had 111 million tickets in the quarter. And again, we're not proud of the number of tickets itself, but rather the quality of the service according to the customers themselves. You can see that the NPS is 91 and that's the customer saying that we are providing a great service quality. And we had gross revenue of BRL 12 billion this quarter, a consolidated growth rate of 12.7%. And I'm going to give you more details about that on another slide. We shouldn't just look at the weighted average of retail and non-retail businesses. The 2 stories are different. And I think that the main story behind this is the 15.5% growth in retail, very solid result with almost a 5 percentage point real gain in mature same-store sales. We had a record-breaking market share with 16.8%, almost 17%. Over the last 12 months, it was one of the biggest number that we had with almost 80 bps in only 12 months. And as for digital, we got a BRL 3 billion revenue. If you annualize that, it would be BRL 12 billion in digital revenue with a 62% increase in the digital business with a penetration of 27%. I'm going to give you more details about that later. Our EBITDA was BRL 909 million, almost BRL 1 billion, in line with the growth in sales of 12.5%. The EBITDA was stable. The EBITDA margin was stable at 7.5%. But we should remember that last year, we had one-off events. And in retail alone, it was 7.9%. Our adjusted net income came to BRL 402 million with a 3.3% margin, 2 percentage points -- 0.2 percentage points higher than last quarter and a free cash flow of BRL 648 million. Now let me give you more details about our revenue. The consolidated number shouldn't be interpreted on its own. We need to break it down into the 2 stories here. First, retail with a growth of 15.5% and a drop in revenue of 17% in 4Bio. And what explains this drop is the fact that we had a pendulum effect. We wanted to grow at any cost in the beginning, but then we told you that we wanted to balance things out. And now I think that we got a little too conservative in terms of growing sales to protect profitability. But half of that drop is not even related to that. It is related to the laboratory that we used in the state of Sao Paulo for distribution through the distribution center in Sao Paulo. And the lab decided to supply products to the state of Sao Paulo through the state of Espirito Santo. And we don't have a distribution center there and that accounts for half this drop. And that happened in the middle of the second quarter. We had that effect in the second quarter, but now it hit us fully in the third quarter. And now we are signing a contract with a distribution center in the state of Espirito Santo to keep the supply coming to Sao Paulo, but also to use it for the other lines of 4Bio. We already have an action plan in course to address that, signing a contract this week with a new distribution center and also because we need to balance things out. And another factor here is the growth of 15.5%. I believe that we had some important wins here. If we look at last year, we had an increase year-on-year, but also quarter-on-quarter from the first quarter to the second and to the second to the third. We were stable for 3 consecutive quarters with BRL 10 billion. And of course, in the first quarter, we have a negative calendar effect. And revenue had become stagnant for 3 quarters. But now we can see that there was an increase since the first quarter of this year. And when we look at where this growth came for, of course, GLP-1 drugs factored in here, but not only that, we grew in HPC at 10.9%, which is a normal level. We did not need to invest more than we were already investing in the second quarter. For HPC, we continued the same level of investment and the results are now better, almost at 11%. And last year, it had been 6% and 8%. We wanted to go back to double digit numbers. And now here it is. And generics. Generics are not related to GLP-1. It grew by almost 20%, thanks to competitiveness and prices, but also it is related to the loss of a few patents. And when a patent expires, it benefits the generics, but it has a negative impact on the brand name medications. And our own brand products grew by 21%, which is very solid. And GLP-1, to be very transparent, is beneficial to us. It helps us. But again, we earned it. Throughout our history, we positioned ourselves as the best store to serve the high-income segment because we always invested in a good experience inside our stores. Some years ago, I remember that people asked us about the fact that we were so high income that we wouldn't be able to cater to the lower income segments as if it were a bad thing. But I believe that we found our way of catering to the lower income communities as well without losing that differentiating factor that puts us in a good position in the high-income segment. And now we are reaping the benefits of that. We are going to see a very high market share in GLP-1 drugs. And we earned it, thanks to everything that we did in the past. So this is a very solid sales level, much higher than the past. And that took us to an increase of 7.8% in mature stores. There's a calendar effect here. This is a record-breaking growth in mature stores. You can see here that we grew by 7.8%, almost 5% above inflation, much more solid than the growth posted in the previous quarters. It's a very solid growth. And that takes us to an impressive level of BRL 1.2 million per mature store. And we have just about 1,700 mature stores that are selling more than BRL 1 million. So this is a very solid growth trend. And the last month in the quarter was better than the first, which points to growth as well. When we go into the digital channel, we see 42% growth in our digital channels, getting to a penetration of 26.7%. There is also a point here with the penetration and sales of GLP-1, which is offering more attractive prices in digital channel. But even without this effect, all categories have grown at least 30% in digital channels and have got improved penetration. GLP-1 analogs has improved our penetration numbers, but all categories have grown at least 30% in digital channels, extremely robust. Of the BRL 3 billion, 80% of it was from the app, which is a major strength of us and 97% of our deliveries are provided within 60 minutes. So convenience to our customers, which is really a landmark. Customers are happier with our experience with an [ NPS ] in the app and also delivery, but we have 6 million digital customers. Of the 50 million customers, 30 million bought in the quarter, 6 million bought through digital channels and they represent 41% of our sales. Online sales, 26.7%, but digital customers who buy online, they amount to 41% of our sales. This is a very important strength. When you have nearly 40% of your sales of customers who are used to our app, who are operating in the digital channels, they really benefit from that 60-minute delivery period, while having customers migrating to other competitors would be hard because they would have to have an excellent offer, really value proposition to make them migrate. So these are digital customers who are very well served by us. Another important achievement in the quarter was the share, 16.8% with 18 bps of growth and we have gained share in all regions. Highlighted Sao Paulo here, it stands out. We've got 120 bps, highest rate of growth. Southeast 70, Center West Midwest, 140 in the South, 20 in the Northeast and in the North, 60. Consolidated North, Northeast about 30 bps. In Sao Paulo, there has been an increased growth because we expanded the opening of pharmacies in Sao Paulo. In the Northeast, let me find it here, it used to be 22 and then it went down. So this is part of our expansion strategy, but we have gained share in all regions. Another point that I would like to make out of the chart is the 30% sell-in, sell-out share. We have 30% of share in Sao Paulo with Droga Raia and Drogasil. The second most relevant network in Sao Paulo would have 16%, 18% share. So there are 2 networks in Sao Paulo getting to 50% of market share. In addition to that, there are some small players in different areas, but this is a highly consolidated market. It's quite hard for new incumbents, even for those that are already in the market with a relevant share with this kind of level of consolidation and strong brands, I would say that I don't believe competitors can benefit from any expansion of growth. State of Sao Paulo amounts to 30% of the medication market. And the market is quite hostile to small players or new incumbents. And this is the kind of consolidation that we see in this region, but not in others yet. Said that, I would like to hand it over to Flavio, who is going to talk about profitability and then I'll be back. Flavio de Correia: Thank you, Raduan. Now going into details about the financial results, let's go into gross profit. It was BRL 3.3 billion, 27.4% margin. Year-over-year, we are talking about margin dilution of 20 bps. But last year, 27.6% included the benefits of CMS of tax of 20 bps. If we exclude that tax benefit, we are talking about stable margins year-over-year. And this is absolutely important. In 2025, we've had some tailwinds and headwinds concerning dilution because of GLP-1 analogs, which were more prevalent in the market and because of competition in HPC, which was really offset by other efforts and other initiatives so much so that we got to the gross profit in the half year, similar to that of the third quarter, which is something offline because of the effect before the CMED price adjustment. So we really should celebrate getting to such high gross profit. Now talking about expenses. Selling expenses was 17.3% in the quarter. Year-over-year, we are talking about worsening of 20 bps year-over-year. But last year, we had also emphasized in our meeting that our headcount was higher and we hadn't really captured the expenses with the new headcount because they had joined the team later in the year. We are talking about expenses normalized by the team that we had at that time in terms of personnel would be 17.5%. Comparing 17.5% with this year, we are talking about a normalized dilution of 20 bps, which is really important. The expansion of headcount, we are talking about 16.5 people per store as of 15.9. It was 0.6 headcount per store, which really provides better quality of service and also work and engagement of our teams in the stores. This is really important. Now analyzing G&A and this is the main achievement we have to celebrate, something that we have started capturing the second quarter and coming stronger in the third quarter. There was no rebound effect here. The SG&A in the quarter was BRL 310 million, which is less than the number that we had last year, which was BRL 323 million. There was a significant dilution here of 40 bps year-over-year, going from 3% to 2.6%. There is a stability of this level quarter-over-quarter because of some specific pressures related with tax provisions and other things which are expected in the operation. Our expectation is to keep on improving our performance in this indicator. Now going into EBITDA, which is a sum up of all the other elements. In a [ plan ] comparison year-over-year, we are talking about stability of EBITDA margin of 7.5% in this quarter, getting to BRL 909 million. But if we exclude offset elements, 20 bps of ICMS tax and the 40 bps of personnel expenses, it would take us to a 7.5% performance as opposed to normalized values of 6.9% last year. Major achievement. This specific quarter is the best third quarter we've reached in terms of percentage EBITDA in our track record since the COVID time. Major achievement. Operationally speaking, in our cash cycle, there was a decrease in our inventory levels and an improvement in cash cycle of 3 days. Now below the P&L, we have financial expenses, which was 1.6% in the quarter over last year, which was 1.3%. This increase is due to the increase in interest rate comparing those 2 periods. So this is the best explanation for this number. It gets us to effective tax rate of 0.4% and this is a result of what we observed here at 4Bio. This rate, if we normalize it by the default number, we would get to 18%, which is exactly what we would expect as recurrent tax rate for the future, at least for the short and mid-term. And it takes us to BRL 402 million in adjusted net income or 20 bps increase year-over-year. Once again, we are not considering normalization of the basis comparing last year in terms of headcount and tax, but still very good result. And finally, this is free cash flow of BRL 558 million, very much aligned with what we expected, similar to what we used to have last year. Our net debt went down from 3.9 in the second quarter to 3.4 in the third quarter with an improvement in leverage levels getting to 1.1x EBITDA over our debt. And back to you, Raduan. Renato Raduan: Well, we've decided to have more time for your questions during this call. But here, let me just emphasize our confidence in the quarter. In the first quarter of my management trying to explain what had happened, I had never thought that we would get to such a strong quarter. I knew that we had strategy to improve. I believe that the results would be better because I know of the strength and the quality of our management team. But in the first quarter this year, I wouldn't anticipate such fast recovery and I'm so glad to celebrate that. It reinforces a number of our strengths. Yes, there had been a few financial and nonoperational deviations for 2 consecutive quarters, but we have really resumed our operational and financial strategy as a whole and performance. We have now the mature pharmacies performing quite well, we are going to have an over share in GLP-1 agonist. It's here to stay. That's going to be part of our structure. But it also evolves HPC, something that we were all concerned about, also acceleration of generic medication. So I believe we've really resumed our operations to very good levels. At the same time, despite that, we've been strengthening other elements of our operations. We've seen the amazing numbers of our omnichannel, which we've grown 62%. And in addition, we offer a very good digital journey, 97% of deliveries made within 1 year. It's difficult to come up with a value proposition better than that if you don't have a good distribution and solid operations such as we do. We have also shown that we can have an efficient management. We've managed cost without impacting deliveries, without impacting services or the corporate deliveries to pharmacies and the distribution center. We've proved that we can have very good operational management. Losses are starting to decrease and we can see a downward trend, which is something that has impacted our gross profit. And while we were fast tracking and adjusting our operations, we have reached over 25% IRR, over 25% in all regions of the country. And we're still working on this wide distribution and logistics of our operations. It's important to have presence and also to be located at the right spots or the right cities. It's not only improving operations and believe that's going to optimize sales forever. You have to be placed at the right spots to sell more. Otherwise, you are just going to be limited to the potential of that specific venue. If you combine efficient operation and the best points of sale, then we can improve our operation. Our company has very robust financial health. We have very robust results. We are improving our inventory levels, cash cycle, controlled leverage, which gives us the possibility of keep on investing where we believe we are going to make a difference. And on top of that, we try to be as transparent as possible with all of you. We are not here to sugar coat things and sell a scenario that is more favorable than it actually is. And when things are not so good, it is also our role to help people see what we see and that is added to all of the differentiating factors that we built over the course of decades with the right team and our execution capacity. And that is part of a perennial company, a company that is here to stay and all of that is built over decades and decades of hard work. It is also impressive to see our ability to adapt fast. Maybe this year was the first year where we had to adjust things so quickly. And we managed to do it and the results of the third quarter bear witness to that. And the market is going to continue to grow because the population is aging and also GLP-1 drugs and other medications that will come make the landscape for us very optimistic. We believe that there is a good trend that is leading us to the end of the year. And with that, we would like to start the Q&A session. We'll try to address as many questions as possible. Thank you very much. Just before we move to the Q&A session, there is one thing I always tell investors about. We were talking about how the entry point in 2025 was so tough with a lot of pressure on HPC and some other lines that were pulling our results down. And our ability to react, as you said, was so important for us to go back to a stable level. And that is going to be our proxy for 2026, '27 and from then onwards. This is a very important position in the retail pharmaceutical market in Brazil. It is a very solid thesis as well when we think about how the population is aging. Now let's start the Q&A session. Operator: The first question comes from Luiz Guanais with BTG Pactual. Luiz Guanais: I have 2 questions on my side, both about GLP-1 drugs. Raduan, if you could give us more color about the weight of GLP-1 drugs in your sales in comparison with the previous quarters? We can see that the number is increasing. It is getting to a high single digit or a low double digit. So that's the first question. And the second question about GLP-1. I'd like to know the effect of them on your working capital. Are you planning an aggressive policy to installment payments -- related to installment payment on those drugs? Renato Raduan: Please, Guanais, go ahead. Luiz Guanais: The second question is about working capital. If you can give us more color about the effect of the growth of GLP-1 drugs on your working capital? And if you plan to offer installment payment in this category since starting next year, we are going to see generics coming in this segment as well? Renato Raduan: Well, the first question about penetration of GLP-1 drugs, your numbers seem correct to me. In the third quarter, we stood at a high single digit, not a low double digit. And in the past, it was 5%. Now we are higher than that. And if you think about the potential of this molecule when we have a limited inventory, which didn't happen yet, I believe that we are going to move to double digit results. But in the third quarter, we were not there yet. But there's a huge potential. And obviously, when we see the generic GLP-1 drugs coming, the average price will go down, but access will increase. I think this will eventually become a category on its own. Just like OTC, HPC, we are also going to have the GLP-1 category. That's how big the potential is. And about your second question, we offer different payment methods for these drugs. In some cases, we offer a 6-installment payment method for customers. And by doing that, we can improve access. Part of the population cannot pay all of that upfront in 1 single installment. But of course, we need to be responsible. We shouldn't just generate that demand and have problems in the future because of that. But good news is part of the industry is helping us fund that payment installments because they want to increase access as well. And also, that puts pressure on receivables. But on the other hand, we are managing the inventory very well. We decreased our inventory significantly. We have been doing that throughout the year. And we see more room to do that, to continue doing that. It was a technical movement, a scientific movement even integrating departments and the impact on the cash cycle as a whole should not be that great because we have been decreasing the inventory coverage at the same time. Flavio de Correia: Just to add another point to this answer about the potential, the growth potential of this category, we're talking about 1 million consumers of GLP-1 drugs in Brazil per month. Out of the 215 million in our population, 1 million people are the target audience for that product. And as the access increases, I'm sure that we'll be able to capture more of that. And we should remember that we have a very high market share in this category of about 1/3, which is very positive. Operator: Now the second question comes from Joseph Giordano with JPMorgan. Joseph Giordano: I'd like to talk more about working capital. Over the past 2 or 3 quarters, we have seen an increase, an improvement and Raduan talked about the coverage of inventory. But I'd like to know more about the logistics. What have you been doing in terms of allocating inventory in the different stores in the different neighborhoods? I'd like to know if there is more room to improve that side of the business. And also about 4Bio, we saw a 17% decrease in your revenue in that segment. And you said that part of that is related to one specific contract. My question is, when you open the distribution center in the state of Espirito Santo, should we expect 4Bio to go back to its previous sales levels? So after the contract is signed, the financial loss would be lower. Is that correct? Renato Raduan: About the first question about cash cycle, well, last year, considering the operating challenges that we had, they included logistics issues in some specific distribution centers, which led us to take a closer look at what was happening and also to improve our policies and inventory allocation. And we realized that part of the problem with the DCs was an excess inventory, a buildup at some point in time for specific reasons. And again, we had to be very humble to understand exactly what we needed to do to improve inventory management as a whole in procurement and also regular supply to distribution centers or the pharmacies themselves. And we started that very strong movement led by Marcello, our COO, and he started to take care of the supply procurement and operation departments, bringing everybody together on the same commitment of reducing that inventory. Now we have an inventory coverage that is 6 to 7 days lower than in the past with the same disruption level that we had. It's actually lower than the past 4 to 5 years. So we are actually improving the service to our customers with available inventory, but a lower inventory as a whole, which makes our operations easier. We are not going to have so many problems with expiration of medications and losses entailed by that. So I think that our management did a great job and I'd like to take this opportunity to thank them for that. And there's still more to be done. I believe that there are other levers that are very clear for us to improve the cash cycle, which is very important when the interest rate is at 15%. So we are going to see the benefits of that on our financial expenses, too. Now 4Bio, indeed, the DC in Espirito Santo is going to help us. We are signing the contract and we are going to resume supply to the lab in the state of Sao Paulo and that is going to decrease the drop in sales and that should take place relatively fast. 4Bio is a solid business. It continues to make money and the projection for revenue is more than BRL 3 billion per year. Now that we are adjusting things, now that we are not so conservative in terms of protecting our profitability at all costs and after the operation resumes from the state of Espirito Santo, I feel certain that we are going to exceed BRL 3 billion in annual revenues. Even without that DC, the third quarter had a better performance than the second quarter because of that balance movement. And 4Bio continues to be a good business with an annual revenue in excess of BRL 3 billion. We restructured our operations, we divested in some other businesses and it was not the case with 4Bio. We decided to continue with it. And we just need to adjust things to go back to the levels that we expect to have. Flavio de Correia: And, Raduan, if we look at the gross margin in the company that is fed by 4Bio, of course, but other categories as well, I think the market gets a bit anxious about our gross margin throughout the year. If we look at the potential dilution of our gross margin due to GLP-1 drugs and due to 4Bio as well, if you do the math, you are going to see that the sales are growing at about 12.5% and the gross profit is increasing by the same rate, 12.5%. So despite the headwinds, we are still growing. Despite the potential dilutions, we are still growing. And if we have any additional performance that we can capture, we are going to distribute even more value. So I think the results are very positive across the board when it comes to profitability. Operator: And now the next question comes from Mauricio Cepeda with Morgan Stanley. Mauricio Cepeda: I have 2 questions too. First, about GLP-1 and the expiration of patents. Raduan said a few things that are in line with our thoughts about the competitive landscape after the expiration of the patents. You said that there is low availability right now, but we also know that the national laboratories are going to start producing those drugs under licenses. So in your perspective, do you think that with the low availability, the semaglutide price will continue to be high, at least in the beginning or maybe that won't be the case? Maybe the competition will be very aggressive. And the players for similars and the pure generics, do you think that they are going to offer you more discounts than other players than what we see in the small molecule market? And the second question is, you mentioned in your release that the market is going generic because it took advantage of the recent patent expirations and that helped you grow, especially in the prescription lines. But now looking forward, we can see that there's less opportunity in the generic space with the exception of semaglutide, but we can see less opportunities of losses of patents. But do you continue to be confident in the contribution of generics and how much can it exceed the contribution of brand name medications? Because we can see that there are molecules that are very competitive. Some manufacturers have a huge capacity. So do you think that the unit contribution from generics will still be significant in comparison with the brand name medications? Renato Raduan: I'm going to go with the first one. But I don't know the answer for sure. I know what everybody knows about theory. The more competitors you have in the market, the more the prices get readjusted and then price setters have to get readjusted. Mounjaro in the market, for example, has taken to readjustment of the other molecules in the market so that they wouldn't lose their share. The more players in the market, as generics or as brand names, the tendency is to have readjustment of the reference brands. But that repositioning of prices, which brings down the average ticket of the molecule because of generics or licensed products, in our opinion, it will be compensated by the increased access. Another important thing is that there seems to be semaglutide as is and liraglutide and then there would be generics coming in, that will be it. No, the industry is still investing in innovation. So Mounjaro and all the product brands, the pharma industry is developing new products, reducing side effects, et cetera. So much more than having one single product with a reference product, generic and similar product, there are going to be other molecules coming into the market with different price points and those who can afford will end up buying the most advanced drugs and the others will keep on buying the already existing ones. We've already had 2 experience. There was the MS generic. We bought it. It's sold. MS could not replace the levels and now there is a licensed product by Europharma, which is available in the pharmacies. But it all depends on medical prescriptions. Those products are not interchangeable. It's not simple, simply to replace the prescription. We have to work -- the doctors have to prescribe it. In the short term, I don't think the average prices will go down. But eventually, as there are more products, more generic and licensed products, the prices will come down. But as a market, I believe there is still room for growth because of access. Flavio de Correia: And I think the most challenging one is the word that you are using for having the market go all generic, right? The Brazilian population consumes about -- 1 million Brazilians buy GLP analogs every month. But we talk about 30% of the population having obesity. It would mean 30 million people who would fancy using the product in addition to the cosmetic aspects of the use of the drug. I would say the market still has a huge possibility of growth. If the prices come down, we would have an increased demand. And generic medications, whenever a product expires its patent, there is an increase in gross margin when we start selling the generic. We have to find the balance point. But in terms of cash, we are going to be able to generate more gross profit when the patent is expired and when we start offering new launches. For other molecules and generics, we still have very healthy gross margin, similarly to our expected levels by having the highest market share. We are the main client of the generic manufacturers. We have a very transparent open process. It's an auction of molecules as we call it. We have it every year, once a year or more frequently to know who are the ones interested in having a higher presence in our stores. And the pharma industries offer the best conditions for these molecules so that they can be more represented on our shelves. Very well transparent process. The pharma industry is aware of that. And we have maintained very healthy, safe margins because of our network of over 3,500 stores. So very healthy margins. Mauricio Cepeda: That's great. I just have a quick complementation. What about the unit prices? The prices are lower. So is it still significant? Unknown Executive: I think it's very solid and significant. This is not something that we see as a concern for our profitability for the future. In our round of discussions, we have had quite many to identify challenges and emphasize our strategies. This has never been considered a topic of relevance. Operator: Let me now invite Irma Sgarz with Goldman Sachs. Irma Sgarz: I would like to go back to gross margin. Could you please tell us more about what you've seen in terms of gross margin, excluding GLP-1 effects and 4Bio? I would like to understand really the need to keep on investing in prices and the progress that you have had in the loss of products. I would also like to know more about how we can understand the behavior of gross margin, discounting mix effects and what we can anticipate for 2026 for the fourth quarter and also Black Friday? It's a kind of promotional campaign that you haven't joined previously. And what about this year? Have you had anything in mind? Do you have anything in mind I mean? Renato Raduan: First question, the most difficult one, right, this equation and this fine-tuning. If we exclude 4Bio, I think we have good news, as we pointed out. From the second to the third quarter, we've maintained our stable gross margin at corporate sales despite GLP-1 pressures. The second quarter has higher gross margin because of the pre-price increase. The third quarter, despite that, we navigated quite well and we had almost 40 bps of negative pressure because of GLP-1. But there were some other effects that contributed to our improvement. They had had a difference over last year, our distribution center in [ Goias ], where we are consolidating the loads to improve the service in our regional operations. It also impacts our gross margin and tax effects, price management. We are still very competitive in HPC with the same level of competitiveness. But in other categories, online and offline, we've been very carefully adjusting prices product by product to have pricing efficiency gains. We haven't invested more in the third quarter than the second quarter because of competitiveness. And still, we had better performance. I haven't told you, but the performance of HPC was nearly 11% over the basis of last year that had increased 10%. We still haven't come across the low basis of HPC, which starts in the fourth quarter. The third quarter last year, HPC growth was 10%. This year is 10.9%. As of the next quarter, we probably are going to find lower levels. Yes, there are pressures on our margins. HPC, we are operating at a stable margin, but offering more promotions than we used to and we probably will maintain it. But I believe our team is finding offsets to really maintain healthy margins. Concerning Black Friday, we have told you very candidly that we were not as aggressive as we should have. And that was part of why HPC didn't grow last year. Of course, we are much better prepared for this year's Black Friday campaign. Our team has been working with it since August with the industry, with suppliers. So we are highly optimistic and confident that the Black Friday this year is going to be much better than last year. We are very optimistic for the fourth quarter, not because of the upward trend of the third quarter, but because we know the Black Friday is going to be much better than last year. Operator: Let's go now into our next question. We have now Vinicius Strano with UBS. Vinicius Strano: One about selling expenses. How can we understand the future of selling expenses? What about personnel in your stores? And something else about hiring, do you still think there are investments to be made to work on selling expenses? And in terms of inventory levels, what results from the higher turnover of sales of GLP-1? And how much of the inventory optimization has resulted from other strategies so that we can get to a normalized cash cycle? Renato Raduan: Going to your first question. Selling expenses, as Flavio pointed out, we had a lot of suppression in the third quarter last year. We were understaffed as we stated and we have come up with an appropriate headcount, 16.5, to reduce the work overload of our own staff and to improve the quality of services. And it was an investment that made sense. Part of the recovery of sales, self-service and recovery of losses resulted from the fact that we have larger teams in our pharmacies. What hasn't been reflected yet, but it's going into the fourth quarter, is the fact that we are going to have that package of benefits for distribution center personnel and pharmacist personnel so that we can improve our employee value proposition so that we can have them more engaged, happier, reducing staff turnover. We are launching a benefit, a package of benefit. We have heard our own people, managers, pharmacists, service operators, distribution center operators to know what would be the most relevant things for them so that they would be more satisfied and engaged. We wouldn't invest in something that would make no sense to them. So we listened to their request and the packet of benefit is going into effect as of October 1. I cannot tell you exactly how much was invested, but we believe it's something that's going to be diluted within our financial results. I still believe in the fourth quarter, we will have lower selling expenses than the quarter last year, of course, this is not guidance, despite all the improvements and also the improvement on our package of benefits. Once again, this is all going to be part of financial performances, which are equally good. In terms of inventories, your question is quite good. Part of the reduction of cycle, say nearly 40% of the cycle reduction resulted from GLP-1, which has very high turnover. The sales turnover is quite high, but there is 60% of the inventory reduction which has nothing to do with GLP-1. It's related to our structural work that had been done by the team, which is really improving our structure as a whole. And we believe there is more to come. These are the 2 points. GLP-1, 40% of inventory improvement. The other non-GLP-1, 60% reduction. Operator: The next question comes from Danniela Eiger with XP. Danniela Eiger: I have a few follow-up questions. The first one is about HPC. You were talking about competitiveness and I think that we can see that in our track record, you are more and more competitive and you're getting closer to the marketplaces, but the price comes at a premium still. I'd like to know what your end game is when it comes to competitiveness. Do you believe you will have to stabilize the prices for some products? We can see that you are very aggressive in some categories. So I'd like to know more about your perspective about the HPC pricing dynamic and also if you believe that you are at a sustainable or maybe comfortable level. And still about HPC, I have a question about Black Friday. You said that the performance will be better, but how much better? At the same time, we can see a very intense competition among the marketplaces. So I think that marketing will be more expensive. So is your strategy focusing on the same customers with your own data pushes? If you could give us more color on your strategy, that would be great. And a question about GLP-1. You said that you have not reached double digit numbers in that category. And you also said that the limited supply is a constraint, but we can already see a higher availability in the fourth quarter with higher doses, which also have higher tickets. So maybe in the fourth quarter, we are going to get there in the double digit numbers. I believe that there will be an improvement. And in the previous call, you talked about the higher doses that you would receive. So I'd like to know more about that as well. And very briefly, I'd just like to know more about the DC for 4Bio. When do you expect it to open in the state of Espirito Santo? Renato Raduan: Well, first, about the relative price. We know that we don't have the same prices as the horizontal marketplaces and we don't think we have to. Many customers, many surveys have told us that we have strengths that the marketplaces don't have. They have the price, but we have guarantee when it comes to the origin of the products. And customers know that in some products, that's very important. The customers, when they don't know the origin of certain products in marketplaces, they buy from us and they are willing to pay more for that. And also, we have 60-minute shipping times, which no marketplace can offer. So we have other advantages, which allow us to have a premium price. But of course, it shouldn't be that much higher. As you said, we are getting closer to their prices. And from the second to the third quarter, we saw performance going back to double digits. And we believe that that is sufficient to sustain a healthy performance. If we put together the lower price, a price that is closer to the marketplaces prices and our benefits, the benefits that we offer that they can't, we believe that that is sufficient to sustain the performance. And of course, if we feel that we need to invest more on that at some point, we are. You asked a very good question about the bloody war that will probably happen between the marketplaces during Black Friday. In the past, we had some similar wars, for example, free shipping. But what we can tell you is that we have an ambition to grow in sales. We are going to do more things than we did last year. We have a target with some industries that we want to reach and those targets are much higher than last year with a negotiated margin. So we are going to do our bit better than we did last year, but competition will tell what the end of the story will be. But we are confident that Black Friday will be better for us despite the red ocean in Black Friday. And the next question was about GLP-1, about the doses, right? Yes. In the third quarter, as I said, we did not reach double digit numbers in that category. I think that will happen, but I can't tell you if it's going to happen in the fourth quarter. I think it's going to happen even before the generics come or the licensed medications come. Once we have a full month with availability for all doses and all products, I believe that we are going to exceed double digits. But I don't know when it's going to happen because it depends on the industry, but I am optimistic about the increase in penetration in this category. And the 4Bio DCs, well, they are smaller. They have 1,000 square meters in area and they require little automation. This week, we are going to sign the contract. It has been negotiated already. We already know the location. And I was talking to the 4Bio CEO this morning because I knew you were going to ask that question. And he told me that we are going to sign the contract this week. And after it is signed, it is very easy to get it running because there's little automation. We just need to have the inventory there. And another point that I would like to add about HPC. I believe last year, the competition against the marketplaces, it was stabilized because now we can show that we have benefits to offer. I believe that we, in 6 months, were able to digest a headwind of 5 points in the speed of growth of this category. And we also are supported by the industry so that we can have a stronger footprint in this category. Our growth thesis for HPC is very much based on that partnership. A partnership brings benefits and exclusive assortment that customers can't find anywhere else. And we are omnichannel, which is critical for us. We have the beauty consultants inside the pharmacies. So all of those attributes are extremely important in this competition against the digital marketplaces. We don't think we are lagging behind at all. Operator: Next question comes from Leandro Bastos with Citi. Leandro Bastos: I have 2 questions. The first one is about expenses. You said that you are going to offer more benefits to the employees. And I'd like to know more about your 5.2 journey. Are you going to implement it? We can see some competitors in the state of Sao Paulo running on this new mode of operation. So if you can talk more about that, that would be great. And the second question is about the tax benefits. I believe that you had it in 3 states. So I'd like to know more about that. And what is the potential that you see in this arena? Renato Raduan: Can you just please repeat the second question because the audio was a bit choppy? Leandro Bastos: Sure. Is it better now? It's about the investment tax benefit. You recognized the benefits in 3 states and I'd like to know a little bit more about that. Renato Raduan: I'm going to answer the first question and Flavio is going to answer the second question. Yes, we are going to convert the pharmacies to the 5.2 mode of operation. And there is one thing related to this is the working hours. The working hours add up to 44 hours per week. When people started working from home during the pandemic, the working hours remained the same. And the 5.2 is the same with 44 hours per week, but the employee has 2 options. They can either come 6 days a week and rest for 1 day only with little time for personal -- their personal lives or they will come for 5 days, working a little bit longer each day. And the benefit on that daily effort is resting for 2 days instead of 1. And again, we decided to listen to our people to understand if that's what they wanted. In some states, we have 30% to 40% of our pharmacists working according to that model. And last year, we converted all of our pharmacists to that model. And still this year, we converted the supervisors as well. And we are in a transition phase right now. We had to listen to our employees to understand what was relevant to them. And on average, they decided to have the 5 days per week and to rest. And we actually had a vote to understand the collective preference and 75% of the employees preferred that model of working 5 days a week. So we are already converting the working hours to that model and we had to adapt and understand what time they should get there and what time they should leave so as to not impact customer service. And things are going well. I think our employees are happier because of that. And that's why we are doing it. We're doing it for them. For us, it doesn't make that much of a difference because the 44 hours won't change, but we are doing what our employees want to be happier to have more free time to spend with their families. And of course, it doesn't apply to everybody. Managers work in a different way. There are many particulars involved, but we are moving forward on this. About the tax benefits, nothing changed when it comes to taxes. This quarter, we are using the same interpretation that we had in the previous quarters when it comes to tax subsidies and the differential tax in BRL 70 million affecting our results positively is a specific case from 2022. We had some court decisions favorable to us being passed in the previous weeks. We were able to revert those numbers. Eugenio used to say that we are one of the very few companies that actually report on a lower revenue than it is in reality. We usually don't report those numbers that come from subsidies. We are considering that these numbers came from the past and we are not including them in our numbers for this quarter. But yes, we had BRL 70 million coming from the subsidies. Operator: Now next question, Robert Ford with Bank of America. Robert Ford: Congratulations on your excellent results. What's the impact of Ultra Farma issues in your market share? And how can we understand Ultra Farma from now on? In addition to working with 4Bio suppliers, are there any other benefits that we have to consider about the distribution center in Espirito Santo? Renato Raduan: Well, thank you. Thank you for your comments and for celebrating our results. We haven't really measured the Ultra Farma effect and all the events that they've been involved in. But our market share in the state of Sao Paulo had been in place even before Ultra Farma issues. We've been growing very positively in the state of Sao Paulo much before the problems they have had. The expansion of our new stores with very high IRR, mature stores. So we don't account for any growth resulting from Ultra Farma's issues because we've been growing like that very steadily for a while. Espirito Santo's distribution center, we are going with a team there tomorrow to officially open our own distribution center of RD, fully automated and we would like to show you in future interactions, highly automated, very modern with robots, with less manual intervention in one single box, there might be a much higher productivity and lower operational cost. If it opens, of course, it's going to enable also a revisitation of current -- current DC and future ones. 4Bio distribution center is different. It's going to serve the pharmacies in Espirito Santo, part of the state of Rio de Janeiro, especially closer to the frontier of the state. So the distribution center is really important there. We open about 330 to 350 pharmacies every year. We inevitably have to build one new distribution center every year so that we can keep up with our expansion. This is in Espirito Santos and there are others that are going to be opened in upcoming periods in different states so that we can keep up with our logistic challenges. Operator: Now Rodrigo Gastim with Itau BBA. Rodrigo Gastim: I have 2 questions. First, going back to GLP. You've mentioned the expectations of market expansion once patents expire. But what about the economics aspect after GLP expiration? I know it's hard to draw any conclusions yet. But what would you have in terms of gains? We know, yes, the generics bring different margins. But in terms of economics, what would be your best guess about future margins? A second topic, in the opening remarks, you said in the first quarter, you didn't expect to be so well positioned now in the second half of the year. And my question is, what has happened that surprised you? Could you please share with us the 2, 3 points that have positively surprised you in the past 6 months for taking us to that better position today? These are my 2 questions. Renato Raduan: I'm going to give you my suggestion, but I don't think it's going to be any better than yours or anyone else's. We've been trying to analyze all data. We have a Board member who is a physician and we ask about perspective. Today, we are reading a McKenzie study to get more references. But there is a consensus that once there is an increased access through generic, the demand will at least have a three or fourfold increase over the current demand of not 2024, but there should be a threefold increase over the references this year with an average price that would be cut by half. It doesn't mean that our profitability is going to cut by half because they're going to sell more generic and so on. But all in all, we believe that the gross margin in cash generated by it in the total balance will be positive and better because of the multiplication of access. We don't have the precise number, but we understand that total cash generated from GLP-1 will be higher despite lower prices, despite lower margins because of the expansion of access. Once again, this is my best guess, but the time will tell. This is what we've been learning and we talk a lot with the pharma industry to hear from them their perspective, but this is my best guess. Now your second point, we have to be extra careful because very few people trust the company so much as I do. I've been in the company for 13 years. I know it quite well because of all the positions that I have taken. I know the strengths, culture, the stores, logistics, expansion, qualification of the team, which has been really improved in the past 5 years, digital transformation. So all the things I've seen in the past 13 years have really assured me of the potential the company has for the future. So when I say that in the first quarter and second quarter, I did not expect that much of results, not because I didn't trust the company or the team. No, I strongly believe in all of us. But it was a great increase, BRL 10 billion to BRL 12.2 billion to structured EBITDA of 7.5% when the structured EBITDA for the quarter was 7%. You used to say we are priced to perfection. When we had a price to perfection, our EBITDA in the third quarter was 7%. Now it's 7.5% EBITDA with 50 bps over the previous situation of priced to perfection. So I think the intensity and the speed of growth have been marked. And I think that despite our strengths, the pride of our history, our company has very candidly understand that sometimes for 2 or 3 quarters, we can get off track. Maybe we haven't operated as much as we could. But we've recognized our mistake, humbly decided to make quick adjustments in cost structure, corporate structure, making the right investment allocations. And we've had made wrong investments, we wouldn't have had returns. It was a joint work of leadership, the support of the Board, our head office team and operations team really also by our site. And this is why we've reached so good results in the third quarter. I think it's a result of our management capabilities and our assets. 2 or 3 deviated quarters are not going to really derail us. They do not ensure permanently good results and the numbers of the fourth quarter and first quarter of the year did show that. But we had assets. We focused our energy, our best efforts, reinvested in value proposition, reinvested in propositions to our own staff. And as a consequence, we've reached good results. Operator: Tales Granello with Safra. Tales Granello: I have a question concerning SG&A and your growth on the online channel, especially because of GLP-1 sales. In the quarter, it was 2.6 and that level of expenses will keep on be at this level. But don't you expect to reinvest in digital as you did last year? Concerning the losses over income, the 10 bps that you had year-over-year and quarter-over-quarter, is it resulting from a reduction of staff? Or do you have better inventory management and right assortment? What has impacted that? Renato Raduan: Excellent questions. The first one is really important. I would like to make a clarification. Reduction and restructuring of the company to operate lightly and more efficiently has not reduced our capacity to deliver. In the past 6 months, we have had the highest level of deliveries and releases in the digital channel despite the restructure. And why? For a number of reasons. First, the team has become more mature, more seasoned, therefore, can work better. We've been working with generative AI to generate code and that has meant improved productivity and efficiency. As a team, we've brought together digital operations and direct business areas, developing things that can really make a difference to our customers. This is an important question because we can make it clear that our corporate improvement had nothing to do or was not at the cost of impacting deliverables and also customer deliveries. Our NPS in the app is better than we used to have. Our NPS of delivery is better than we used to have. And we have a recurrence level, 66% of our customers. So 2/3 of the customers are recurring clients. They like the journey, so they come back. We keep on investing in building our future, our ambidexterity. We have to be efficient in both channels and it requires investing in the future and we are being extra careful. We are going to keep on investing in digital channel, supporting the operation, but it doesn't mean that we have to go to a G&A of 2.8 or 2.9 or go back to the 3 point level. Concerning losses, I think we have to combine a number of things. Some reductions of tests in stores, some specific actions to avoid shoplifting, also the products that got expired and we then have to get rid of and we've reduced that number of expirations. There is no silver bullet, I have to say. This is the combination of a number of small actions. And when built together, they produce better results. And we are very confident that we can keep on reducing that. It was not just one action. It's a combination of a number of small actions. Operator: We now are going to hear from Ruben Couto with Santander for the last question of our Q&A. Ruben Couto: I've just -- you have online, you have Black Friday. I would like to hear your expectation, not for the fourth quarter, but for 2026. Do you think that's going to be additional investment source? Please tell us more about that. Renato Raduan: Well, I'll start and Flavio can complement. I believe it's going well. It's growing more than we expected. It's growing more than the core revenues as expected. And the growth will be double digit for a long, long time and [ Fabi ] and her team have been doing a great job and they have been making progress according to expectations. We do have a good problem, though. If you look at our first slide, our EBITDA in the quarter was BRL 909 million, almost BRL 1 billion. In order for you to do something that is going to move the needle in a mass of BRL 1 billion in revenue, it has to be something extremely significant. But it is a good problem to have. But we should remember that the business has always almost BRL 3.5 billion or BRL 4 billion per year. Any additional revenue stream will help us. We continue to be very optimistic about this business. And any additional penny will help both on the revenue side and on the cost reduction side. And Black Friday is going to be a good opportunity for us to leverage the push. It is a very good moment for us to get to a new level there. We have a different experience with some ads and we now have different interpretations on the impact of those ads and they are going to help us capture that share. Just to wrap up, I believe that we are using AI more and more in our activities and that is helping us gain scale and depth in our deliveries. Fabi is leading that initiative together with a number of other departments in our company. The ads are dealt with the entire business side of the company, bringing more value proposition than just ads alone. And with that, we are capturing an ROI much above the average in other companies or other service providers. So I believe we are going to have some tailwinds that will help us grow in this activity even further. Operator: That concludes the Q&A session for today. And now I'd like to turn the conference over to the executives for his -- for their closing remarks. Renato Raduan: Well, let me check if I have a slide about that here. I'd like to invite you to the RD Saude Day. It is going to take place on December 1. It is going to take place here in the headquarters from 2:30 to 6:00 p.m. You will have the chance to meet all the executives, not just me and Flavio. So you're all invited. It will be a pleasure to have you here and talk to you some more about our strategies and everything we have been doing to build an even brighter future. So save the date and we hope to see you all here. Some closing remarks. First, I'll repeat the obvious. Thank you. Thank you to everybody in our company. This result was extremely solid, as we said. And I am not the one responsible for that. Everybody, the 70,000 people working in this company are responsible for that. 70,000 people working according to our culture, providing the best service to our customers in the pharmacies, in the head office, in our distribution centers, they are the ones that worked hard to deliver such great results in the third quarter, exceeding our expectations. I think it exceeded your expectations as well. If you expected such a strong result in the third quarter, maybe that's because you regained the trust that you had in us. And we continue to be extremely confident and optimistic about the results in the fourth quarter and 2026 and from then on. And again, I'll keep my commitment of being as transparent as possible in hardship and also in happy moments. I will always be here talking candidly to you without sugar coating the results, but rather speaking my mind. And I continue to believe that the best is still to come. This company has been around for over 100 years. We have a lot to be proud of, but I am certain that what future holds for us is even better. We had strengths, we have strengths that are difficult to replicate, a brand that was built over the course of 120 years with credibility, trust and a culture that is easily recognized by customers that cannot be built overnight. And we are in the best locations in every neighborhood and that it cannot be replicated overnight. Not everybody can do that. The digital capability that we invested so much in, many players don't have the financial capacity to do the same. The 70,000 people that work with us already have our culture and they are growing in their careers. The managers used to work as pharmacists, the regional directors, the operation directors, they all started their careers here and that is very difficult to replicate too. International companies try to do that here in Brazil. They were not successful. Other pharmacy chains tried to do the same. They were not successful. So the marketplaces won't easily succeed either. There are players that indeed have very strong assets. And if we keep working on our strengths and if we continue to have a sharp focus on doing what's relevant for customers and our employees, protecting the execution in the present and also looking at the future with the right speed, if we put all of that together, our assets and the capacity that our team has makes me truly believe that the best is yet to come and that we are going to celebrate many happy moments in our earnings calls and we will be able to make our society even healthier. So thank you very much for your trust in us, for your interest in our results and see you in the RD Saude Day or the next earnings calls. Thank you. Operator: Thank you very much for joining us this morning. This concludes RD Saude's earnings call for today. Have a good one. [Statements in English on this transcript were spoken by an interpreter present on the live call]
Operator: Hello, and welcome, everyone, joining today's call, AMC Holdings Third Quarter 2025 Earnings Webcast. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions]. It is now my pleasure to turn the meeting over to John Merriwether. Please go ahead. John Merriwether: Thank you, Sabrina. Good afternoon. I'd like to welcome everyone to AMC's Third Quarter 2025 Earnings Webcast. With me this afternoon is Adam Aron, our Chairman and CEO; and Sean Goodman, our Chief Financial Officer. Before I turn the webcast over to Adam, I'd like to remind everyone that some of the comments made by management during this webcast may contain forward-looking statements that are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned against relying on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. On this webcast, we may reference non-GAAP financial measures such as adjusted EBITDA and free cash flow. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier this afternoon. After our prepared remarks, there will be a question-and-answer session. This afternoon's webcast is being recorded, and a replay will be available in the Investor Relations section of our website at amctheatres.com later today. With that, I'll turn the call over to Adam. Adam Aron: Thank you, John, and good afternoon, everyone. Thank you for joining us today. At AMC, we're especially pleased that with revenue of precisely $1.3 billion and adjusted EBITDA of $122 million, yet again for another quarter, AMC Entertainment comfortably beat Wall Street consensus assessments for both our revenue and adjusted EBITDA. As has often been the case in the recent past, AMC's leading market position and the skills demonstrated in the implementation of our numerous and important marketing, operations and cost containment strategies allowed us for yet another time to overperform the expectations of those who underestimate us. As we look at AMC's third quarter results and for that matter, the full year-to-date, calendar year 2025 is turning out exactly, and I mean exactly as we have long predicted. Due primarily to the timing of major studio film release dates, a weak first quarter was followed by a blazing hot second quarter, which then was followed by a softening third quarter. We continue to expect, however, that the year will culminate in what we hope will be quite a strong year-end in quarter 4. Hello Oz with WICKED: FOR GOOD, hello Disney's AVATAR: FIRE AND ASH, Indeed, a broad array of appealing movie titles will be coming out before year-end. Our prediction of a so-so third quarter industry box office turned out to be true as the North American box office declined some 11% following tough comparisons against last year's strong third quarter. But when evaluating AMC's performance in the context of the third quarter's challenging industry-wide environment, I see our company firing on all cylinders, marketing prowess, operational strength, financial discipline, all are direct evidence that AMC is very well positioned to capitalize on the box office growth that we believe lies just ahead. Remember that about 2/3 of our incremental revenue drops to the adjusted EBITDA line. So when industry revenues rise, which we believe they will in Q4 of 2025 and again throughout 2026, AMC's financial results should rise even more rapidly. The third quarter industry-wide softness should not be a cause for alarm nor a harbinger of some negative trend about which to hand ring or worry. To the contrary, we expect that this will turn out to be the highest-grossing fourth quarter in 6 years. We also continue to believe that the size of the 2026 box office will be dramatically larger than that achieved in 2025. There are clearly bright spots in AMC's third quarter financial results that bode well for AMC, with an expecting rising industry-wide box office in the fourth quarter of this year and again throughout 2026. Specifically, AMC outperformed the industry, achieving all-time record admissions revenue per patron of $12.25. In addition, food and beverage continues to be a shining success for us as we achieved the second highest food and beverage revenue per patron in our company's entire 105-year history of $7.74. Combining revenue increases with aggressive cost management, it is noteworthy that in the third quarter, we grew our consolidated contribution margin per patron by 9.2% compared to the prior year, and this metric is now approximately 54%, 54% higher than it was pre-pandemic in 2019. The improvements in our efficiency as a company are one of the reasons we are standing proud and tall today. Despite an industry-wide box office that was well below the third quarter of last year, AMC also generated improvements to cash used in operations and in free cash flow when compared to the same time of a year ago. And also looking at the third quarter, it is especially satisfying to us that in the United States, during the third quarter, AMC significantly increased its market share. so much so that in looking at studio-reported grosses for the full year-to-date, January to September, AMC's market share increase handily outshined that of any other movie theater circuit in the country. AMC's share now approximates 24% of the domestic box office versus 15% for Regal and 15% for Cinemark. Taking out Canada, where we have no theaters, AMC has a 27% share of the U.S. box office, Regal and Cinemark 16% each. Marcus has just under a 3% share. No other U.S. circuit has even a 2% share. AMC is now about 50% larger than our 2 next nearest competitors. And we are 10-ish times the size or more of everyone else. Our market share increases this year are encouraging to us and a sign that our strategies are working. But it is simply the outsized magnitude of our market share that is so particularly compelling because, as the box office grows over the next 14 months, as we believe it will, AMC is better poised than anyone else to reap the benefit there from. We believe all this sets us up so very well as we look ahead, given what AMC believes will be a rebounding industry-wide box office going forward, coupled, of course, with all the actions and improvements being made specifically within and across AMC theaters in the United States and Odeon Cinemas in Europe. As previously announced, perhaps more important than any other accomplishment during the third quarter, AMC successfully completed several transformative capital markets transactions that greatly strengthen AMC's financial foundation. We refinanced $173 million of debt maturing in 2026 and equitized $143 million of exchangeable debt, the latter of which, in turn, was subsequently increased to $183 million of equitized exchangeable debt without the issuance of any additional equity or additional use of cash. Going forward, we will continue to take the necessary actions to enhance our balance sheet and position AMC to capitalize on what we believe will be a multiyear industry recovery. In conclusion, let me add that we are tremendously excited about the film slate coming in the remainder of this fourth quarter, both with blockbuster titles and also with more intimate storytelling. It all starts this weekend with Disney’s action-packed PREDATOR: BADLANDS coupled with Sony Pictures Classics NUREMBERG. In November, we also will have Lionsgate ‘s NOW YOU SEE ME NOW YOU DON’T, Disney’s family favorite ZOOTOPIA 2, , Paramount’s THE RUNNING MAN and Universal’s acclaimed and much awaited return to Oz with WICKED: FOR GOOD. Universal’s chilling FIVE NIGHTS AT FREDDY’S, Paramount’s animated adventure THE SPONGEBOB MOVIE: SEARCH FOR SQUAREPANTS, Focus Features’ SONG SUNG BLUE and the third chapter of Disney’s epic saga from the mind of the legendary James Cameron, AVATAR: FIRE AND ASH. What a lineup of movies. With that and all the other highly anticipated films that will be coming out in November, December, in addition, we believe the fourth quarter box office will surpass that of last year and knocks 2025 as the largest post-pandemic box office year yet. Of course, that all depends on ticket sales in November and December. We'll all know for sure in about a couple of months. To put an exclamation point on that expected box office growth in the near term, if one sets aside the anemic first quarter of 2025, the domestic industry-wide box office has actually been on a $10 billion pace since April 1. That is a number that is still very much larger than the calendar year box office recorded for either 2023, 2024, or the current year 2025. What's more knowing of the long list of great titles coming from our studio partners in 2026, we envision a strong and robust film slate is on the horizon for the full year ahead. Sean, let's go into the quarter in more detail. Sean Goodman: Thanks, Adam, and thanks, everyone, for joining us today. As predicted, the third quarter was relatively soft compared to last year. Nonetheless, while the North American box office was down 11%, AMC's consolidated admissions revenue was down by only 3.9% and domestic admissions revenue was down by only 5%. This reflects the meaningful growth in our market share, thanks to the power of our premium large-format offerings, unrivaled loyalty programs, innovative marketing, promotions, and pricing. This afternoon, I'd like to focus my comments on several key third-quarter performance metrics that clearly demonstrate the underlying strength of our business. Our consolidated revenue increased by 7.5% versus last year and is now 47% above pre-pandemic Q3 2019. This remarkable growth is driven by a 60.5%, that's 60.5 6.5% increase in food and beverage revenue per patron and 33.8% increase in admissions revenue per patron, all relative to Q3 2019. These are impressive metrics yet, but even more important is the incremental profit that we generate with each additional moviegoer. Our measure of this is contribution margin per patron, and we define it as total revenue minus both film exhibition and food and beverage costs divided by total attendance. In the third quarter, we grew our consolidated contribution margin per patron by 9.2% compared to the prior year, and this metric is now approximately 54% higher than in 2019. From a segment perspective, our U.S. operations delivered a truly exceptional quarter. Consider the following: in Q3 2025, our domestic adjusted EBITDA reached $111 million. This is nearly $4 million more than in Q3 2019, despite us selling $18.9 million or 31% fewer tickets than we did in Q3 2019. This achievement was possible because domestic revenue per patron was 50% higher and domestic contribution margin per patron was 57.5% higher than in 2019. Turning to our Odeon operations. The European industry was challenging in the third quarter, with attendance at our Odeon cinemas down 11.4% versus the prior year. Nonetheless, the business continued to deliver strong fundamental results with total revenue per patron up 13% and contribution margin per patron up 14.4% compared to last year. Total international revenue per patron is now up 37% versus 2019, and international contribution margin per patron is up 42.2% compared to 2019. These results are evidence that the box office does not need to fully recover to achieve pre-pandemic levels of adjusted EBITDA. This is thanks to a combination of initiatives focused on theater portfolio optimization, operational efficiencies, food and beverage innovations, industry-leading marketing programs, and the ongoing success of our AMC Go Plan. Over the last few years, we have taken meaningful steps to optimize our theater portfolio. This includes rent negotiations, the closure of underperforming locations, and selective capital deployment in new and existing high-performing locations. In 2025 alone, we closed 20 locations and we opened 3. And since January 2020, we've now closed 212 locations and opened 65 for a net reduction of 147 theaters or about 15% of our fleet. Going forward, we'll continue to strategically manage our theater portfolio to optimize profitability. Moving to the balance sheet. We ended the quarter with cash and cash equivalents of $365.8 million. This excludes restricted cash of $51.1 million. Our free cash flow in the fourth quarter will inevitably be dependent on the box office during the next 2 months. Provided this turns out in line with our expectations, we anticipate being free cash flow positive for the 9-month period ending December 31, 2025. From a capital expenditure perspective, we expect full-year 2025 CapEx net of lease incentives to be in the range of $175 million to $225 million. Our capital allocation priorities remain: one, maintaining adequate liquidity and financial flexibility; two, strengthening the balance sheet; three, elevating the guest experience; four, pursuing high-return growth initiatives. This disciplined approach to capital allocation reflects our commitment to building an increasingly strong and resilient company to deliver long-term shareholder value. Since the beginning of 2022, we've now lowered the principal value of our debt, finance leases, and COVID-related lease deferrals by nearly $1.5 billion, and we're not yet done. We'll continue to take decisive steps to strengthen our balance sheet so that we are increasingly well-positioned as the box office recovery continues. In closing, AMC's third-quarter results underscore the meaningful progress that we have made over the last few years. With promising fourth quarter already underway, a robust firm slate ahead, and an improving capital structure, we believe AMC is exceptionally well positioned to capture the full benefit of the industry's continued recovery and to deliver long-term value for our shareholders. With that, I'll pass the call back over to Adam. Adam Aron: Thank you, Sean. Before we take your questions on this webcast, I'd like to touch briefly on 5 different points. First, AMC Theaters distribution took another bold and new step forward in the third quarter of 2025 when we partnered again with the iconic one and only Taylor Swift to highlight the debut of the 12th studio album in her astonishing career. All the planning occurred within the third quarter for our theatrical release on October 3 to 5 of the 1 weekend screening of Taylor Swift: The Official Release Party of the Showgirl. This unique theatrical event was showcased on approximately 6,500 movie theater screens in the United States and across some 56 countries, generating some $50 million in box office receipts in a weekend, $34 million domestically, and another $16 million internationally. We're proud that Taylor Swift, the official release party with Show Girl, came in at #1 in the domestic box office for its opening weekend. We're also proud that it was graded an A+ on CinemaScore and in the high 90s on Rotten Tomatoes. And as a result, that we put so many smiles on the faces of millions of Taylor Swift fans globally. These impressive results speak to the strength of AMC's innovative distribution abilities, not only bolstering AMC's results but also contributing to the health of the overall industry. The numbers of the Taylor Swift project speak for themselves. To that end, here's a number for you, 7.5. 7.5 you ask, it is incredible to think, but from start to finish, from the time of our very first phone call about this potential project to generating from some 56 countries, fully $50 million in box office ticket sales receipts, plus, of course, food and beverage revenues in addition, AMC pulled all this off in only 7.5 weeks, 7.5 weeks from first conversation to completed project. And going back to the concept of our success in increasing AMC's outsized market share in the U.S. and Canada, of course, we take some real satisfaction that our normal market share has now grown up to 24%. But on the Taylor Swift official release party of the Sogirill event, AMC's market share was an eversoullant 36%. As excited as we are by the numbers, it is especially gratifying to us that after our immensely successful 2023 experience with Taylor, she came back to AMC for another round in 2025. What a compliment it is to AMC that the Swift family was so pleased with us that they came back another time. I've said this often before, but I want to say it again. Our every interaction with Taylor, with everyone in the Swift family, and all the people in our camp, all those interactions, every single one has been nothing less than a true joy and an honor and a privilege for AMC. I say this with all the sincerity I can muster. Thank you, Taylor. We are so proud to be a small part of your team. This all leads us to believe, by the way, that while our bread and butter will always remain the vast output of the current studio system in the future, there also is clear opportunity on an incremental basis for AMC to create and distribute more theatrical content. Second point, speaking of adding more content for our screens, I am especially optimistic that we can do more on a cooperative basis with Netflix. During the third quarter, we opened a new dialogue between AMC and Netflix that led to our showing KPop Demon Hunters over Halloween weekend. Not surprisingly, given our array of theaters and our loyal customer base, AMC generated more than 1/3 of all the U.S. theater guests seeing KPop last weekend. The talks with Netflix are in their infancy, and we do not know yet the ultimate size there can be for this potential cooperation. There is much still to work out, especially, for example, on Windows. But even so, realizing that Netflix is a great company and the largest streaming service on the planet with an enormous amount of content, and that AMC is the largest movie theater chain in the world, sitting here today, I am highly confident that there is more to come with our 2 companies working cooperatively together. Stay tuned. Third, again, on generating more content, given the success we've demonstrated with Keller Swift and Beyonce, and when you factor in that we have now built the technical capability, and this is unknown to many of you, to be able to live broadcast events to 277 of our 530 theaters in the United States and to a similarly large percentage of our theaters in Europe. I believe there is dramatic opportunity for AMC to broadcast live concerts and live sporting events on our giant screens. We intend to make this pursuit one of our highest priorities for 2026. Fourth, when talking of giant screens, no one in our industry is anywhere close to AMC in the area of offering premium large-format screens, extra-large format screens, and other premium experiences. With 223 IMAX screens globally and right at around half of the IMAX screens in the United States, we are a significant recipient to share in IMAX's obvious success. Heretofore, our recent monies have been concentrated on improving the quality of our IMAX screens, enhancing them greatly through a multiyear effort to convert almost all of them to the much preferred IMAX with laser at AMC concept and format. That format includes laser projection, much enhanced sound, more attractable visual inauditorium aesthetics, and more comfortable seating. Depending upon your view of the terminology, that effort to upgrade our IMAX theaters to IMAX with laser is now either in the back stretch or the home stretch such that we are now turning our attention to another notion that we have, in fact, entered into discussions with IMAX about once again increasing the number of our IMAX locations as well. Similarly, we are so incredibly pleased with our investment in Dolby Cinema PLFs, which are doing so, so very well for AMC. We currently have 177 installed globally. And as we announced earlier this year, we are so confident in our success with Dolby Cinema that we would like to grow that count of Dolby auditoriums by around 25% over the next few years. And while today, we only have 6 ScreenX auditoriums and no 4DX auditoriums, again, early this year, we signed an agreement with CJ to exponentially increase our count of their 2 premium offerings within the AMC and Odeon fleet of theaters. Not to be outdone only by our so-called third-party PLFs, AMC also has 147 of our own house brand PLFs, primarily branded Prime in the United States and iSense in Europe. I would expect that in the next couple of years, our house brand PLF locations will also grow in numbers, and specifically that with Prime in the United States, we will double, possibly even triple, the number of our Prime auditoriums. And in a fast-moving advance for AMC, we've moved ever so quickly to introduce what we call our extra-large format screens with our new XL offerings, which I might add command a price premium in ticket price. Launched just 1.5 years ago, we already have 151 XL screens installed and delighting moviegoers, 67 in the United States and 84 in Europe. By next Christmas, that number should about double. I expect that we'll have in the vicinity of around 300 or so XL screens in full operation a year from now. You all likely know that premium large-format and extra-large format screens greatly appeal to moviegoers. But what I find particularly impressive is that we have pulled off this great commitment to increasing and enhancing our premium experiences, all the while living within our very tight $175 million to $225 million annual net capital expenditures targets. And finally, the fifth point, as you might expect, AMC is actually -- is actively canvassing how AI, artificial intelligence, can be used both to make our company more efficient, but also to dazzle our guests. We're already using AI internally in many ways, and our use cases will increase dramatically in 2026 and beyond. But especially interesting, during the third quarter, we found our first way to participate in AI-powered technology that already is dazzling those people seeking engaging out-of-home entertainment. In August, we made a single-digit multimillion-dollar equity investment in Nova Sky Stories, a company brilliantly conceived and led by its visionary founder, Tesla Board member, Kimbal Musk, and brother of Elon. Nova Sky Stories was created a few years ago when Kimbal acquired the formal aerial drone division of Intel. He has since turned its cutting-edge and leading AI-powered technology into also storytelling aerial drone shows that fascinate both free guests and paid ticket buyers alike, key in on that paid ticket buyers notion as Nova Sky Stories creatively lights up the dark evening skies with its just wonderful light shows. Nova's most recent effort was in September, a truly mind-bending Grace for the World concert and aerial drone light show that took place over St. Peter's Square in Rome in full cooperation with the Vatican in conjunction with its Jubilee. You can see footage on Disney+, which telecasted live, and stunning excerts can be found throughout YouTube. The next incredible NovaSkytory show will take place at the Rose Bowl in Los Angeles just next weekend on Saturday, November 15. For more information, check out www.novaskystories.com, that's NOVA for novaskystories.com. In addition to just investing in this company with what we expect will be its explosive growth financially in 2026 and 2027, there is much that AMC Entertainment can and will do together in cooperation with Nova Sky Stories. More details about that to come in the coming year. I'll wrap up our webcast today by saying that AMC is so very excited about the 8-week sprint that we have in front of us to finish out 2025. Over the next 2 months, it will be movie after movie after movie. I can't wait for Norberg this weekend. And I was not alone when I found my sight crying in a movie theater while I was viewing an advanced screening of Focus Features' movie coming out of Christmas, the remarkable Songsun Blue. After all, as our very own Kidman has said for some heartbreak feels really good in a place like this. And of great importance financially to AMC. Advanced bookings for Wicked: For Good are Through the Roof. They exceed the advanced bookings that we previously had at the same time before release for the original Wicked movie of a year ago, which itself was a global Triumph, both for Universal and for AMC. And then what is there to say that James Cameron, storyteller extraordinary. The entire world is on pins and needles waiting to see your latest short of the masterpiece, Avatar Fire and Ash. With that, Sean, let's go to questions from our shareholders and from analysts. Operator: [Operator Instructions] And we'll take our first question from Eric Wold with Texas Capital Securities. Eric Wold: A question a little bit on kind of the concessions and ticket prices. I know, obviously, you had some great success driving up the per patron spending over the past couple of years with a lot of the initiatives you've had within the theater. Just want to talk about kind of the baseline pricing kind of below the surface given the consumer environment we're in right now. Maybe talk a little bit about the pricing power, maybe the price increases that you've been kind of pushing through on both tickets and concessions. I guess starting with tickets, have you been pushing up baseline ticket prices kind of across the board? Or has the focus mostly been on the various premium pricing options, IMAX, and consumers kind of choose to pay the higher prices for the premium auctions versus raising prices across the board on all tickets? And then on concessions, kind of what are your thoughts on kind of price increases up and beyond the need to offset kind of inflationary headwinds right now, if you feel that's something that moviegoers would be accepting in this environment or if that's something that you think is kind of -- that maybe kind of need to wait a little bit as we get a little further into '26. Adam Aron: That's a question. Thank you, Eric. Nice to talk to you again, as always. I have to be very -- we're happy to talk to the point, but I got to be very careful because to talk about pricing thoughts on a going-forward basis because that could be interpreted to mean signaling to competitors. But I can comment on our pricing actions previously, and you can read into those whenever you want to read into those. If you look at our ticket pricing of $12.24 that was achieved in the third quarter, which is on a consolidated basis, it was the highest number we've ever had in our history. And if you look at our ticket pricing, it's risen pretty substantially over the past several years. It's moved in the past much faster than general consumer inflation. And I would especially point you not only to looking at our consolidated prices, but looking at our prices by geographic segment. Our prices have increased in Europe and our prices have increased in the United States as well. But I think what's really interesting is, yes, some of those price increases derive from our growing commitment to PLFs. But we've also not been shy in taking ticket pricing up. And in fact, if you go back to May of 2025, just 6 weeks before the third quarter began, knowing that we had some big movies coming in June and July, we did take across-the-board price increases, not at all of our theaters in the United States, but I would say most of our theaters in the United States. And those price increases vary theater by theater and market by market. But prices did go up. And they went up because we think -- again, I want to be careful only to talk about what we've done looking backwards, not looking forward. Our thoughts then were we ought to cleverly price. It goes back to your very first economics class in the Freshman college when you learned the laws of supply and demand and the laws of charging prices in the peak and charging different prices in the so-called off-peak, charging more in periods of high demand and charging less in periods of low demand. So we have not been shy in taking prices up at those theaters with the most demand. We have not been shy in taking prices up on Friday and Saturday nights when demand for our theaters is at their peak. But one of the things that gave us comfort in being able to put those prices -- those price increases into place is that we also have been maniacal in finding intriguing ways to discount prices for bargain hunters. And the 2 biggest examples that come to mind are A-List. We now have almost 1 million members of our A-List program. And those people, it's out of -- this is -- we have a similar program in Europe, I might call limitless. But just talking about A-List in the United States. It's only 1 million consumers, just under. So only 1 million consumers out of a population of 330 million people. But these people account for 15% of our total patronage at AMC. That's like an incredible number from only 1 million people. And those people are paying between $20 and $28 a month. And on average, they're seeing 2.4 movies a month on average. But they're entitled to see 4 movies a week. That's theoretically 17 movies a month. And they're getting all that for -- depending upon what geographic market they live in, between $20 and $28 a month. For people who want to seek out a bargain, that's a good bargain. The second bargain that comes to mind in what I think was a bold initiative by AMC that was announced effective with Tuesday, July 8, and Wednesday, July 9, and what we said would be a permanent feature going forward. We expanded our long-time discount Tuesday offering for AMC Stubs members to discount Tuesday and discount Wednesdays for AMC Stubs members. Now it's free to join AMC Stubs, and you can do it instantly merely by giving us your e-mail address. So anybody who wants to take advantage of the new Tuesday, Wednesday discounts can do so. We stepped -- we made the level of the discount much more dramatic by positioning it as a 50% discount to the typical evening list price on a standard auditorium. So it's a powerful discount. It's available on twice the number of days per week that it was for the last 15 or so years when the movie industry thoroughly had discount Tuesdays. The fact that we now have 50% off Tuesdays and 50% off Wednesdays also is a tremendous enrollment device to encourage moviegoers to join AMC Stubs because they only get the discount if they're AMC Stubs members. But as I said, you can easily and instantly join. And so like AMC is committed to offering bargains -- but we're also -- we've also proven in the past that we believe we not only can offer premium experiences, which in themselves command premium prices, but we believe and we demonstrated through our past actions, again, not signaling about the future, that we are willing and able to raise price across the board. As for food and beverage pricing, I'll let Sean talk to that and our otherwise compression strength in the area of concessions. Sean Goodman: Thanks, Adam. Clearly, food and beverage is a key focus area for us, as one would expect, right, because of the profitability of that segment. And when we look at our food and beverage business, the key drivers of our food and beverage per person are the percentage of people participating going to the concession stands and buy food and beverage, the number of units that they buy when they go to the concession stand, and the price they pay. And if you look at the increase in food and beverage per person versus pre-pandemic levels, all 3 of those factors, all 3 participation units per transaction, and price has been part of that significant increase in food and beverage. If you look just at Q3, then in Q3, the percentage participation and the price were the biggest drivers of our food and beverage increase. To drill down on the price aspect of that food and beverage per person in a little more detail, I think there's a couple of factors here. One is the price is impacted by mix, right? What are our guests buying. And as we've added collectible concession vehicles, we increasingly focused on movie-themed drinks and movie-themed cocktails, that's really helped to increase the price, even if actually the price for the regular item hasn't changed that you have that positive mix impact, and we see that still being very, very beneficial for our business. The other thing to say about price is we've been very analytical with the data that we have on pricing. So really looking at individual theaters, individual market locations, where can we take price, where should we reduce price. We're very focused on that. And then we're always offering opportunities in discounts, as we spoke about the discount days, if you look at the food and beverage, we have discount food and beverage offerings on those discount ticket days as well. So there's something available for the consumer in. But again, it's sort of food and beverage is really critical to our business and been a big part of why we've been so successful in our per-person metrics as we've gone through the recovery. Adam Aron: And if I can add, Eric, sort of I think getting to the thrust of your question as opposed to the factual answers, I think you were trying to inquire, do we think with angst in the general economy, and like are we somehow constrained by consumer sentiment that somehow our pricing actions will be limited. And again, I don't want to make any kind of speculative comment about what we will do in the future. But I would like to point out this fact. I don't feel -- I think we have to be -- I always say you want to be prudent in not taking prices up too quickly. But I don't feel any price limitation from our clientele. The fact that our premium screens sell out first tells us something. The fact that we introduced 151 XL screens that already were screens that already existed in our theaters. They are bigger than the other screens in our theaters, and we just slot the XL logo on the door to remind people it was a bigger screen and that we're able to command almost a 10% price premium from those XL screens. But here's one other little factoid that shows you that I believe that our consumer is willing to pay for what we offer. Our merchandise business was literally nonexistent 3 years ago. nonexistent. I mean, like $0 in revenue for merchandise. This year, 2025, globally, U.S. and Europe combined, it's going to be over $65 million. And if you look at the price points of some of these merchandise items that we're selling at the concession stand, it's not hard to find items that are priced at $15.99, $19.99, $29.99, more than $30 a pop. And like literally, one of our biggest problems is that we're selling out too quickly. We are often sold out. We're sometimes ordering 50,000, 100,000 of these units in the United States alone, and we're selling out on the first night or 2. It's a high-class problem. And you do have to order this stuff 9 months in advance and get it shipped in economically. But I mean, it's just another example. Consumers are willing to reach into their pockets to pay us for the experience that we offer, provided that we do a good job of it. And that's why we work so hard to keep our theaters in good shape. That's why we work so hard to keep our film crew staff motivated and treating our guests well. And just look at the results. highest ticket prices in our history, second best food, and revenues per patron -- I guess it's ticket prices per patron in our history, second highest food and beverage revenues per patron in our history achieved in this third quarter. With that, operator, I think we're going to turn to some shareholder questions. Sean, what's the first question from our shareholder base? Sean Goodman: Yes. There's been a lot in the press about the Warner Bros situation, and people are interested in what our comments on that are. Adam Aron: So it's a little premature to speculate about what's going to happen at Warner Bros. There are some obviously who believe that Warner Bros will stay independent. There are others who obviously are aware of Paramount's repeated offers. There are other potential suitors for Warner who seem to be emerging. Let me just say this because it's not a reality yet, and so there's no real need to speculate too much. I would like to comment that AMC is thrilled beyond thrilled that David Ellison and his organization, led by Jeff Shell, have bought Paramount. We think they're going to do a spectacular job, and they have committed to greatly increasing the movie count that Paramount will be releasing going forward. Paramount was down to 7 movies a year. We think that Paramount is on record as saying they want to more than double that movie count as quickly as they can under the ownership of David Ellison. Similarly, Warner Bros has told us that they also -- I think they were down to 11 movies in 2025. And they also would like to be and are committed to increasing the release of more movies in 2026 and beyond. That also is very good for AMC. So I guess with respect to any potential studio consolidation, our attention will be laser-focused on one issue and one issue only. And that is the count of movie releases that's coming up from studios. Clearly, if it's more movies, that's good for AMC. And if it's less movies, that's not as good for AMC. So we're watching closely. And what we're watching more than anything else is will the number of movies being issued going forward go up or not. Next question. Sean Goodman: We've had -- and we were just talking about it a few moments ago, we've had a couple of quarter-after-quarter of really, really strong performance metrics for the business. And kind of related to the question we just discussed as well is people are asking how sustainable is that? Can we continue to keep these key performance metrics at this high level as the industry box office continues to recover? Adam Aron: I'm completely convinced that we can keep these metrics strong, that they are, in fact, not flukes but sustainable and that we can grow them. And what gives me that confidence is we've been growing them now for 6 years, since 2019, or really in the last 3 years since the box office sort of got semi-respectable post-COVID. And we apply as a company so much attention and brainpower, mental acuity to getting those metrics up. They didn't happen by accident. And we'll apply that same emphasis on keeping those metrics strong and growing, looking ahead. There are 2 numbers that kind of fed my head more than anything else about how AMC survived the last 5 years, because look, I mean the industry box office is still 20% down from pre-pandemic levels. That's a problem. Some people don't want to admit that's a problem, but that's a problem. It would be much easier for us if we can see the box office grow to what we hope will be a much larger pace in 2026 than it's been in the last 3 years. And as I said in my prepared remarks, if you look at the 9-month period from April 1 to December 31, 2025, the industry has not been on the $9 billion pace that it will probably be on for 2025 calendar year, but a $10 billion pace. And it sure be nice if that's the pace that we have going forward. In a rising box office environment, AMC does very well because 2/3 of our incremental revenue drops the EBITDA line. It's not a linear relationship between rising box office and rising EBITDA. It's an exponential relationship between rising box office and EBITDA. So the same attention that we're paying to keeping these metrics strong comes much more easily in a growing box office. The other metric, the number that -- or I said there are 2 numbers that float in my head. Look at our contribution per patron. Our contribution per patron pre-pandemic 2019 versus say, it's up 54% in 6 years, 54% increase in contribution. We would not be alive today had it not been for our ability to increase our contribution margin by 54%. We are simply a much more efficient operator than we were pre-pandemic, and we don't need the box office to come all the way back to pre-pandemic levels for us to be very successful at the EBITDA line. This other number that floats in my head, of course, is we raised $4.5 billion of equity over the past 6 years and $2 billion of debt, which we have since repaid off not only the $2 billion that we raised, but we paid off more than $1 billion more than that. So our debt levels are actually lower today than they were going into the pandemic. But we still owe so much gratitude to our shareholder base, especially our retail shareholder base, who stayed with us all these years because their belief in our future, their willingness to let equity come into our coffers to keep our cash reserves robust and healthy and strong are why we made it. Next question. Sean Goodman: Do you want to comment a little bit about the M&A environment? We recently noticed Connapolis' acquisition of Imagin Entertainment, and any thoughts on the M&A environment in this industry for us? Adam Aron: Sure. So we ended the third quarter with $363 million of cash on hand. Every dollar of that cash is earmarked. So now is not a great time for us to be diverting cash to other strategies other than running our company well and strengthening our balance sheet. Similarly, we are out of shares. So it's not like under the current situation, we could use share equity capital as a currency for M&A activity. Having said that, over time, our cash reserves will grow from whatever means. And when I look at the M&A environment, it looks quite attractive to us right now. Cinnapolis, a high-quality operator in Europe, bought 14 movie theaters in the United States at 5x trailing EBITDA, 5x. Now it's only 14 theaters. Like you couldn't buy AMC for 5x EBITDA because we're 900 theaters, not 14. But it does tell you that there are plenty of movie theater circuits out there who have less than 1% market share, less than 2% market share, where we, AMC, if we had cash to deploy for M&A purposes, could pick them up at levels at bargain levels and then arbitrage them into being worth much more if they were part of the AMC network. And not only much more merely because we trade at higher multiples than what you might pick up some of these circuits for the cheap, but also because if those theaters were run by AMC, we believe they would do better. We have better marketing strategies. We have better purchasing power. And I think our ability to deliver the numbers bottom line beat a lot of the smaller operators who are still around, and what is still a quite fragmented industry, 40% of the industry is still coming from very small operators. So I think the M&A market is ripe for us to move if we have the resources to move. Today, we don't have those resources. But I can tell you that we are paying a lot of attention to M&A activity. We're still analyzing a lot of potential combinations, small ones, not necessarily big ones. It appears to us there are -- there is opportunity out there for us at hand when it's the right time for us to move intelligently, and that is as we can do it without compromising either our cash reserves or our absolute commitment to strengthening the balance sheet. Sean Goodman: Final question here regarding the loyalty programs. We provided a lot of additional benefits to our loyalty members recently. And so people are just asking for an update about that. How is that going with things like discount Wednesdays? So we did just add a significant benefit by adding discount Wednesdays to the mix of discount Tuesdays. Adam Aron: Remember, one of our tiers of AMC Stubs is AMC Stubs A-List. Back in May, we enhanced the benefits of A-List. A-List was quite successful for us before. You used to be able to see 3 movies a week, now you can see 4 movies a week. We made it much easier to use the A-List program because you no longer need to fish for a state ID, a driver's license to get in, you're using A-List just as a flash your phone because we added a picture ID to your profile within our A-List within the app, within AMC app for A-List. So like that's all we did, add a lot of benefit. But the results are just great. A-List started out right after COVID when we reopened theaters in 2020, having only about 500,000 members. It's up to close to 1 million. So that's doubled over the last 5 years. We also introduced a new tier of Stubs, our loyalty program on January 1 called Premier Go, which gives people double the points generosity that a so-called insider, a member of our free tier, gets and gives them other benefits. It's a path to getting from insider to Premier. Premier, you got there by paying $15 a year, now $18 a year, speaking of price increases. Now $18 a year. I guess my marketing department would assist. I say it's $17.99. So it's not quite $18, right? In the consumer head, we only raised it by $2, not $3. But with Premier Go, you get this increased generosity level. It's not all the way to the generosity level of Premier because Premier is a 5x level of discount. But you earn Premier Go not by paying us a $17.99 purchase price, but you earn it basically by seeing -- making 8 visits a year to our movie theaters, which isn't that hard to do. And the number, we didn't have one single member in our Premier Go tier on December 31, 2024. Sitting here today, we have between 600,000 and 700,000 of them. And by definition, they're seeing 8 movies or more a year. Like this is really good for us. So our knowledge of loyalty programs continues to be enormous. We continue to reap great benefits from it. And we're doing this not only in the United States. In 2025, we launched a points-based loyalty program in the United Kingdom. The U.K. has always had -- not always, but it's for a long time, has had actually ever since we bought it in 2016, has had its limitless program, which was a model for A-List. But we now have a loyalty scheme in the U.K., just like we have Stubs here in the U.S. And that loyalty program in the U.K. is also being spread to some of our other country territories across Europe. So this is an area where we know we're doing, and we're -- and it's one of the reasons why we're optimistic for our future. With that, I think is that the last question for today. So I'd just like to close by telling you all, I don't know where you're going to be Friday night, but I'm going to be at an AMC theater watching Nuremberg. It's going to be a really great movie, I think, starring Russell Crowe. And my goodness, the movies we have coming out over the next 8 weeks, it's a parade of one great title after another. I think I can say with some degree of confidence, America and the world is going to be in movie theaters in November and December. We hope we can count you among them. Thank you for listening to us today and joining. We'll talk to you again soon. All the best. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good day and welcome to the Energy Transfer Q3 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tom Long. Please go ahead. Thomas Long: Thank you, operator, and good afternoon, everyone, and welcome to the Energy Transfer Third Quarter 2025 Earnings Call. I'm also joined today by Mackie McCrea and several other members of our senior management team who are here to help answer your questions after we get through the prepared remarks. Hopefully, you saw the press release we issued earlier this afternoon. As a reminder, our earnings release contains a thorough MD&A that goes through the segment results in detail, and we encourage everyone to look at the release, as well as the slides posted to our website, to gain a full understanding of the quarter and our growth opportunities. As a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements are based upon our current beliefs as well as certain assumptions and information currently available to us and are discussed in more details in our Form 10-Q for the quarter ended September 30, 2025, which we expect to file tomorrow, Thursday, November 6. I'll also refer to adjusted EBITDA and distributable cash flow, or DCF, both of which are non-GAAP financial measures. You'll find a reconciliation of our non-GAAP measures on our website. Let's start off today with the financial results for the third quarter of 2025. We generated adjusted EBITDA of $3.84 billion compared to $3.96 billion for the third quarter of last year. Excluding several nonrecurring items, adjusted EBITDA was flat year-over-year. We saw several volume records during the quarter, including midstream gathering, NGL transportation, NGL and refined products terminal volumes and NGL export volumes. We also saw strong volumes through our natural gas interstate and intrastate pipelines. Year-to-date, we generated adjusted EBITDA of $11.8 billion compared to $11.6 billion for the same period in 2024. DCF attributable to the partners of Energy Transfer, as adjusted, was approximately $1.9 billion. And for the first 9 months of 2025, we spent approximately $3.1 billion on organic growth capital, primarily in the NGL and refined products, midstream and intrastate segments, excluding SUN and USA Compression CapEx. Now turning to the results by segment for the third quarter, and we'll start off with the NGL and refined products. Adjusted EBITDA was $1.1 billion compared to $1 billion for the third quarter of last year. We saw higher throughput across our Gulf Coast and Mariner East pipeline operations, as well as through our terminals. For midstream, adjusted EBITDA was $751 million compared to $816 million for the third quarter of 2024. Results for the third quarter of 2024 included $70 million in proceeds from a onetime business interruption claim that was recognized in the third quarter of 2024. Absent this claim, midstream results would have been up compared to the third quarter of last year due to higher volumes in the Permian Basin, which were up 17% as a result of processing plant upgrades and new plants placed into service, as well as the addition of the WTG assets in July 2024. This growth was partially offset by lower gathering volumes in the dry gas areas. For the crude oil segment, adjusted EBITDA was $746 million compared to $768 million for the third quarter of 2024. During the quarter, we saw growth across several of our crude pipeline systems, including the Permian joint venture with SUN. These were offset by lower transportation revenues, primarily on the Bakken pipeline, as well as on Bayou Bridge, where we saw greater impacts related to some refinery turnarounds in Louisiana, which have since been completed, and volumes have returned to normal levels. In our interstate natural gas segment, adjusted EBITDA was $431 million compared to $460 million for the third quarter of 2024. Results for the quarter included a $43 million increase related to the resolution of a prior period ad valorem tax obligation on our Rover system. Excluding this accrual, interstate results would have been up compared to the third quarter of last year due to higher demand on several of our interstate pipeline systems. And for our intrastate natural gas segment, adjusted EBITDA was $230 million compared to $329 million in the third quarter of last year. During the quarter, we saw increased volumes across our Texas intrastate pipeline system due to third-party volume growth. This was offset by reduced pipeline optimization, primarily as a result of our continued shift to more long-term third-party contracts, which are expected to provide more stable revenues at good rates over the next 10-plus years. Now looking at organic growth capital guidance. We now expect to spend approximately $4.6 billion on organic growth capital projects in 2025 compared to our previous guidance of $5 billion. This is a result of project forecast reductions as well as spending deferrals into 2026. Looking ahead to 2026, we expect growth capital to be approximately $5 billion, the majority of which will be invested in our natural gas segments. We continue to expect our growth project backlog to generate mid-teen returns. The majority of the earnings growth associated with the Flexport Permian processing, NGL transport and Hugh Brinson Pipeline Expansion Project is expected in 2026 and 2027, promoting strong growth in the coming years. Beyond these projects, we also have a significant backlog of opportunities which support continued growth. Taking a closer look at some of our recently approved and currently underway projects, we continue to see significant demand for our services on the natural gas side of our business, which is expected to support growing demand for gas-fired power plants, data centers, and industrial and manufacturing. First, looking at our Desert Southwest pipeline project, which we announced last quarter. This strategic expansion of our Transwestern Pipeline will enhance system reliability and provide new and existing markets in Arizona and New Mexico with access to low-cost, reliable Permian Basin natural gas. We recently completed an open season, and the 1.5 Bcf per day project is now fully contracted under long-term commitments with investment-grade counterparties with a term of 25 years. This includes a 400,000 MMBtu per day contract with a new demand source along the pipeline route. In addition, since the launch of the open season, we have received significantly more interest in current planned capacity, and we are evaluating options around a potential increase in capacity. We also recently entered into commitments with U.S. pipe mills to lock in the majority of space and delivery for pipe in the fourth quarter of 2027, at favorable prices, and we expect to have 100% locked up very soon. Since the day we announced this project, our teams have been actively engaging with elected officials, county leadership, and associated communities along the route to communicate project information and updates. To date, we have engaged with over 175 stakeholders who have interest in or are involved in this project. Our discussions have been very positive, as these stakeholders are pleased about the economic benefits expected and also realize the critical need for a substantial supply of gas to help address the significant demand growth in Arizona and the Mexico markets by providing access to reliable, affordable electricity. Next, we continue to expect Phase 1 of our Hugh Brinson Pipeline to be placed into service no later than the fourth quarter of 2026. As of today, 100% of the right-of-way has been acquired for the proposed route. Over 85% of the pipe has been delivered to our pipe yards, and construction is underway on all 5 spreads of Phase 1 of the project. In addition, last quarter, we announced Phase 2 of the project, which will include additional compression. This system will be bidirectional, with the ability to transport approximately 2.2 Bcf per day from West to East and approximately 1 Bcf per day from East to West. The Hugh Brinson pipeline will provide significant optionality by connecting shippers to our vast natural gas pipeline network, as well as providing access to the majority of gas utilities in Texas, and to ever major trading hub in Texas. Additionally, our existing customers have the option to increase their volume commitments, and we will expand the system to meet those commitments in accordance with those agreements, if exercised. At this point, over 90% of our 3.8 million MMBtus per day of Texas cross haul capacity is sold out with demand charges through 2036, with the majority of this volume extending out through the remainder of the decade. This includes Hugh Brinson and all the other pipeline flows from the Permian Basin to markets in the East. We have also sold capacity from East to West on the same systems, which will add significant revenue to our pipeline assets without additional capital. We are constantly evaluating whether our pipelines can generate more revenue by transporting a different product. In numerous instances, we have converted systems to different products, which have generated significantly more revenue once they are converted. Although we are highly confident that we can keep our NGL pipelines out of the Permian Basin at or near capacity, we are considering converting 1 of our NGL pipelines to natural gas service. Considering the contracts we have already consummated, as well as the numerous transactions we are negotiating, we believe we may have the opportunities to significantly increase the value of that capacity by converting it from natural gas liquids to natural gas transportation service. In August, we also approved the construction of a new storage cavern at our Bethel natural gas storage facility, which is expected to double our working gas storage capacity at the facility to over 12 Bcf. And we expect to place the new cavern in service in late 2028. This expansion will increase our equity gas storage capabilities to serve growing demand in the heart of our extensive intrastate natural gas pipeline network and will further strengthen the reliability of our systems, as well as provide the opportunity to benefit from pricing volatility. We are well positioned to meet the future growth, and we have the ability to develop at least 15 Bcf of additional storage capacity at Bethel. Now for a brief update around the recent natural gas opportunities for new power plant and data center development. As a reminder, on our last call, we announced that we had signed a deal to provide natural gas supply to a major hyperscaler in Texas. Since then, we have added to that agreement and are now able to disclose that we have entered into multiple agreements with Oracle to supply natural gas to 3 U.S. data centers, 2 of which are in Texas. Under the terms of these long-term agreements, Energy Transfer will deliver approximately 900,000 Mcf per day of natural gas. Supply for these agreements is expected to be sourced from our extensive intrastate pipeline network and construction of a new pipeline lateral from Hugh Brinson and our North Texas pipeline is underway. First flow is expected to occur by the end of the year, with final completion to follow in mid-2026. We have also entered into a 10-year agreement with Fermi America to provide a pipeline interconnection and exclusively provide initial gas supply of approximately 300,000 MMBtus per day to Fermi's hypergrid campus located outside of Amarillo, Texas, subject to Fermi's election. Energy Transfer has entered into several of these types of exclusivity agreements with data center and power plant customers, reflecting more than 1 Bcf of additional supply should these projects move forward. In addition, we recently entered into a 20-year binding agreement with Entergy Louisiana to provide 250,000 MMBtus per day of firm transportation service to fuel their facilities in Richland Parish, Louisiana, subject to limited conditions precedent. The agreement would begin in December 2028, and includes an option for Entergy to expand the capacity in the future. Within the last year, we have contracted over 6 Bcf per day of pipeline capacity with demand-pull customers. These contracts have a weighted average life of over 18 years and are expected to generate more than $25 billion of revenue from firm transportation fees. This includes volumes from end users, data centers and utilities off of Desert Southwest, Hugh Brinson and other of our natural gas directed projects. Also, our interstate power plant and data center team is working on multiple transactions in a number of states other than Texas and Louisiana, which have a high likelihood of reaching FID. These opportunities continue to show how extensive our interstate pipeline network is throughout the country and how fortunate we are to have so many of them near our pipeline assets. In addition to the gas-fired power plants and associated data center opportunities, we also continue to negotiate with industrial, manufacturing and utility customers needing our gas storage and transportation services. Our team continues to do an excellent job of identifying the most likely opportunities, and we remain in advanced discussions with several other facilities in close proximity to our footprint. Lastly, construction of eight 10-megawatt natural gas-fired electric generation facilities continue, and we are currently commissioning the third facility at our Grey Wolf processing plant. Now looking at the Permian processing expansions. As a reminder, both the Lenorah II and Badger's 200 million cubic foot per day processing plants are in service. The Lenorah II plant is currently running at full capacity, and the Badger plant continues to ramp up. As a result of our recent processing plant optimization and expansion projects, our processed volumes in the Permian Basin, as well as Y-grade transportation throughput from the Permian, reached new records during the quarter. In addition, we continue to expect our Mustang Draw plant to be in service in the second quarter of 2026. We also recently approved the construction of Mustang Draw II, which will have a capacity of 250 million cubic foot per day, and is supported by continued growth from existing customers. Mustang Draw II is expected to be in service in the fourth quarter of 2026, and is expected to cost approximately $260 million, including spend related to additional gathering and downstream pipeline infrastructure. It will add additional revenue to our downstream assets as well. At our Nederland terminal, our Flexport NGL Export Expansion Project was previously placed into ethane and propane service, and volumes are expected to continue to ramp up throughout the remainder of 2025. In addition, the facility is now ready for ethylene export service. We expect to have over 95% of all LPG export capacity at Nederland contracted through the end of this decade. In our crude segment, an expansion is underway at our Price River Terminal in Wellington, Utah. This expansion, which is backed by an agreement with FourPoint Resources, is expected to double the terminal's export capacity and enhance its deliverability of American Premium Uinta oil to markets throughout the Lower 48. The expansion includes new railcar loading facilities, a new heated storage tank with approximately 120,000 barrels of capacity and 2 additional 6,000-foot storage unit tracks, which will significantly improve storage capacity at the facility. The project is expected to cost approximately $75 million and is expected to be in service in the fourth quarter of 2026. In September, Energy Transfer, along with Enbridge, completed a successful open season for the Southern Illinois Connector project, which resulted in 100,000 barrels per day of contracts for transportation of Canadian crude oil to Nederland from both Flanagan and Hardisty. This project will connect Enbridge's pipeline near Wood River to Energy Transfer's assets in Patoka, Illinois to support the delivery of Canadian crude oil to the U.S. refineries, further strengthening market connectivity and value for all our stakeholders. Separately, Energy Transfer is working with Enbridge to provide capacity for approximately 250,000 barrels per day of Canadian crude oil through our Dakota Access pipeline. This project would provide much needed capacity for oil out of Canada, and would be a significant part of the steady volume throughput on Dakota Access for many years to come. We have taken FID on the Southern Illinois Connector project and expect to take FID on the other project by mid-2026. We are very excited about both projects, which would fill available and additional capacity on our Dakota Access and ETCOP pipelines, and we look forward to providing additional details in the future. Turning to Lake Charles LNG, we are in advanced discussions with MidOcean Energy related to its participation as a 30% equity owner of Lake Charles LNG with a commensurate percentage of LNG offtake. We're in discussions with other parties for the remaining equity we intend to sell in order to reduce Energy Transfer's equity interest to 20%. We are also in the process of converting nonbinding heads of agreement with several offtake customers to binding agreements with the remaining volume of offtake needed for positive FID. FID on the project will be dependent upon bringing these items to the finish line. We continue to be extremely focused on capital discipline. The process we are going through during the development of our LNG project highlights this focus. Our projects need to meet certain risk/return criteria, and we are not there yet on LNG. Now turning to guidance. We expect to be slightly below the lower end of the guidance range of $16.1 billion to $16.5 billion. Looking ahead, Energy Transfer is one of the best positioned companies in the industry to help meet the substantial growth in demand for energy sources over the next several years. We are leveraging our strong relationships to develop new projects, backed by high-quality counterparties on both the supply and demand side, and we see growth opportunities across all aspects of our business. When combined with our existing natural gas pipeline network, our Hugh Brinson, Desert Southwest and Bethel storage projects further establish us as the premier option for customers seeking reliable natural gas solutions to support their power plant and data center growth plans. Our significant processing capacity expansion in the Permian Basin will help feed our downstream pipeline network. We are continuing to expand our NGL business in the United States to help meet growing international demand, and we continue to expand our crude oil pipeline network with strategic projects that will help fill available and additional capacity on our existing pipelines. In short, we have an extensive backlog of growth projects that are coming online over the next several years, and we continue to be extremely focused on capital discipline. These projects are highly contracted under long-term agreements, many of which are demand pull in nature, and they are expected to generate significant revenue, providing strong returns and considerable earnings growth over the next decade or more. That concludes our prepared remarks. Operator, let's open the line up for our first question. Operator: [Operator Instructions] The first question comes from Keith Stanley with Wolfe Research. Keith Stanley: First, I just wanted to clarify on the guidance for the year. So saying you'll be a little bit below the low end of the range for 2025, does that include SUN's acquisition of Parkland? Or is that still stripped out when you're making that statement? Dylan Bramhall: This is Dylan. For the guidance, we have not included Parkland in there. So we're saying without Parkland, we expect to be slightly below the initial guide. Keith Stanley: Okay. Great. And then picking up on Lake Charles, where you left off there. Can you give us more detail on -- I guess, realizing you guys are showing capital discipline, just how many more contracts you need at this point to firm up? And I guess, where you are timing-wise in the sell-down process to get to an FID decision? Marshall McCrea: Yes, Keith, this is Mackie. Let me step back real quick. We worked on Lake Charles for a lot of years. We've had different partners. We've gone through the pandemic. We've gone through DOE positive, LNG positive, Ukraine. Everything kind of ebbs and flows, and Tom and Amy and his team have done a great job of getting markets in difficult times, especially when we're competing against companies that's all they do is LNG and they're willing to go to FID without having sufficient contracts to provide guaranteed rates of return. So where we sit is -- and we've said this all along, Tom and I -- the only way we get to the end zone with LNG is to check all the boxes. And the major boxes are our EPC contract. We feel great about Raj and Rob and the team that worked very well with KBR and Technip to get a good price there and add contingency and get rates of return that work for us. And then we've spent a great deal of time getting the markets to where they need to be. We're very close to that 15 million, 15.5 million tons. Some of those are still HOAs, we've got to convert to SPAs that we expect to do by the end of the year. But the big box -- and Tom has already hit on this -- we really are focused with all the opportunities we have on our financial discipline. So we're very stringent about this one in regards to we're going to keep 20% of the equity in this, and we've got to have 80% of the other partners that are going to ride with us, good or bad, whether it's -- comes in under or over at the end of the day. So a specific number of contracts, and we've got a whole handful of equity players. We have -- it's amazing, the international market of how bad they want this project to go. It's one of the most attractive projects still not at FID, but we've got a lot of work to do. We -- time is not working against us. We'll have to go in and renew the EPC contract before too long. So we're hoping that these equity partners will step up by the end of the year and get us to where we want on kind of the risk profile and the participation we want in this project. So we're going to keep our heads down, we'll see over the next couple of months how things turn out, and we're pushing hard to get there, but we've got a ways to go. Operator: The next question comes from Jeremy Tonet with JPMorgan. Elias Jossen: This is Eli on for Jeremy. Just wanted to start on some of the recent data center deals you guys have signed. Trying to get a sense of the financial impact going forward. Just given the size of the partnership, I understand the orders of magnitude that it could have to the business, if you can provide some commentary there? Marshall McCrea: You bet. I think probably 7 or 8 of us, we'd love to talk about this. It's so exciting. We talk about every time we get on these calls. A year ago, when we announced Hugh Brinson, we didn't even know what a data center was. And we kicked it off a little less than 1.5 Bcf, and then data centers kicked in, and it's really been an impetus between that pipeline. Also, Desert Southwest had a lot to do with data centers. And then it just opened up the door for so many opportunities we're so excited about. The unique nature of these data centers, especially the hyperscalers are very confidential. So unlike a lot of our business, we can't really talk about it. I can't really get out there and get out in front of it. We were pleased to have the ability to disclose what we disclosed for this earnings call, believe me. And Tom said in the opening statements, we have so many of these we're chasing. A lot of them are high probability to get there. As far as how many we've done so far than what we've disclosed, which is on demand pull, a lot of that $25 billion is toward data centers. And I'll say one more thing, too, around data centers. Besides the fact that so many of them are in such close proximity to our pipelines, the Hugh Brinson pipeline, I believe -- and I don't think I've said this to a lot of our folks here is that I think it will be the most profitable asset we've ever built. And the reason for that is it's kind of the main artery connecting the Permian Basin with the rest of the world, the Southeast, East and rest of Texas, Gulf Coast and all that. And so not only have we sold out to this point, 2.2, we have data centers that have options over the next few quarters to exercise the right to create 800,000 more of capacity. So we'll be doing some more looping of Hugh Brinson. And in addition to that, we've sold a material amount of capacity, significant revenues from an East to West standpoint, which means a backhaul with no additional capital. And I think our data -- Adam is sitting here with me, he leads our data center group in Texas. And we couldn't be more upbeat about where we sit today through data centers throughout the country, but especially in Texas because of our ability to perform and provide reliable gas to all these data centers and because of our close proximity to where these are being built and our ability to source from Waha, Maypearl, Katy, [ Hex ] South Texas, Carthage. You can even leave the state and bring gas into some of these data centers. So it's something we'll be able to talk more and more about as these confidentiality issues go away as we're able to visit more. We're very excited about the future, and it's hard to over-exaggerate what these data centers and power plants associated with those and power plants unassociated with those for a grid -- to deliver electricity into the grid. So a very positive, exciting part of our growth for many years to go. Elias Jossen: And then recognize 2026 budgeting is likely ongoing, but just want to think about it at a higher level, the kind of major puts and takes that you guys are looking at, both on the base business and then some of the organic growth projects that you're bringing on, just kind of framing the high-level drivers for performance next year? Dylan Bramhall: This is Dylan. So as we look at next year, I think the biggest piece is really to look at -- we are going to have really the main impact of Flexport coming online. Those contracts kick in basically January 1. And so while we've got a little bit of -- little bit of spot volumes running here through the third and fourth quarter this year, we're going to get the full impact of Flexport coming online. Permian. Permian plants continue to fill the plants. We've got new plants that we're constructing right now, so we'll see the continued growth out of that. With all those plants, remember, we're sending those liquids down our NGL lines into our NGL and fractionators as well. So that will continue to be growth. We'll have frac line coming on next year as well. And so those are the main pieces there. And then Hugh Brinson will come online at the end of the year next year. And so just wait to see based on timing, how much impact that will have as well. Operator: The next question comes from the line of Theresa Chen at Barclays. Theresa Chen: I want to ask about the consideration of converting one of your NGL pipes to natural gas service in the Permian. Would you be able to provide any additional details related to that at this point? Which pipeline do you have in mind for this? I imagine something directed to the Gulf Coast. What would be the cost and related economics of doing something like this? Marshall McCrea: Yes, Theresa, this is Mackie again. Let me give a quick little history. So you'll probably know most on the call that we are constantly looking at every one of our assets. And if assets are underutilized and could be put into a different service, we do that. And we have a [ record ] of doing that. Dakota Access would not have been a project without our ability to convert our 30-inch trunkline from natural gas to oil. It was very beneficial to the North Dakota producers to get a good rate down to the Gulf Coast. We converted a TW line as a natural gas interstate pipeline and natural gas liquids, which has been instrumental about getting a lot of liquids out of the Delaware Basin into our pipeline network. And also, our J.C. Nolan, it was a liquid line that we converted to diesel and are flowing diesel from the refineries in the Gulf Coast to West Texas. So it's something we're constantly looking at. And what we run into on the NGL front is that we have some tiers, some contracts, cliffs over the end of this decade that is kind of approaching. So as we negotiate to extend and/or fill that up, what we've started to recognize is there's been a lot of announcements. One of our competitors several months ago announced a large diameter NGL line. That was just the most recent pipeline announcement for an NGL line. We're scratching our head. How in the heck in this environment, at the rates these folks are quoting to producers, how they can build these assets and get any kind of reasonable rate of return. So what it's causing us to look at is -- we have 3 NGL pipelines out of the Permian Basin. Does it make sense to continue those NGL service? It may. We're in negotiations with over 300,000 barrels right now. But we're looking at very closely as we continue to negotiate. As the fees get more and more tight and more competitive, it just doesn't make sense. So you correlate that with the success Adam and his team have had on these data centers and you start putting numbers to it. If these options are exercised over the next few quarters, we're going to be loop and pipe. We're going to have to be required to loop Hugh Brinson, make it a bigger project. We could forego between $800 million and $1 billion. And if you look at the rates that we'll have to move that gas on the anticipated volumes that will recontract up at these much reduced rates, some of the scenarios show twice the revenue with natural gas as what we might see with NGL. So this is not something we're making a decision on today. But as we always look at and analyze, how do we make the most money we possibly can for our unitholders with the assets we have, and we are certainly, seriously looking at this conversion. Theresa Chen: Understood. And on that same line of thinking as it relates to capital efficiency, your agreements with Enbridge on the crude side and moving WCS through DAPL and ETCOP to Nederland, it seems like that time line would line up nicely with DAPL's recontracting in the 2027 time frame. And considering the narrowing of Bakken differentials over time, certainly, a new source of barrel is welcome. From an earnings perspective, are these connections backfilling volumes and maintaining earnings at the level that they are versus facing a contract roll off? Or would you expect earnings growth across your crude assets as these projects come online? Marshall McCrea: This is Mackie again. I think we probably used the word exciting, excitement too much. But we're very excited about what's going on in there and teaming up with Enbridge because you're right. It's almost like you've got somebody in our office. You're right. I mean, we've seen volumes level off. If you talk to the majority of the largest producers in the Bakken, they're not talking growth anymore. They're talking kind of flatline. So as these cliffs fall off of some of these contracts, the timing with what we're doing with Enbridge could not be better. We just announced today that we've got FID on 100,000 barrels of heavy that we'll deliver into our southern end of our Dakota Access, which we call ETCOP. And even more exciting is the need for Canadian barrels to find better markets, and the best markets for Canadian barrels or U.S. refineries. So we're very pleased with where we sit with Enbridge. We -- they are going through a process with the Canadian producers. It's going to take several months. I'm not sure I've heard -- we've heard any protest, exceptions or anything. Everybody is fully behind this. We kind of think of this as the first phase, that's 250,000 a day. So to your answer to the question, it fits in perfectly. Our first priority will be to make sure that we give the opportunity for all the producers in North Dakota to sign up for whatever term they want to make sure there's capacity on Dakota Access for their pipeline. That's our first priority. Our second one is keeping our pipeline full. We have the ability to move 750,000 barrels a day. We're 500, 550 today, so we can move a lot of the barrels from Enbridge without much capital, but we also think this may be just a stepping stone of what we may be able to accomplish with Enbridge out of North Dakota. But anyway, on the first 250, that we're parlaying very well with any declines or any cliff that we have on existing with the timing of these first 250,000. And then like I said, we think there's also some upside. So as Tom said in his remarks earlier, we are so excited about the timing of this and how it's going to keep Dakota Access full for a long time because these are 15-year agreements that we'll be working on with the Canadian producers. It will take us into the 2040s. Operator: The next question comes from the line of Spiro Dounis with Citi. Spiro Dounis: I want to start with the growth backlog more broadly. Curious, how you're thinking about the total opportunity set for growth, maybe beyond the sanctioned projects and a lot of the ones you've talked about today. Some of your peers have started to quantify these opportunities with multibillion-dollar backlogs. And so curious if that's a number you'd be sort of willing to share? Or maybe even another way to think about it, how do you think about a new run rate for CapEx in this environment? Thomas Long: Yes. Listen, I'll go ahead and start off with that. This is Tom. We have put out the $5 billion for next year. Obviously, as we get into early next year and year-end, we'll keep that number updated for you. So you can see we've got -- we do have a great backlog of very good, high-returning projects. And if you start trying to look out further than that, I don't know that we can really give you a lot of guidance there. But you can see just from what we're already talking about. I'm not trying to guide you toward the '26 number continuous, but you can see we continue to have a lot of opportunities, and we've got a great team that's out there chasing a lot of these. So in fairness, at this stage, don't really have a -- probably a number for you there, but it's going to be a strong number. And they're going to be good returning projects, and we're going to make sure that we have the appropriate risk on them too as we venture off into these. So... Spiro Dounis: Got it. Tom, I appreciate taking a swing at that one. Second one, maybe just going to Desert Southwest. You mentioned seeing additional interest there. Could you maybe just remind us again how you're thinking about upsizing that pipeline, what diameter you're looking at now. And you also mentioned, I think it was 400,000 dekatherms a day of demand source along the route. Can you just expand a little bit more on that? Marshall McCrea: Yes, this is Mackie again. Yes, Beth and her team did a fantastic job. We kind of -- in a lot of these cases, on these projects started way behind. And it took a while to get there, but we were very pleased to announce that. We've taken trips to Washington. We've been to both states along the way, and the project is very highly thought of from a political standpoint and from an economic standpoint. So huge upside there. We did complete the overseas on as we have said, there's at least a Bcf above what we've already sold out above the 1.5 Bcf. So we're in -- a lot of work to figure out. Some of those involve some laterals off of [ DSW ]. So we've got some work to do. But we're -- certainly have the capability of increasing it by at least 0.5 Bcf, possibly up to 1 Bcf, we'll be making those decisions over the next 5 or 6 weeks. We've locked in steel prices for a majority of that project, and we up until the middle of December, we have the flexibility to go from 42 to 48 or any combination thereof. So we sit in a really good spot on where we've already locked in prices, and we'll see how it plays out. As part of the 400,000, that kind of falls under that unique nature of confidentiality. We can say a whole lot more on that. But that project and others similar to that, we are chasing. And I would say, we're pretty confident that we will expand it higher than 1.5 Bcf, but not sure if we'll get to 2.5 Bcf, but we'll see how the next six weeks play out before we have to make a decision on pipe size. Operator: Next question comes from Jean Ann with Bank of America. Jean Ann Salisbury: Congrats on all the data center deals. I know you get asked this frequently, but you've been so active with the hyperscalers. I think you said earlier this year that Energy Transfer place in the story is primarily gas supply. But what keeps you from wanting to go into the power generation itself in a bigger way? Marshall McCrea: This is Mackie again. I think we're all anxious to answer this. Because we like good rates of return on our projects, and we just -- unless we've missed the boat on that, the opportunities that we've seen are low double, if not high single digit, it just doesn't fit. I mean, we'd love to team up with the folks that are generating those projects and provide all the gas they want. Not saying that we never will participate in that, but we'd have to see a lot better rate of return than what we've seen in the projects we're aware of. Jean Ann Salisbury: That's very clear. And then as a follow-up, earlier this year, you FID-ed the Bethel gas storage expansion. Are gas storage rates high enough today to drive material other brownfield storage expansions in the U.S.? Or is Bethel kind of a unique case? And do you kind of see more upside on gas storage rates as LNG starts up in the next few years? What inning do you feel like we're in, in those rising? Marshall McCrea: I'll go again. Here we go again, exciting. Storage is another huge area for us. We have about 233 Bcf of storage. We're expanding Bethel by another 6 Bcf, which is about 240 Bcf. The majority of that, probably 190 Bcf is in Oklahoma, Louisiana, Texas, very well positioned, tied to our large [ end of the ] pipeline. And with the absolute necessity of reliable gas supplies to the -- all these data centers, it's imperative that we have the ability through our big inch diner pipe to deliver and more importantly, deliver when we have freeze offs in Oklahoma or freeze-offs in the Permian Basin or other areas. So we believe that the value of storage is going to skyrocket. You think about 30 Bcf of LNG that's going to come online by the end of this decade, early [ 2030 ], and you pick a Harvey, you pick a hurricane that spins along the Gulf Coast for days. Yes, there's some storage capability of all these LNG facilities, but there's going to be problems, and it's going to happen. And we're going to be very well positioned. As far as Bethel, which we had 100 Bcf there. It's in the heart of all of our large diameter systems. It gives us the ability to come out of those systems and go anywhere in Texas, all the major hubs, all the major utilities, and as well is going into the interstate markets both at Waha area, our interstates and others and also the Carthage area. So we are very bullish. However, we're not going to go out and just back a bunch of storage. We're very disciplined. It's kind of where we're at now, and all of our capital spending, as we -- as Thomas said several times. And so -- but it doesn't mean that within the next 6 months, we don't kick off another storage to back to another project. And it's very important to our data center customers. So we have a lot, and we look forward to talking over the next few quarters of a lot of others that we intend to add, but to not only have the capability we have. I just said kind of all these other receipt points, but also in dire times like [ Uri ] and tough times, we have the ability to perform unlike anybody else. And storage gives us that backdrop to be able to do that. Operator: The next question comes from Michael Blum with Wells Fargo. Michael Blum: I wanted to go back to the data center deals, you've announced Entergy, Fermi and Oracle. Is there a way -- can you provide us any kind of framework for how to think about the capital outlay for each of these data center supply projects and your expected returns? I realize they're all a little bit different, but just like high level or a way to think about that? Marshall McCrea: Sure. High level, and we've said this before. A lot of the data centers were talking to, very low capital. As I mentioned earlier on Hugh Brinson, we didn't have a data center in our head when we announced that project. And then [ low and behold ], we go through right by Abilene with 1 of the largest -- potentially largest data centers in Texas. All we have to do is lay a lateral, 24-inch lateral kind of a loop system that provides what's going to be needed that location. You look at Franklin Farms in North Louisiana, we're looking at a less than 20 mile lay. So pretty low capital stuff. Others, depending on where we go, there's some -- a couple of them that are kind of out in the middle of the [indiscernible]. But we look at [ the land too ]. Those would be capital exclusively for the large capital dollars exclusive for those opportunities. But Michael, I think you said it well, it's all across the board. I mean, it can be embedded in some of our large inter-projects that we already have built. It could be embedded in projects that we've announced. And part of that is data center expansions, which is what helped us expand Hugh Brinson was these data center deals that we have done. So it's kind of a combination. But I'd say a lot of what we're looking at now, especially in Oklahoma and other areas of Texas that we're very close to getting some deals done, much less capital than for the amount of volume that we're talking about. And I have one thing to that. We have some data centers that have secured their electricity supplies somewhere. Renewables, somewhere else. And yet they're willing to pay large demand charges or the ability to instantaneously pull gas from our system in the event they've got interruptions from there. So those are very low capital projects that we'd be utilizing. As I mentioned earlier, our storage capabilities, along with our large diameter capabilities to move large volumes quickly to these locations. Michael Blum: Okay. Got it. That makes sense. And then just a clarification on your earlier comments on Lake Charles. I guess the first question is, would you definitely -- do you see this as you're definitely going to get to FID? Or is it really subject to all of those criteria that you laid out earlier? And if you do get to FID, what would you -- what's your latest on when you think timing-wise, you'll get there? Marshall McCrea: Yes. So let me make this real clear. Yes, we will not proceed with LNG until we have secured 80% of equity partners similar to ourselves. And we've got some work to do -- to do that. I mean, we -- getting the contracts done, feel great about that. If you see contract, feel great about that. But the last big, most important box, especially as we're emphasizing this financial discipline that's very important to us. When you only chase 1 or 2 projects, you don't think about as much. When you're changing billions of dollars in projects, several of which we've already announced, we've got to be careful in stepping out on something like this. And -- we're not an LNG company, like we compete -- we're a pipeline company that has an LNG or a regas facility, converting part of it to LNG. So no, we're not going to get to FID until we have the required amount of equity partners that we need. And we've -- as we've said, we've got our work cut out for us to get that done timely enough to be able to get to FID in relation to our EPC costs that are -- that we have with our EPC contractor today. Operator: The next question comes from Zack Van with TPH. Zackery Van Everen: Maybe going back to Hugh Brinson. Now that Phase 1 is fully contracted and we've seen a few producers come out and indicate they signed up for capacity. Can you talk to the breakout of supply push from Waha and demand pull contracts from data centers and other demand sources on that pipe? Marshall McCrea: Yes. This is Mackie again. I think you said Hugh Brinson, it seems like that. We didn't hear the first part of that. But yes, that project started out as demand pull. Then to kind of get to finish line, we had a lot of producer push. And now as we've grown and expanding it, it's pretty much all demand pull. So it's been a pretty balanced combination of those two. But what we do see on the growth on any type of expansion will be a demand pull. Zackery Van Everen: Okay. Perfect. And then I know this might not be your arena and more on the end customers, but it feels like there's a lot of straws going into the Permian for gas between your projects and various other ones through the end of the decade. Have you seen your customers start to talk about actually signing supply deals out of Waha to make sure that gas is there on top of the FT contracts they have with you all? Marshall McCrea: What a great question. It's interesting because if you don't think we're looking at this closely and doing our own studies in this, but there's been four pipelines announced. Depending on rumors, about one of those going to a 48-inch, possibly one of ours going to 48-inch. We could -- you could see north of 11 or 12 Bcf of new demand projects built out of that, not counting probably 0.5 Bcf to 1 Bcf of data centers that are built in the Permian Basin. So to answer your question, we are aware of some of the end users have reached out to producers to try to lock some of that up. But the great thing about our assets, our gathering assets, our intrastate, our interstate assets coming out of the Permian Basin, it can do nothing but grow dramatically. It's got to grow between 12% and 15% just to get enough gas to fill the pipes that have been already announced over the next 4.5 years. If I was in market, I would be out locking up production today. Operator: The next question comes from John Mackay with Goldman Sachs. John Mackay: I appreciate the time. A quick one for me. You have in this slide -- on gas going to the power, you talk about 6 Bs of new deals signed over the past year. If you do some math, it's actually a pretty good margin on those. I'd love to know, how much of that 6 is kind of incremental growth on top of kind of what the business is doing right now? And then, yes, if we were to kind of back into a margin on what -- or a fee and what that's implying, is that a reasonable run rate for what you guys are seeing on some of these incremental power data center deals? Dylan Bramhall: Yes, John, this is Dylan here again. Yes, that's all incremental business that we've signed up that we're not currently doing today. So these are all new demand sources that are in the process of being constructed right now. And so that's all incremental. Now backing into the fee, yes, that's correct. If you do that math, you will back into a few, but that is made up of a lot of different types of contracts. So I'd be careful on trying to just project that forward on everything. I mean, that's got a good mix of Desert Southwest, some of the setoff in Hugh Brinson and then a couple of Bcf of just other demand growth along our systems or we're building laterals out too. So when you put that all together, yes, you do get to that pretty strong weighted average fee. But like I said, it is made up of those different sources. Operator: Thank you. This will be our last question. It's from the line of Manav Gupta with UBS. Manav Gupta: I'll ask only one question. Bloomberg has reported that Energy Secretary, Wright, has sent a [ draft ] proposal to FERC that would limit the regulators review period for data center connections to power grid to 60 days, expediting the process, which can currently take years. I'm just trying to understand if this proposal does go through, could that mean a material acceleration in demand for natural gas to support electric generation? Because, honestly, it's like bring your own electricity right now. So that you might be the only game -- or your pipeline side be the only game in town if this proposal actually does go through. Marshall McCrea: Manav, I think we've not heard that yet, but that would definitely be a big boost to the pipeline business. And being able to move that quickly there would definitely be good for our business. Manav Gupta: Okay. Can you elaborate a little bit on the expansion of Price River Terminal? It looks like a very interesting project, an exciting project. And what would be the demand for this expansion? Marshall McCrea: Yes. Once again, Adam is sitting here next to me. What a great project. Years ago, we kind of took over that and it was kind of struggling and our team worked very hard to really grow that business, and it's phenomenal what they've done. I would say we've got time to know what percentage locked in of the acreage up there, but it's a significant amount of that acreage is locked into us for many years to come. That's for a lot of refineries that's very valuable, kind of lack the oil that fits what they're looking for. So not only is that a great project for us as we expand that terminal, but we also see a lot of synergistic downstream, have new possibilities with a lot of those barrels going to St. James and possibly to Nederland. So there's a lot of upside to that project, but stand-alone, that's going to be a really great project for us. Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Tom Long for any closing remarks. Thomas Long: Listen, once again, we do thank all of you all. As Mackie answered on several of the questions -- excited, it was the most commonly used word here of how excited we are. And you know that we've -- we've always dreamed of kind of getting to this point right now through our growth here with M&A and organic growth projects. And the reason why you're seeing a lot of this is just because of the massive infrastructure that we've built up and where our assets sit. So that's what's provided the opportunity. We are going to stay very disciplined on our capital. But these are the kind of projects that are just very high returning projects, that are right in our wheelhouse, and we're going to continue to chase them with a great commercial team and the E&C team to build them. And of course, the finance team and the rest of the group, the team to be able to keep everything going. And so you're going to see these opportunities, and we look forward to talking to you more about this capital and about these great projects. Appreciate all of you joining today, and we look forward to the follow-up questions. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Marqeta 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, Maria Greiser, Investor Relations. Please go ahead. Maria Greiser: Thanks, operator. Good afternoon, everyone, and welcome to Marqeta's Third Quarter 2025 Earnings Call. Hosting today's call is Mike Milotich, Marqeta's CEO and CFO. Before we begin, I would like to remind everyone that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website, including our annual report on Form 10-K for the period ended December 31, 2024, and our subsequent periodic filings with the SEC. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of the time of this call, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials, which are available on our Investor Relations website. With that, I'd like to turn the call over to Mike to begin. Mike Milotich: Thank you, Maria, and thank you for joining us for Marqeta's Third Quarter 2025 Earnings Call. To start, I'll briefly highlight our Q3 results, followed by an update on our progress growing the business across the full spectrum of debit and credit products, consumer and commercial offerings in a wide variety of use cases and geographies with both new and existing customers. I'll conclude with details about our Q3 financial results and our expectations for the remainder of the year. Our great third-quarter financial performance continues to demonstrate tremendous growth, resulting in our ability to deliver higher adjusted EBITDA through both efficiency and scale. Total processing volume, or TPV, was $98 billion in the third quarter, a 33% increase compared to the same quarter of 2024 and an acceleration of over 3 points from last quarter. Since this is the second consecutive quarter with accelerating TPV growth despite our increasingly larger base to grow over. To put this performance in perspective, this is our highest TPV growth rate since Q1 2024, despite the base we are growing over this quarter being almost 50% larger than the base we grew over in Q1 2024. Q3 net revenue of $163 million grew 28% year-over-year due to robust growth across a broad spectrum of use cases we enable. Gross profit was $115 million, a 27% increase year-over-year, largely in line with the net revenue growth. Adjusted EBITDA was $30 million in the quarter, a 19% margin, fueled by both exceptional gross profit growth and continued expense discipline while we make strategic investments in new capabilities and scale to fuel future business growth. This is another all-time high for adjusted EBITDA dollars as we progress on our path to profitability. This year, we remain focused on expanding and deepening our customer relationships by enabling innovative programs and seamless geographic expansion while also increasing our bank supply. One factor driving our performance is a remarkable growth in our lending use cases, including Buy Now, Pay Later. The growth is a testament to our ability to support customers in many markets, including North America, Europe, and Australia, but also to the innovation at scale that we enable. Once again, we are adding unique value to our customers in support of this use case. While BNPL started with Marqeta enabling virtual cards for seamless payment experiences without costly back-end integrations, the category continues to evolve. We have been at the forefront of enabling the new wave of growth in the space with what we call pay anywhere cards that allow end users to pay anywhere that cards are accepted, with the flexibility to split a purchase over time. We were also the first to support the Visa flexible credential in the U.S., which gave us a significant lead, as it has been rapidly adopted over the past year and now includes Klarna's recent expansion into Europe. The newer solutions enable our customers to deliver a better value proposition to their consumers with more flexibility to expand the availability of credit. Our unique combination of capabilities, geographic reach, and scale has helped broaden the category significantly, with TPV and lending, including Buy Now, Pay Later use cases, growing much faster than the overall company TPV growth. Another area where we have continued to see increased growth and demand is in commercial programs, particularly platforms that enable SMBs to reach bigger markets with money movement and access to working capital. In Q3, we signed a Fortune 500 customer to enable electronic supplier payments for the small- and medium-sized businesses they serve. Our customers' global platform has a comprehensive suite of financial and business management applications, serving millions of users. They were looking for a partner who would allow them to stay at the forefront of the needs of their end users with easier and more modern payment options. They saw Marqeta as a leader and enabler of innovation and expense management use cases and selected Marqeta for both our flexibility and ability to execute at scale. In Q4, this program will be the first to launch with one of our new U.S. bank partners. At the start of the year, we talked about our desire to expand our bank supply with partners who prioritize new capabilities and technology, maintain a strong focus on regulatory compliance, and can support our full range of offerings across debit and credit. In the U.S., Cross River Bank is now live, and we are in the process of technically integrating Coastal Community Bank to support programs starting in 2026. We are excited to grow with both banks going forward. With the addition of TransAPay, enabling us to provide program management in the U.K. and the EU, we are also adding bank partners in Europe. Griffin Bank in the U.K. is now live in support of a new program currently in testing, which will launch broadly in Q1 2026. We also plan to add a new bank partner for the EU in the first half of 2026. In order to seamlessly interface with multiple banks, this year, we built our business integration platform with the flexibility to rapidly onboard additional partners around the world. It serves as the orchestration layer that connects our internal money movement systems with external banking and payment partners through secure APIs and web hooks, ensuring every transaction remains synchronized end-to-end. This approach makes our platform bank-agnostic and reduces the time for bank integration by more than 50%, enabling us to scale new products and geographies without heavy engineering work or custom integrations. Centralizing business logic and routing across banks also reduces operational complexity, improves resiliency, and creates leverage in our cost structure as we expand with more banks and payment partners globally. Europe continues to deliver strong results with momentum across a diverse set of use cases, driving TPV growth to remain over 100% year-over-year. This quarter, we completed the acquisition of TransActPay on July 31. This transaction has driven significant customer interest and increased referrals from the payment ecosystem, including our network partners, as well as increasing our TAM to pursue more enterprise customers looking for a single provider for processing, program management, and EMI license in both the U.K. and the EU. This enables us to deliver a complete offering comparable to what we offer in North America, so customers don't have to navigate the complexity of working with multiple partners. In Q3, we signed one of our top 5 expense management customers that we have supported in North America for many years to expand into Europe. The acquisition of TransactPay was the catalyst, as they can now deliver their offering in Europe at parity with North America through the Marqeta platform without a lot of incremental work. We also continue to gain steady traction as we seek out the right partners for our innovative credit solutions. We are having productive conversations with prospects who are looking to differentiate their offering and work with a single modern provider who can support multiple use cases. This quarter, we were selected to power a credit solution for our company's loyalty programs, which enable small and mid-sized companies. This customer has millions of monthly active users and the underlying data to help companies capitalize on trends through analytics and a credit product to drive incremental loyalty benefits, both in stores and through their app. They chose Marqeta because they were looking for a modern partner who could grow and scale with them, given their significant embedded customer base. This customer plans to utilize several services in addition to processing, including tokenization, disputes, and our real-time decisioning risk product. To wrap up before moving to the details of our financial results, the business continues to have strong momentum as we head into the last quarter of the year, both in terms of our actual performance and the level of engagement from prospects on future opportunities. What continues to become clear for current and prospective customers is that Marqeta has a unique combination of modern capabilities, scale, geographic reach, expertise, and flexibility to enable its innovations without the need to make trade-offs. We provide our customers with a level of agility and control in issuing payment credentials that maximizes their ability to deliver value to their users, whether it's through creating new revenue streams, deepening engagement, or improving access to capital. This will continue to serve us well as we further diversify the business outside of debit and beyond the U.S. to deliver future growth. Now, let me transition to our Q3 financial results. Q3 was a very strong quarter with performance significantly outpacing our expectations. Q3 TPV growth of 33% accelerated by over 3 points from Q2 after increasing by 3 points in Q2 versus Q1. This accelerating volume growth, combined with slightly higher net revenue and gross profit take rates versus Q2, drove the P&L outperformance. Additionally, our adjusted operating expense growth was on the lower end of our expectations, which resulted in adjusted EBITDA of $30 million. For the second quarter in a row, the business outperformance and disciplined investment brought us close to GAAP net income, showcasing how the business can scale and demonstrating the tangible progress we are making on our path to profitability. Q3 TPV was $98 million, an increase of 33% year-over-year. The Q3 TPV growth acceleration versus Q2 was broad-based, including both block and non-Block growth as well as each of our 4 major use cases. Non-Block TPV is now growing 2.5x faster than block TPV, helped by Europe TPV continuing to grow over 100%. Growth within financial services continued to be a little slower than the overall company. Our non-block customers are growing over 3x faster than block within these use cases. Consistent with prior quarters, expense management growth continues to be a little faster than the overall company, driven by our customers continuing to acquire new end users as their modern platforms gain share. On-demand delivery growth accelerated into the double digits in Q3, growing about twice as fast as last quarter, primarily fueled by both the merchant category and geographic expansion of our customers. Lending, including Buy Now, Pay Later TPV growth, accelerated 10 points versus Q2, with a year-over-year growth rate that is about double the rate of the overall company. Six of our top 10 customers within this use case had their growth rate accelerate from Q2 to Q3, with 3 customers growing over 100%, while 2 customers were growing slower than 20%. This remarkable growth is driven by a combination of trends that accelerated from last quarter, with the 2 most significant being increased adoption of Pay Anywhere card solutions, including growth in flexible network credential usage and geographic expansion, and growth on our platform. The TPV growth acceleration in Q3 is another demonstration of our ability to grow at scale, processing over $1 billion in volume on about 2/3 of the days in the quarter. Q3 net revenue growth was $163 million, growing 28% year-over-year. Our Q3 net revenue growth acceleration of 8 points versus Q2 and the outperformance versus expectations was driven by strong TPV growth in all of our major use cases, and our net revenue take rate of 17 basis points was slightly higher than last quarter. The addition of the TransActPay acquisition for 2 months after closing on July 31 contributed 2 points to growth. Block's net revenue concentration of 44% in Q3 decreased by about 2 points from Q2. While both block and non-Block net revenue growth accelerated from last quarter, non-Block growth was over 10 points higher than block growth, driven by the strong TPV and the inclusion of TransAPay. Q3 gross profit was $115 million, growing 27% year-over-year, fueled by strong TPV growth and a gross profit take rate of nearly 12 basis points, slightly higher than last quarter. The addition of TransActPay added 2.5 points to growth. Gross profit growth was 10 points higher than the top of the expected range we shared with you last quarter. So obviously, there were a few positive surprises in the quarter. I would classify the outperformance into 4 categories. By far, the most significant factor driving our outperformance is the underlying business growth. Accelerating TPV growth, combined with a favorable business mix supporting our gross profit take rate, accounted for approximately 6 points of the outperformance. On our earnings call in August, you might remember we spoke about our Q2 TPV growth accelerating 3 points versus Q1, which was a little unexpected. So we wanted to see an elevated growth trajectory endure for longer than a couple of months before adjusting our forecast for the remainder of the year, especially considering the macroeconomic uncertainty. As I just walked through, Q3 TPV further accelerated by more than 3 points versus Q2, driven by a broad cross-section of our customers and use cases. About 2/3 of this underlying business outperformance was driven by lending, including Buy Now, Pay Later and on-demand delivery. The growth in these 2 use cases meaningfully accelerated in Q3 versus Q2 as we continue to support our customers' business expansion. Second, approximately 2.5 points of the outperformance were driven by unusual items that were unexpected. The large majority of this impact was driven by recovering fees from smaller customers who previously terminated their card programs. We have worked diligently to recover contractually obligated fees, and it just so happens that several of the larger efforts were resolved during Q3. Third, approximately 1 point of the outperformance resulted from earning a network rebate from one of our network partners that we did not anticipate. Based on the Q3 results, we expect this will continue to be a benefit going forward. The final component of our outperformance was the strength of the TransactPay business, which contributed approximately 1 point more to our gross profit growth than expected. The TransactPay business is on a better trajectory in 2025 than we had expected, and our visibility was limited until we started to consolidate results following the July 31 closing. As a reminder, we revised our accounting policy for estimating and recognizing card network incentives starting in Q2 of this year. We are now accruing incentives each quarter based on the forecasted annual contract tier we expect to achieve, as opposed to booking the incentives each quarter as they are earned and moving through the progressive tiers. As a result, Q3 gross profit growth had a headwind of 1.4 points due to the difference in methodologies for the year-over-year comparison. Q3 adjusted operating expenses were $84 million, growing 4% year-over-year, which was on the lower end of our expectations. This was a timing shift of marketing initiatives from Q3 to Q4, which lowered Q3 growth by approximately 2 points. The addition of Transact Bay contributed approximately 3 points to our year-over-year growth. Q3 adjusted EBITDA was $30 million, reaching another all-time high in dollars for the second quarter in a row. This resulted in a margin of 19% as we continue to make significant progress on our path to profitability. Adjusted EBITDA margin based on gross profit, which was 26%, is the metric we look at internally to illustrate the profitability potential of our business. The Q3 GAAP net loss was $3.6 million, which included $8 million of interest income and a nonrecurring litigation-related expense of $4.3 million. We ended the quarter with a little over $830 million of cash and short-term investments, driven by strong operating cash flows. With the addition of TransactPay this quarter, one thing to note on our balance sheet is the $235 million of restricted cash and the offsetting liability. TransactPay must comply with the regulatory safeguarding requirements associated with the EMI licenses, so we account for the customer funds they hold differently than our approach in other geographies, such as the U.S., where our program funding arrangements are structured more optimally. Our share repurchase activity remains ongoing as we continue to believe the current valuation does not fairly represent the company's value or the market opportunity ahead of us. In Q3, we repurchased 3.2 million shares at an average price of $6.12. For the year-to-date period ending September 30, 2025, we have repurchased 64.6 million shares at an average price of $4.53, which is a reduction of nearly 13% of the total issued and outstanding shares as of the 2024 year-end. As of September 30, we had $88 million remaining on our buyback authorization. Now, let's transition to our expectations for the fourth quarter of 2025. Based on our Q3 results, we are raising our expectations for Q4 and the full year. We now expect Q4 2025 net revenue and gross profit growth to be at least 5 points higher than what we had shared last quarter, and adjusted EBITDA margin to be 2 points higher. Therefore, we now expect net revenue to grow between 22% and 24% in Q4 and approximately 22% for the full year 2025. Gross profit growth is expected to be between 17% and 19% in Q4 and approximately 23% for the full year 2025. The expected slowdown in gross profit growth from Q3 to Q4 of approximately 9 points is primarily driven by 3 factors: First, Q3 growth benefited by approximately 2.5 points from unusual items, mostly the recovery of contractually obligated fees. Second, the impact of our revised accounting policy for network incentives on the year-over-year comparison will be the most significant in Q4. We expect a drag of about 5.5 points on gross profit growth in Q4, which is approximately 4 points more drag than Q3. Third, as we have discussed all year, we are actively engaged in renewal discussions with 2 large customers. We expect one of those renewals to be in effect in Q4, resulting in a headwind of approximately 2 points. We expect Q4 adjusted operating expenses to grow in the mid-single digits, in line with what we shared last quarter, despite the timing shift of some marketing expenses from Q3 to Q4. Adjusted EBITDA margin is expected to be between 15% and 16% in Q4 and approximately 17% for the full year 2025. This equates to a little over $100 million in adjusted EBITDA in 2025, which is more than 3x higher than last year and nearly double what we anticipated at the start of 2025. In conclusion, our incredible Q3 financial results not only led us to raise our full-year 2025 expectations for net revenue, gross profit, and adjusted EBITDA, but they also reflect the deepening of our customer relationships and expansion of our platform capabilities. The combination of strong gross profit growth, efficiency increases, and scale benefits is rapidly improving our profitability and foreshadowing the future earnings potential of the business. We expect to finish the year strong as we position the business for sustainable long-term success through multiple growth vectors and increasing scale. I will now turn it over to the operator for questions. Operator: [Operator Instructions] And our first question comes from Bryan Keane with Citi. Bryan Keane: Mike, congrats on the very solid results. I guess my question is just trying to figure out new business, new ramping of contracts, and what that pipeline looks like. It looks like a lot of the outperformance is just by the existing business. And then my follow-up is just kind of thinking about going forward, does it make it tough to figure out how to guide and what the normalized growth rate of the company should be, given that you have areas like BNPL with such outsized growth? It's just hard to predict. Mike Milotich: Yes. Thank you, Bryan, for your question. So I would say, first, when we are looking at the growth, we look at it, I guess, slightly differently than the way you characterized it. We look at new business in terms of new programs and, within those new programs, how many of them are driven by existing customers versus new customers. So you are right that many of the exciting growth areas of the business are coming from our existing customers, but most of that is being driven by new programs that they are launching with us, either new products or expanding into new geographies. And whenever they make those decisions, of course, we would like to have deeper relationships with them. But of course, they have other options. And so we still consider that great new business that drives growth. This year, we've talked a lot about what we call our new cohort business, which includes all programs that have launched since the start of 2024. And those are very much on track with what we believed at the start of the year, excluding the impact of Varo deciding to terminate. So our programs this year, again, programs that have launched since the start of 2024, are expected to contribute over $40 million in revenue in 2025. So that business is ramping well, and we're excited to continue to see it ramp into next year. In terms of guiding, I think we do have a complex business. But I feel like, generally speaking, we do forecast the business pretty well. I would say going into the holiday season in Q4, where Buy Now, Pay Later, the volume significantly ramps up. It is a little bit more difficult in Q4 and particularly with sort of the uncertainty in the macroeconomic environment, it's a little bit tougher to tell, but we feel pretty good about our ability to project the business forward, and we'll see as the quarter unfolds. Bryan Keane: And then just as a follow-up, it sounds like TransactPay has been key to kind of develop the European market. Is it just expansion from existing customers that they didn't kind of feel comfortable expanding until you had that solution? I'm just trying to figure out exactly how big that could be for you guys now that you have that asset under your belt. Mike Milotich: Yes. So there are 2 primary sources of value for us with TransactPay. So one thing you mentioned is that it does make it much easier for our customers to move to either side of the Atlantic, so either North American customers going to Europe or European customers coming to North America. And the reason for that is prior to TransactPay, we couldn't offer the same level of solution that we could in North America, with the biggest difference being program management. So when a U.S. customer, for example, wanted to go to Europe, we'd be able to tell them, well, from a processing perspective, this will be pretty seamless on our platform, but there's a lot of things that you're going to have to find someone else to do for you in Europe that we take care of for you in the U.S. So that was not ideal for our customers. And so the TransactPay acquisition removes that barrier, where actually our offering now will be very similar and very seamless to expand going either direction across the Atlantic. The other source of growth for TransactPay is incremental business. What we repeatedly have heard in the market and even what other ecosystem players tell us is the very large opportunities, the real enterprise customers want one partner, one platform to serve as both processing program manager and bring the EMI license. So there was a part of the market, which is really the bigger part of the market, the high end of the market, that we really couldn't play in before. And now with the TransactPay acquisition, we can play in that market, and our pipeline reflects that. So those are the 2 things that are quite exciting about the addition. And we're only 3 months in now, but we've hit the ground running since the close. Operator: And our next question comes from Timothy Chiodo with UBS. Timothy Chiodo: I was hoping we could dig in a little bit more into the Kara Card relationship. So clearly, it's expanding into 15 new markets, I believe, is the number that was put out there. This is the in-store relationship with the card, but I also understand that the Apple Pay portion would be applicable as well. I was hoping you could help us, one, just put a little bit more detail around the relationship. But also to the extent, even directionally, you could give us a sense of some of the numbers that we could start to put around this, meaning we certainly have estimates around the number of cards that this could be, given there's a wait list in the U.S., and we could put some kind of an assumption around the markets in Europe. But volumes per card, what's a reasonable expectation relative to the, call it, 2,000 or so per card that we see with the Affirm Card? And then directionally, if the yield on this business were lower, higher, or about the same, that would be appreciated. Mike Milotich: All right. Thanks, Tim. I'll let you throw a lot in there. So let me see how much I can cover. So yes, Klarna is a great partner of ours. They've been a customer for a very long time, certainly going back probably 7 or 8 years. And we continue to have a great relationship where we can enable innovation together. What's exciting about the expansion of the Visa flexible credential into 15 new markets is that last October, we did a pretty significant migration for Klarna in Europe. It was in 3 countries, and we converted or migrated over 5 million cards. And so we've been operating with them in 3 markets, and now they're going to add 15 additional markets to that relationship. So we have, I guess, a good amount of information based on the 3 markets that we see today, but those were businesses that already existed before they got onto our platform. So it's a little bit different than in these new markets where they're starting with the first time of having a card solution. What I can tell you is that what we see in those 3 markets is that the growth has been really strong. So when you're doing a migration, you move a lot of the historical information from one platform to your own. And so we had a good sense of the trajectory of the business prior to it coming onto the Marqeta platform. What we're seeing in the quarter since that happened is a significant acceleration in that business. And so part of that, of course, is that Klarna gets all the credit. They're executing really well and driving a lot of growth. But we'd like to hope that we at least have some hand in the capabilities of our platform and really making it easy and reliable for them to drive that kind of growth. And so we'll see how the new 15 markets go because we don't really have as good a benchmark because as you said, in the U.S., they had waitlists and other things. So I can't share those numbers. Maybe they would share them with you. But the yield was your last question. I would say, in general, Europe, the yields tend to be a little bit lower because just the economics in Europe are a little different, but there are still healthy yields for us to drive growth and also allow Klarna to be very competitive and offer a very effective value proposition for their end users. Operator: Moving on to Darrin Peller with Wolfe Research. Darrin Peller: There was a lot on the call, but I want to just take a step back. And if we look at the puts and takes of what you look at for 2025 and think about the trajectory of the business that you're on right now relative to what you'd expect and hope for going forward, anything anomalous that we're seeing now in this trajectory that we should think is unsustainable because the growth obviously has done very well this quarter. And I guess we're getting questions on how that can look at the end of the year and into next year already. So any early indication of what you're seeing in terms of just trends and anything that may not be? You mentioned 2 contracts that might be renegotiated, or anything else you can call out? Mike Milotich: Sure. Yes. No, thanks, Darren. I mean, there's no doubt that the trajectory of the business is stronger than we expected. Just the TPV growth is accelerating again for the second straight quarter. And as I mentioned, this is our fastest TPV growth in about 6 quarters. So clearly, things are on a good trajectory. I would say, first, from, I guess, the positive aspects that are driving this is certainly the Buy Now, Pay Later use case. And again, this combination of some geographic expansion as well as these, what we call Pay Anywhere cards, but the Buy Now, Pay Later companies offering a card that can be used anywhere a card is accepted to deliver the Buy Now, Pay Later use case. We are getting really strong adoption. And our lead and leadership, I guess, with the flexible credential from Visa has been something that we're quite proud of as the first to enable that, and that's leading to a lot of growth. Also, in SMB lending, that part of the market is also doing quite well. I didn't highlight that much, but that's another area. So everything in lending, I would say, is definitely performing better than we expected and driving better growth. And then the on-demand delivery acceleration this quarter was a little bit of a surprise. Our customers continue to expand into new merchant categories, I guess, as well as geographies, and that's driving strong growth. And then just in general, I would say the business is doing a little better. The things that can change there are a few. So one is, we talked about the renewals at the start of the year. And as I just mentioned, one of them we expect to be in effect in Q4, and lower our growth by about 2 points in our gross profit growth by 2 points in Q4. That other renewal, we do expect to get done in the early part of 2026. So what we said at the beginning of the year was we expected those 2 to be a combined 4 points of drag on growth. The first one is coming out to what we expect it to be, about 2 points; we'll see. So we'll update you on those 2, but that's one thing that's changing. I think the second thing I would highlight is that we do now expect that Cash App is going to diversify some of their new issuance with Bancorp and use another processor. So it's the new issuance for now, is our understanding. Even if they do all their new issuance starting January 1, which would be aggressive. But if we just use that as an assumption, we think that would be about 2 points of drag on our growth in 2026. So that's something that we also expect to change. And then the last thing I would just point out is that in this quarter, we did have 2.5 points of just unusual items that we think are very unique to the quarter, and those wouldn't continue. So those are a few of the factors that are, I would say, we expect to change in '26, but we'll tell you more about that when we talk again in February. Operator: Our next question comes from Tien-Tsin Huang with JPMorgan. Unknown Analyst: This is Connor on for Tien-Tsin. Mike, I wanted to ask about Europe a little bit. You talked about it still growing 100% plus or doubling. I was curious if you could just talk about how sustainable you feel like that is? I think it's across a couple of use cases, and it seems like you've got a couple of clients doing particularly well, but maybe just thoughts on the sustainability of that and mix shifts you're seeing within the use cases, maybe? Mike Milotich: Sure. Thanks, Connor. So yes, the international business is doing really well, and a lot of that is being fueled by Europe. Just so you have a sense, our non-U.S. business represents sort of a high teens percentage of our TPV, and that's up 5 percentage points from Q3 of last year. So that very high growth rate means it's grabbing a bigger share of our business over time. And the European growth remains over 100%. That's probably not sustainable, obviously, as the base gets larger, but we've now done that for several consecutive quarters. The use cases in Europe, what's great is that it's very similar to our U.S. business. We have very large customers who are growing quickly in neo banking, lending, and Buy Now, Pay Later, as well as in expense management. So all 3 of those areas are all growing over 100% and are all of substantial size. I would say the only difference in Europe compared to the U.S. is just the on-demand delivery business is much smaller. It is there, but it's not nearly as significant as it is in the U.S. So that's really the biggest difference. In terms of sustainability, I mean, again, 100% growth is probably a little bit much to expect, as the base just keeps getting bigger and bigger. But we do think that the TPV growth in Europe can continue to grow at a materially faster rate than the overall company. And that's because we've got TransactPay coming into the fold, which again just makes our offering that much more compelling and allows us to seamlessly support customers who maybe want to move to Europe or European customers who want to move to North America. And it just allows us to compete in the premium market where the large enterprises play. So the big volumes that can be had are now available to us, and we can be competitive, which really wasn't the case. So what I would say is in the coming quarters, our growth rate might slow a little, like dip below 100%, but still be very fast, much faster than the overall company. And then the plan would be in a year or so, as some of these programs with the combination of Marqeta and TransactPay together start to come on board that, that TPV growth could reaccelerate. So we think it's going to grow much faster than the overall business for at least the foreseeable future. Unknown Analyst: Perfect. And maybe a follow-up on just like Flexential more broadly. I'm curious, I mean, you talked at some length about within BNPL kind of the use case for Visa Flex Credential. Curious, like outside of BNPL, are you seeing demand for it from any of your customers? What can you say about adoption curves if we exclude BNPL? Mike Milotich: Yes, we are seeing a lot of interest because of the flexible credential beyond just Buy Now, Pay Later, because really, the first use case was this combination of a debit credential with the ability to do essentially transaction-based lending or Buy Now, Pay Later lending. But what is coming from the networks that, again, you could ask them for more details. I don't want to steal their thunder, but we are going to move to a world where the flexible credential could be debit and more of a revolving credit instrument. And so then that now has a lot of applicability for people versus today, we probably all have a credit card and a debit card in our wallets. In the future, you might be able to just have one card that allows you to pay now and pay later, or revolve all in one credential. So the discussions about that type of offering we have a lot of those conversations given that we have the most experience with these flexible credentials. And so we have a lot of conversations about that. The second area that I'd also say is right now, it's the Buy Now, Pay Later companies who are at the forefront of using this flexible credential, but we also talk to other companies who want to have a debit offering where you might embed Buy Now, Pay Later that comes from one of these major Buy Now, Pay Later customers of ours. So we do think even the current use case can expand beyond just Buy Now, Pay Later companies, but other issuers as well. And that would be both good for that issuer's value proposition as well as drive distribution for the Buy Now, Pay Later customers of ours. Operator: Moving on to Craig Maurer with FT Partners. Craig Maurer: I wanted to ask, when we think about 2026, how does Cross River help with the backlog? Does it open you up to new potential in terms of growing that? And second, the renewal cadence, you obviously talked about renewing 2 customers in the fourth quarter and the first quarter. How should we think about that going forward? And just lastly, how are the opportunities with American Express starting to shape up? Mike Milotich: Sure. Thanks, Craig. So yes, and just in terms of Cross River Bank, I mean, we're excited to start working with Cross River Bank. Again, we have a program that is going to go live in Q4 and launch, which we're excited about. And then early next year, we expect to also have Coastal Community Bank up and running. The key thing is that when we are looking for new potential bank partners, we look for the combination of both with banks that have a lot of capabilities and technology. So they had made a lot of investments themselves because those are the things that we can utilize seamlessly to deliver value for our customers. We wanted them to have, obviously, a strong regulatory compliance footing. And then we also wanted banks that could support a broad range of offerings. What makes Marqeta unique is that we do all use cases across debit and credit, consumer and commercial. And so we really want partners who also have that kind of breadth of offering. And Cross River Bank, we feel like is a great partner, and we're excited to work with them as we go forward. So it will be more and more part of the new business that we bring on board to our platform, starting in Q4. In terms of the renewal cadence, so yes, originally, we thought these 2 renewals would get done kind of in the middle of 2025. And they've just taken longer. They're both going to get done before the contract or the current contract expires. So it's not like we're bringing it down to the wire here, but they are just taking a little bit longer. They're bigger customers, larger relationships. And so there's just more to discuss. And we expect one in Q4 and then the other one in the early part of 2026. And once they're done, we'll give you updates. And then your last question on American Express. So there are several opportunities that we're talking to customers about with American Express. And we are also talking to American Express about unique things we could do together. So I would say we had a few things in mind when we started the integration, which is almost complete. And we do continue to partner together to capture some people who are trying to do unique things in the market, where we both bring something unique to the table. Operator: We'll go next to James Faucette with Morgan Stanley. James Faucette: I wanted to ask, you talked about your ability and opportunity you've had to ramp incremental markets with Klarna, et cetera. Can you talk about how that impacts your ability to add new markets for other partners and things that you can do to accelerate that process operationally for them? It seems like that would be a good opportunity, especially as people look at different countries around the world where they may want to have a presence. Mike Milotich: Totally agree, James. And we're doing this for a broad number of customers. Our view is that a lot of the fintech winners have been crowned, if you will, and many of them are becoming big businesses, and they're expanding in terms of both products and geographic reach. And we're really helping them do that. If we look at our top 10 customers, 8 of them operate in more than one geography with us, which we would define as sort of the U.S., Canada, Europe, Australia as sort of the primary geographies that, I guess, in 1 or 2 countries in Latin America. So we already have the majority of our largest customers operating in more than one of those on our platform. And I think it's around in the mid-teens of our top 20 customers are also in more than one market. So this is something we already do and have been doing for a while, but we think there's even more potential because in a lot of cases, these were maybe smaller efforts, but I think now many of our customers are seeing traction and looking to invest in those markets as there just aren't nearly as many people chasing all the same opportunities as there was 3, 4 years ago. And so that's creating opportunity, which is part of the reason, as we talked about earlier, for the TransactPay acquisition is just to make our platform and our capabilities on a geographic basis much more consistent. And when we look at the pipeline of who we talk to now in terms of new customers and new opportunities, this is one of the key criteria when we're looking at who we should target is who are the companies that are already multinational and have the scale that could take advantage of that unique capability that we have. So the fact that we are 100% modern and operate at scale and can do all kinds of use cases across debit, credit, consumer, and commercial, but that also means that we were one stack. And so we make it very easy for you to move from market to market, versus many other competitor platforms that might be a whole different platform that requires a different integration. So this is an area that we're leaning in both with our existing customers, as well as if you were to see our pipeline, it includes a lot of companies that very quickly want to be in more than one market. Operator: [Operator Instructions] And we'll go next to Jamie Friedman with Susquehanna. James Friedman: So I was wondering if you could share any perspective on the kind of respective revenue yields, as there's relative growth in some. For example, you called out that revenue yield in Europe might typically be lower. How should we compare commercial, say, the expense management initiatives relative to consumer? Any perspective that you might have on revenue yield would be helpful. Mike Milotich: Sure. Yes. Thanks for your question, Jamie. And I would say I'll talk about our gross profit take rate since we tend to focus on gross profit take rate. So I would say the yields from use case to use case are not as different as you would think. I would say, generally, they're relatively consistent. What changes the actual yield in each kind of use case has more to do with the size of the customers that we have. So, how big are the very largest customers in that space? So when we compare our offerings or our gross profit take rate in the various segments, the differences more come from the weighting or the mix of the size of the customers in each, as opposed to us fundamentally charging different amounts for different use cases. For example, in our financial services and the neo banking, obviously, our largest customer, predominantly their business is there, but we have a couple of other quite significant customers. And so that one tends to be a little bit lower. And I would say the same thing in expense management. We have 2 or 3 very large customers in that space. And so the gross profit take rate tends to be a little bit lower than in on-demand delivery and lending, and Buy Now, Pay Later, it's a little bit more diversified customer base. There are a lot more customers who are contributing. And so the gross profit take rates are a little bit higher. The only other thing that I would just mention about this is one of the other things that I haven't mentioned when we talk about TransactPay is that traditionally in Europe, our gross profit take rate was much lower because we were only providing processing, and we really didn't have much else to offer versus now we'll have processing and program management, including the license, all of which you can monetize. And then also, we're bringing a lot more of our value-added services to Europe. So we do expect that our gross profit take rates in Europe are going to improve over time, which will maybe also make the difference between, say, North America and Europe, not as significant as it is today. James Friedman: And that's a good follow-up to my second one, Mike, which is about value-added services. I might have missed it this quarter. I felt like you had more about it in the script earlier in the year. So what is the narrative on value-added services? And I apologize if I missed it earlier. Mike Milotich: No, no, you didn't. Yes, we didn't cover it much this quarter, but we spent a lot of time on it last quarter. We continue to expand our value-added services. If you really think back to 2, 3 years ago, a lot of our engineering energy was going into scaling the business. A payment platform that has to work every time. There's a lot of effort that goes into it when your volume is growing at the rates ours has over the last several years. That was a big part of our efforts. But I would say in the last 12 to 18 months, we've really broken through that next level of scale. And it's allowed us to then divert some of our resources to adding more value-added services and making the offerings more robust. So some of the big areas, I would say, right now are related to things related to tokenization, as well as our risk products are both growing quite quickly. So those are 2 areas that we're excited about. And then the new area that we just started launching this year is our ability to support people with the user experience, so a white label app. A lot of the customers or a lot of prospects on our platform do want that full end-to-end solution because, as we move into embedded finance, just remember that the way we at least define embedded finance is that it's companies whose core business is outside of financial services. So our traditional customer base in fintech, they wanted to own a lot of these things and build a lot of these things themselves, versus an embedded finance, these customers have another core business, and they're really looking for a full end-to-end solution. which is why we've really been investing in this area because we think more and more of our business going forward will be full solution sets, including lots of different offerings from our platform to make it easier for them. So it's relatively small right now, but growing quickly and will become a bigger part of the story in the coming years. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
Operator: Greetings, and welcome to the Gulfport Energy Corporation Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jessica Antle, Vice President of Investor Relations. Please go ahead. Jessica Wills: Thank you, and good morning. Welcome to Gulfport Energy's Third Quarter 2025 Earnings Conference Call. I am Jessica Antle, Vice President of Investor Relations. Speakers on today's call include John Reinhart, President and Chief Executive Officer; Michael Hodges, Executive Vice President and Chief Financial Officer. In addition, Matthew Rucker, Executive Vice President and Chief Operating Officer, will be available for the Q&A portion of today's call. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance and business. We caution you that these actual results could differ materially from those that are indicated in the forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non-GAAP measures. Reconciliations to the comparable GAAP measures will be posted on our website. An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement. At this time, I would like to turn the call over to John Reinhart, President and CEO. John Reinhart: Thank you, Jessica, and thank you for joining our call today. Last night, we announced meaningful progress on key inventory additions that strengthen the company's core asset value and support sustainable long-term value creation for shareholders. Since 2023, we have consistently communicated our commitment to adding high-quality, low breakeven locations. And during the third quarter, we made meaningful strides in expanding our drillable inventory. First, driven by Gulfport's development and recent peer activity, resource viability of the Ohio Marcellus has expanded to the north, demonstrating the significant incremental value in Gulfport's inventory portfolio overlying our existing Ohio Utica development in Northern Belmont and Southern Jefferson County. These high-quality locations are being added to the existing portfolio at no incremental land cost, effectively doubling our net drillable Marcellus inventory in Ohio. Second, the successful appraisal drilling of our first 2 U-development wells in the Utica validates the feasibility of U-development across our acreage position, adding economic low breakeven inventory on otherwise underutilized acreage, which previously only accommodated subeconomic short lateral development. Third, we have continued our disciplined discretionary acreage acquisitions into the third quarter and since mid-2023 have invested over $100 million towards high-quality, low breakeven locations that enhance optionality across our portfolio. Collectively, these initiatives have increased our gross undeveloped inventory by more than 40% since year-end 2022, and we now estimate Gulfport holds approximately 700 gross locations across our asset base. These inventory additions facilitate substantial fundamental value enhancements for the company by increasing our net economic inventory by approximately 3 years and brings our total net inventory to roughly 15 years, with peer-leading breakevens below $2.50 per MMBtu. Finally, we also achieved a significant milestone on the financial front during the quarter by completing the redemption of our preferred equity. This transaction simplified our capital structure and complements our ongoing equity repurchase program. Inclusive of the preferred redemption as of September 30th, Gulfport has returned $785 million to shareholders since March 2022, and we intend to continue to opportunistically repurchase our undervalued common stock, announcing plans to allocate an incremental $125 million towards repurchases during the fourth quarter of 2025, all while maintaining an attractive leverage ratio forecasted to be at or below 1x at year-end 2025. Moving to our third quarter results. Our average daily production totaled 1.12 billion cubic feet equivalent per day, an increase of 11% over the second quarter of 2025 and keeping us on track to deliver full year production of approximately 1.04 billion cubic feet equivalent per day, which includes unplanned third-party midstream occurrences that were previously disclosed alongside our second quarter results in August. On the capital front, we remain committed to allocating capital to the highest value opportunities across our asset base. We announced 2 targeted initiatives where we plan to invest incremental discretionary capital expenditures during 2025. First, as part of our technical team's ongoing focus to optimize development and unlock additional value within our existing portfolio, we have elected to invest approximately $30 million towards discretionary appraisal development during 2025. This program predominantly targets the drilling and completion of our first 2 U-development wells in the Utica, which, as mentioned, were recently successfully drilled and are scheduled for completion late in the fourth quarter. These wells validate the technical feasibility of U-development across our acreage and enable us to optimally develop areas of our acreage footprint that were either not prioritized for future development due to acreage configuration or only contemplated for shorter lateral development that did not clear our current economic hurdles. This discretionary investment allowed us to unlock roughly 20 gross locations, nearly 1 year of high-quality dry gas inventory and enhances our long-term development optionality. In addition, our team identified and executed several other appraisal opportunities during the second and third quarters of 2025, including DUC completions of laterals that were drilled several years ago, infilling 2,000-foot spaced laterals as well as refrac opportunities from under stimulated wells in the Utica. These activities were designed to supplement base production with limited incremental capital, and we will assess performance from these initiatives and apply the learnings to pursue additional value-enhancing opportunities that may exist elsewhere in the company's portfolio. Second, in response to known forecasted production impacts from simultaneous operations of an offsetting operator as well as planned third-party midstream maintenance production downtime in the first quarter of 2026, we are planning to invest approximately $35 million towards discretionary development activity during 2025. This proactive spend is expected to mitigate the forecasted upcoming production impact and position the company to deliver offsetting volumes into a favorably -- into a favorable economic commodity price environment. While we continue to optimize our 2026 development program amongst our attractive development areas and plan to announce our formal capital and production guidance in February, the discretionary capital investments made in 2025 will benefit the 2026 program. Along with these incremental capital investments, the company reiterates our commitment to return capital to shareholders through our ongoing common share repurchases. And this incremental capital spending will not reduce the amount we previously planned to allocate towards share buybacks during 2025. In total, we expect to allocate approximately $325 million to common stock repurchases during the year, while maintaining financial leverage at or below an attractive 1x. On the land front, through September 30, 2025, we have invested roughly $23.4 million on maintenance, leasehold and land investment, focused on bolstering our near-term drilling programs with increases of working interest and lateral footage in units we plan to drill near term. In addition, we continue to pursue discretionary acreage acquisitions, primarily in the dry gas and wet gas windows of the Utica, and we have invested approximately $15.7 million during the first 9 months of 2025. We reiterate our plans and remain on track to allocate $75 million to $100 million in total before the end of the first quarter of 2026 and currently forecast approximately $60 million of cumulative spend by year-end 2025. Upon successful completion of our planned expenditures, this is planned to add over 2 years of core drilling inventory, further bolstering our undeveloped well counts and development optionality beyond the additions we announced earlier today. Specific to our Marcellus activity, we continue to be very encouraged by our Hendershot pad results in our first multi-well development, the 4-well Yankee pad brought online late in the second quarter and located in the Marcellus core development area. The Yankee pad is exhibiting attractive performance compared to its direct offset, the Hendershot 5-well, and when normalized to 15,000-foot laterals, tracking in line on a 2-stream equivalent comparison. Notably, the Yankee pad represents our first Marcellus pad to be gathered and processed under our new midstream agreement, which enhances development economics by enabling the extraction and sales of valuable NGLs, especially considering the favorable ethane treatment that the contract provides. In addition to our Marcellus core inventory, as I noted, recent peer development activity has expanded our Ohio resource liability into Northern Belmont and Southern Jefferson Counties, where we hold a meaningful amount of acreage, as depicted on Slide 8 of our investor presentation. We estimate approximately 120 to 130 gross locations across the defined Marcellus North development area, expanding Gulfport's gross Marcellus inventory by approximately 200%. We plan to drill our first Marcellus North development in early 2026 and look forward to discussing the development results once the wells come online and we gain production history. In summary, we remain focused on expanding and responsibly developing Gulfport's high-quality, low breakeven inventory while prioritizing shareholder returns and maintaining our strong financial position. The expansion of our Ohio Marcellus inventory, validation of new development and targeted discretionary acreage acquisitions have increased our total net inventory to roughly 15 years with breakevens below $2.50 per MMBtu, and we remain committed to returning capital to shareholders through common share repurchases, including the planned incremental repurchases in the fourth quarter of 2025, again, all while preserving a strong balance sheet. Now I will turn the call over to Michael to discuss our financial results. Michael Hodges: Thank you, John, and good morning, everyone. From a financial perspective, Gulfport delivered a strong quarter with robust quarterly production growth and solid cash operating costs, which resulted in attractive adjusted EBITDA and free cash flow generation. Net cash provided by operating activities before changes in working capital totaled approximately $198 million during the third quarter, more than funding our capital expenditures and common share repurchases, while maintaining our balance sheet strength at just over [ 8/10 ] of a turn of financial leverage. We reported adjusted EBITDA of approximately $213 million during the quarter and generated adjusted free cash flow of approximately $103 million, which includes the impact of approximately $12.4 million of discretionary capital expenditures. Our all-in realized price for the third quarter was $3.37 per Mcfe, including the impact of cash settled derivatives, resulting in a premium of $0.30 above the NYMEX Henry Hub index price. This outperformance reflects Gulfport's differentiated hedge position, the pricing uplift from our liquids portfolio and the impact of our diverse marketing portfolio for our natural gas. As many of our peers have discussed, we are entering an exciting time for the natural gas market, fueled by LNG expansion and the increase in demand for natural gas power generation that is accelerating from the build-out of new data centers. This evolving landscape presents exciting opportunities and while on a smaller scale than some industry peers, Gulfport has been able to benefit from our firm transportation portfolio to secure targeted arrangements with larger gas marketers that deliver incremental value to the company. We continue to evaluate additional opportunities to supply gas to meet this growing demand and Ohio appears to be fertile ground for future development in this area. This market trend also pairs well with our direct exposure to the growing LNG corridor near the Gulf Coast through our firm transportation agreements that access the TGP 500 and Transco 85 sales points, markets which averaged more than $0.50 above the NYMEX Henry Hub index price during the third quarter. Together, these marketing and takeaway arrangements improve our realized prices, increase our all-in netbacks and ultimately lead to enhanced durability in our free cash flows. Turning to the balance sheet. Our financial position remains strong with 12-month net leverage exiting the quarter at approximately 0.81x, down from the prior quarter and benefiting from the increasing EBITDA our business has delivered over the past year. As of September 30, 2025, our liquidity totaled $903 million, comprised of $3.4 million of cash plus $900.3 million of borrowing base availability. And we recently completed our fall borrowing base redetermination with our lenders, unanimously reaffirming our borrowing base at $1.1 billion, with elected lender commitments remaining at $1 billion. Our strong liquidity and financial position today is more than sufficient to fund any development needs we might have for the foreseeable future and provides tremendous flexibility from a financial perspective as we are positioned to be opportunistic should situations arise that allow us to capture value for our stakeholders. As demonstrated through our discretionary acreage acquisitions, proactive capital initiatives and planned share repurchases announced alongside our earnings. As John mentioned previously, we completed the opportunistic redemption of all outstanding shares of Gulfport's preferred stock during the third quarter. The company redeemed a total of 2,449 shares of preferred stock at an aggregate redemption value of approximately $31.3 million. This is a milestone financial accomplishment for Gulfport as the completion of this transaction simplifies our capital structure and underscores our belief in the attractive value proposition that Gulfport's equity represents. Inclusive of the preferred redemption, during the third quarter, we repurchased 438,000 shares of common stock for approximately $76.3 million. And since the inception of the program, we have repurchased approximately 6.7 million shares of common stock at an average price of $117.45 per share, approximately 40% below the current share price. Our consistent approach to share repurchases over the last 2 years has delivered tremendous value to our shareholders. That said, we also remain opportunistic, utilizing our financial flexibility to allocate capital when we believe the current valuation does not reflect the strength of our underlying fundamentals. And as such, repurchasing shares at today's level represents a highly attractive use of capital. As John mentioned, we expect the incremental discretionary capital expenditures announced today to be funded without impacting our planned share buyback program and alongside earnings announced plans to allocate approximately $125 million to common stock repurchases in the fourth quarter of 2025 to be funded from adjusted free cash flow and available revolver capacity, all while maintaining leverage at or below 1x. In closing, we remain committed to allocating capital strategically, recognizing the highest value opportunities across our assets while maintaining our return of capital framework, all anchored by a strong financial position that provides substantial flexibility. Our recent inventory expansion delivers meaningful asset accretion and long-term shareholder value, and our low breakeven inventory positions the company to benefit from improving natural gas fundamentals and deliver meaningful free cash flow growth going forward. With that, I will turn the call back over to the operator to open up the call for questions. Operator: [Operator Instructions] And the first question comes from the line of Neal Dingmann with William Blair. Neal Dingmann: Great update. John, my question is, you've talked a lot on the release and this morning about just seems like well results when I look at versus type curve. They continue to improve. And I'm just wondering, I guess, 2 questions around that. Is it just you're targeting the rock better? Or maybe just talk about what you think is really driving that certainly notable upside? And then is it fair to say, I mean, if there was even pressure and takeaway wasn't an issue that could we even see materially bigger wells than we're already seeing? John Reinhart: Thanks for the question. I think one of the things that we're pretty proud of here is the team's constant focus on operational execution and their ability to test and optimize the completions and drilling, quite frankly, and drill out phases of our development. The teams -- what I'll point you to, the teams have progressed, especially in the different windows of the Utica with cluster spacing, with sand. So for instance, there's been a pretty material change in the way we allocate sand, whether it's 40/70 or 100 mesh, the cluster spacing, the stage sizes. So the teams are constantly evolving, assessing and testing as we move through our development program in both the Marcellus and the Utica and the condensate, and the well results showed that. So pretty pleased with how the teams are focused on that, that optimization and certainly look for more to come. I think on the upside question you asked about, there's certainly no doubt with some of the occurrences that we experienced that the throughput could have been well over what our actual production results went up in '25, and we communicated that earlier in the year. I think on a per well basis, we do follow restricted choke management. And while there may be some upside there, generally speaking, although we've had some modifications to some of these restricted rates being a little bit lower because of some of the occurrences, I'll tell you that the teams and the execution of the production results out there are following in trend and what we expect. So limited upside on the pressure managed results. What I'll tell you is any restrictions we'll see near term will just kind of pan out and prolong the plateau period and shallow the decline later on. But I mean, overall, great well results. It's a great asset base and the teams are constantly looking to optimize value. Neal Dingmann: Great. Great. And then just a follow-up, maybe on capital allocation, I don't know either for you or Michael. I mean is it simply -- I mean, again, we know you focused on the, I think, very smartly on the stock buyback. But again, when you're looking at M&A -- and you have little debt, so I understand that. But when you guys are looking at sort of M&A prospects, does it just -- is it -- I don't know, maybe I'm making it too simple, simply, are we better to buy -- continue buying back a ton of our shares? Or what is the value when we see some assets out in the market? I mean, does that factor in, and maybe just discuss that around the capital allocation? Michael Hodges: Yes. Neal, this is Michael, and John can certainly jump in. But I think you're hitting the nail on the head. I think when we look at kind of the opportunities that are already in front of us, kind of I'll call them these organic opportunities with the acreage acquisitions we've been able to execute on over the last few years and then with the equity, I think those are extremely attractive. I mean, again, I won't get into specific rates of return and then there's always intangible factors we consider as well. But I would just tell you the rates of return on some of those investments are quite high. And so you think about other opportunities outside of the portfolio and the need for those to compete. There certainly are those opportunities out there. And we do know that the market has seemed to value some scale. But I think for us, the way that we've been able to consistently add at those high rates of return has made a lot of sense. And I think the equity value has reflected that so far. We think there's still some underappreciated aspect to it there. But I think, again, we're constantly measuring those opportunities against what we already have and at least in our view, trying to be very disciplined about the way we think about those things. Operator: The next question comes from the line of Brian Velie with Capital One Securities. Brian Velie: Just a couple here real quick. I wondered if you could walk me through kind of your line of thinking for adding those appraisal U-development wells this year rather than waiting until '26? Was it just the gas pricing getting better recently? It certainly looks like it was the right time to do it. But I just wondered what that does for you or what this does for you in setting up '26? Maybe just kind of put you a little bit leaning forward into next year? Were there other time line considerations or things that encouraged you or convinced you to pull this into this year? John Reinhart: Yes. Brian, I appreciate the question. I think as we looked at the company's portfolio, I mean, it should be no surprise to anybody that we've been very focused on expanding the high-quality inventory over the past 3 years. We probably sound like a broken record whenever we say it, but that is a key focus for us. And as we looked at the fourth quarter, there's robust cash flow. The company has a healthy balance sheet. And almost every investor meeting that we have wants to see us kind of grow that inventory. And I think we agree, having sustainable long-term low breakeven inventory is very important for the company. It just provides durability, that's very important. So as we looked at all that, it was the right time to take a look at this appraisal bucket, which was primarily allocated towards these U-development. And this is a real opportunity for the company to take what was -- what I would call shorter lateral type development that were subeconomic to the right side of the skyline and really pull forward some really good, high-quality return 20 gross wells, that also adds, by the way, some dry gas into '26. So, I think the company was positioned very well overall financially. The commodity environment really looks constructive, and it was just the right time to continue to expand on our inventory through the Marcellus delineation efforts and all the technical work there as well as the U-development. Michael Hodges: Yes. And I just think maybe I'd add to that, Brian. I think the timing certainly helps, right? I mean I think the gas environment is strong. And I think we're certainly conscious of that as we make these decisions. But John hit on the point. I think it's really about unlocking the inventory. And we'll see what the results look like. We'll get these things completed near the end of the year, get the production online. Some of this appraisal capital, I think John mentioned in his remarks, was also related to some legacy DUCs and some refracs. And so, we'll kind of see what the productivity of these projects are. And so I think as far as thinking about next year at this point, probably a little early to guide you on kind of how much incremental there is there, but we'll certainly be following up. And I think John mentioned this in his prepared remarks, looking for other opportunities within the portfolio where we can apply some of these learnings that we've had. Brian Velie: Great. That's very helpful. And then maybe one quick follow-up. I just want to make sure that I'm thinking about this correctly and see if any shifts in the way that you guys are thinking about it. But we're working on 2 back-to-back years, returning more than 90% of free cash flow to shareholders. This year is probably going to be in the low 90%, the way I model it with fourth quarter free cash flow and your $325 million of buybacks, plus the discretionary capital number, you're going to be right there again. This year it's a little bit more of the total on acquisitions of land versus buybacks than maybe it has been in the past few years. Should we think about that the same way for 2026? At least as it stands now where the mix or the balance between the 2 choices that you have is going to depend on kind of acquisition availability or deal flow and then the other piece, you have share price performance. Is that the right way to continue thinking about it? Michael Hodges: Yes, Brian, I think that's a great way to think about it. I think the framework that we've laid out hasn't changed, right? I mean I think we feel like we're going to generate a lot of free cash flow next year, and we are going to continue to look for these highly accretive locations that we've been able to add. This year, we had line of sight to a little bit bigger number than the last 2 years, but this is 3 years in a row that we've been able to add those locations. So as we think about next year and what the opportunity set might be, certainly not ready to size that just yet. But whatever that size comes in at, I think our strategy would remain with buying back the equity, assuming that the value continues to be a proposition that we think makes a lot of sense. And so as I sit here today, that's the way we think about it and certainly able to adjust that as we move forward. But we think that, that's the highest and best use of our free cash flow right now. Operator: The next question comes from the line of Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I know you all don't have 2026 guidance out yet, but we're trying to understand sort of the puts and takes of your recent comments. You're accelerating some activity in 4Q, and you mentioned some constraints that you've seen in 1Q from midstream and offset fracs. We saw a pretty dramatic kind of [ SKU ] to the production in 2025 with first quarter down a lot. How should we think about sort of the shape of production? I know you don't have guidance. But just trying to understand kind of the impact of your 4Q acceleration and how that's going to shape the next couple of quarters? Can you give any context on that? Michael Hodges: Yes. Tim, this is Michael. I'll take the first shot and John can certainly jump in. I think if you look back at Gulfport over the past at least few years when our management team has been involved, we've had a fairly front-loaded capital program, and that was true in '25 as well. So if you think about the timing of the turn-in lines for some of that activity, you're going to see that a lot of that coming online, call it, second, third, early fourth quarter, which leads you to flush production kind of late in the year and a little bit lower production as you get into the first part of the year. Now to your point, we've got some projects here later in the year that will help the first quarter production, but we also have some midstream issues. So all that to say, I think the general shape will be similar to years in the past. I think that some of these projects might help a little bit. So maybe on a year-to-year comparison, there might be a little bit of a benefit there. But I think overall, that cadence is going to be very similar. And you'll see strong production from Gulfport kind of Q3, Q4 with a little bit lighter as you go into first quarter, second quarter. Timothy Rezvan: Okay. That's helpful. I appreciate that. And then I want to talk on ops real quick. Slide 8 showed sort of this outperformance of the Yankee wells versus the Hendershot pad, and you talked about that a little bit. Is there something specifically you can kind of point to, that drove that outperformance? I know that no rock is identical. But is there something you feel that like has kind of emboldened you for this resource acquisition from that pad when you think about sort of optimizing production? Just curious any insights on that? Matthew Rucker: Yes. This is Matt. Happy to take that one. Certainly, from that Hendershot pad, first 2 wells that we performed here in Ohio, lots of lessons learned, core data taken, things like that. So when we came back in for the full development opportunity here at the Yankee, certainly applied those lessons. I can't necessarily attribute it to one specific thing, but we did change our completion design techniques based on what we saw in the first 2 wells, as well as some different targeting within the formation there based on our core data and our production results. So all of those things combined and understanding the reservoir fluid system a little better after the first 2 allowed us to really hone in on what those are based on just learnings in other plays and basins. And so, I think that's the result we're seeing here and certainly applicable to the rest of our position, which has kind of given us the support here to continue to add to our inventory. Operator: The next question comes from the line of David Deckelbaum with TD Cowen. David Deckelbaum: Just -- curious just on the Marcellus delineation. First activity, I guess, up in Belmont. One, I guess, when are you thinking about doing some of your own work in Jefferson? And I guess, as you look at delineated activity in Belmont, what percentage do you think that, that would incrementally derisk of Marcellus prospectivity in Belmont? And I suppose as well, like would the intention be to design wells that would be similar to what you would see in development mode? Or is there going to be a little bit more science on these? John Reinhart: Yes. I think to your first question on activity and just our general inventory add there. There are several well points to the east of us. And I think even Michael, Matt and I in our prior lives down in Monroe County, there's been several Marcellus. And then here, we were, of course, up in that Belmont area. I think there's a lot of data points. What really kind of triggered the timing for us here is that northern data point that kind of shored up the structural features and structural mapping as you go from south to north, which really kind of put a pin in it for us and that offset operator who drilled that well. It's got substantial production that's public now. And I'd reference you to Enverus as well on some of their inventory data. It really facilitated us recognizing what we believe is a materially derisked footprint here. I will tell you that we're pretty conservative, and we took a conservative approach on this inventory adds in the Marcellus. If you reference Slide 8 in the investor deck, it kind of shows ongoing assessment. And I think that's maybe what you're referring to. We wanted to make sure that we stayed structurally and honored to structural and honored the data that we saw for these 50 or 60 net inventory wells, but there is meaningful upside. I think to your point, as we think about development, we're going to drill this first pad in Northern Belmont, which kind of ties along to the same structure and features is that Southern Jefferson. So for us, it's -- we're agnostic to it. What we're looking for is what well mix that's going to provide. So by the end of this year -- or sorry, the end of next year, we'll have a pretty good understanding of the production mix. And so, to your question about development opportunities, we'll then take that information and start looking at midstream contracts, processing agreements. So we're probably 2 to 3 years out from actually full developing that northern core, but we are going to drill our first well up there to get a good idea of production mix. On the South ongoing assessments, what I'll tell you is we're not an exploration company. We like to really derisk what we do operationally. So as we work from the east to the west, that will naturally start to delineate that ongoing assessment area where we feel like there's some real upside there potentially for the company because the actual play moves to the west as you go farther south, just that's the way the structure works. So there's a little bit -- we feel positive about the opportunities to potentially add some locations in the future, but we won't have any kind of real well set data or anything to compare to at least over the next 1.5 years. So that -- there's more to come there in the future. David Deckelbaum: I appreciate all the details there. I wanted to just ask on the buyback in the context of flexibility going forward. You guys highlighted the $35 million of spend that would accelerate the pad into 4Q '25 to really, I guess, offset impacts that would have happened in the first quarter. And you guys announced you're going to buyback about $125 million of shares in the fourth quarter. It was 3.5% of your cap, [ that was ] pretty notable. Do you see an intention, I guess, to start building excess activity so that you have flexibility around issues in sort of peak periods as you get sort of beyond '26? Michael Hodges: Yes, I'll take the first part, and then John or Matt can talk about kind of excess operational activity. I think on the buyback side, I think we've remained pretty consistently committed to it, David. So I think the announcement around earnings with the extra $125 million, I think it was maybe a little bit of an extension of what we've been doing anyway. I do think as we thought about the additional capital investment that we talked about earlier, the appraisal capital and then the proactive development capital, I think we wanted to show that the buyback is not kind of the offset to that, right? So I think that was the intention there. And I think there was a question earlier in the call about the intention going forward, and I think we'll remain pretty consistent there. But I don't think that on the buyback side, kind of the inventory of operational opportunities is changing our approach. In fact, I think what we did here in the fourth quarter kind of indicates that the buyback will remain consistent despite any kind of additional activity we consider going forward. So I don't know if, John or Matt, do you have anything you want to add to that? John Reinhart: Yes. I'll touch on the preparedness and kind of contingencies. We've really been focused, as we talked about on adding additional inventory. And these inventories kind of scour different landscape areas. So we've been focused on dry gas, wet gas. We've developed -- and certainly some Marcellus. We've developed some condensate wells. So as you think about kind of preparations for future occurrences and incidents, these all are in different footprints in different areas. So, by default of just adding this low breakeven, high-quality blocky acreage we can develop, it does set us up for contingent options as we move forward for any kind of unforeseen or unplanned incidents that we might have in the future. So, by default, we're actually focused on doing that by these inventory adds, and we feel like that's a very prudent action for us to take just considering what's happened over the last year. Operator: The next question comes from the line of Jacob Roberts with Tudor, Pickering, Holt & Company. Jacob Roberts: I wanted to ask on the 20 U-development locations. Is that largely a function of just the previous wells drilled? Or is that a function of that footnoted price? I'm just wondering over a multiple year period, how many of these do you think you could actually identify as feasible? John Reinhart: Yes, it's a great question. I'll tell you that the general first review over our portfolio and acreage footprint, these are more geared towards looking at land configurations that would limit lateral lengths. Otherwise, there would be longer lateral development. So, for instance, when the teams went through and scoured in these highly productive, high-quality acreage positions, we had 20 gross locations that we could actually form through basically combining, let's just call it, double that amount of shorter laterals. And what that did was it took a very subeconomic short lateral even at 350, 375 gas, let's just call it 20% IRRs. These are still attractive returns, but they just -- they don't compete for capital with our current portfolio. And they raised those up to somewhere along the lines of 60% plus returns. So what we're effectively doing is combining some of these subeconomic shorter laterals and moving them to the left in the skyline chart. So, it's really a function of the acreage position and maximizing our utilization of our current footprint. That's how I would characterize it. Jacob Roberts: Great. As a follow-up, I'll echo the sentiment that it's great to see the inventory additions to the portfolio. I'm wondering if that longer-dated inventory and as you guys continue to add to that, does that open up the conversation more to potential power agreements, data centers and all those types of conversations? I understand there's an absolute volumes component to those conversations as well. But just wondering if that's making those conversations more feasible? Michael Hodges: Yes. Jacob, this is Michael. I think not necessarily. Like so, if you think about our position in the area, we're having kind of ongoing discussions. We are a bit on the smaller side. And so I think in general, you're going to see most of those announcements go with folks that are investment grade or just bigger producers of gas. I think having the inventory certainly matters when you have those discussions. I mean there's certainly kind of a desire to be able to demonstrate the durability. I would tell you that our motivation has really been more on our business and certainly shoring up our own views of kind of duration of inventory, which, again, we felt very strongly about over the past few years, and we're continuing to execute on that. So just kind of demonstrating that out. But I don't think that in the past, those have been issues that have limited those discussions. We're in discussions on some of those projects. But certainly doesn't hurt to have kind of that additional runway to be able to demonstrate. Operator: The next question comes from the line of Peyton Dorne with UBS. Peyton Dorne: Just one question on my end. NGL stepped up nicely in the period. I believe it was from the new Marcellus pad and maybe also from the [ Cadiz ] pad. I just wonder if you could touch on how the NGL recoveries have gone so far with that development mode that you entered into and how you see NGL marketing shaping up as you've obviously added a bit more to that Marcellus opportunity set? Michael Hodges: Yes. Peyton, this is Michael. It's a great question, actually. You're right. We did see a nice uplift in our NGL volumes this quarter. A combination of things there, right? So you had mentioned our Marcellus pad, our Yankee pad and the 4-well pad in the Marcellus. We had some strong recoveries there. I think the liquids yield on those wells, that look very attractive to us. And our new midstream agreement that we actually signed earlier this year, this is the first 4-well pad where we've been able to process the liquids over there. So good recoveries. There's some strong economics over there as well. John mentioned in his prepared remarks, we don't talk a lot about it, but actually have some really good pricing around some components of the barrel of that NGL barrel over there. So that was a positive. The other area that you didn't mention is we have our wet gas development that's come on this year. And I would tell you that the yields there have actually been very strong as well. So that's in our kind of -- we called it our wet gas Utica. It's part of our discretionary acreage budget that we spent over the last couple of years. We put those wells on earlier this year. And we saw, I would tell you, kind of outperformance on the NGL side. So again, we've got favorable contracts up there. Not a lot has changed in our legacy Ohio Utica contracts, but that Marcellus contract on the marketing side is very strong from an economic perspective. And so, we feel really good that our netbacks have been strong even when I would tell you that some others in the basin have seen some weakness in NGLs. Operator: The next question comes from the line of Noah Hungness with Bank of America. Noah Hungness: First question here. Last week, Governor DeWine announced the energy opportunity initiative, $100 million fund for power developments in Ohio. And I guess I was just wondering, how do you think that changes the playing field for data center development and ultimately, just regional natural gas demand? Michael Hodges: Yes. Noah, this is Michael. Great question. I think we've seen increasing levels of interest. I was just going to -- I mentioned that maybe a little bit earlier in my prepared remarks that there's a lot of activity going on in Ohio right now. I think -- Ohio, I think I called it fertile ground, but it certainly seems like there's a favorable regulatory environment. There's favorable political environment, and there's just a lot of interest in projects in that area. So again, from our perspective, we're a bit smaller than some of the other guys out there. So, more likely for us to participate in kind of some aggregation strategy of marketing firms that put together volumes of gas come to us looking for volumes. We can get some uplift in our value when we do that. I think you're aware that we like to keep things fairly flexible in our business. So we're always kind of balancing the long-term commitment element of that with the pricing opportunity that we have. So, to your point, I think it's very favorable, I call it positive momentum in the area right now. And ultimately, we've got gas, a lot of gas that's still uncommitted to any of those projects. And so to the extent there's further opportunities, we can certainly consider those. Noah Hungness: That's really helpful. And then for my second question here, going over to Slide 8, I see that you guys gave an average lateral length for your core Marcellus and North Marcellus positions. And it is long laterals 3, 3.5 miles. But given the undeveloped nature of the bench, why do you think the lateral lengths aren't longer, something like 4 miles or 4.5 miles? Matthew Rucker: Yes. Noah, this is Matt. I mean this is really just a representation of our current development plan on our footprint. We'll always be looking for opportunities to find more efficient longer laterals. I think there's some land constraints in certain parts, but these are pretty long and pretty attractive economics. So for us, this is kind of in that wheelhouse of where we like to be, with minimal risk on the operations side. And so, that may change over time as we continue to develop out the footprint, but this is a pretty comfortable position for us to be in right now. Operator: The next question comes from the line of Carlos Escalante with Wolfe Research. Carlos Andres E. Escalante: Look, I think the inventory disclosure is very helpful for the market. So I can appreciate your efforts to -- across multiple horizons to deepen your portfolio bench and the value add that it has. But I wonder what kind of conversations are taking place aiming at larger opportunities, in particular around what your role is in broader consolidation? And this goes for both of your operated basins. I mean we've seen a lot of activity on a relative scale in the Anadarko in general. So just wondering where your head is at with that? Michael Hodges: Yes, I'll start, and then John can jump in. Carlos, thanks for the question. I think Neal asked a little bit earlier a similar question where I think our view on those opportunities is that we have pretty compelling opportunities within our existing portfolio, and we're measuring anything outside our portfolio against those opportunities. So I think there -- likely, you're aware that there's been some activity up in Appalachia. I think for the company, we've been disciplined over the last few years and feel like the strategy has really been effective for us. So I think that will continue. And I think to your point on the Anadarko Basin, I think there was another operator last night that announced a potential transaction. There is growing activity in that area. We've seen a number of transactions. Our position is very, very strong in that area. I would tell you that it's desirable, but we really like it. We allocate capital there every year. I think if you look at it on a rate of return basis, the well results are very competitive with our Appalachian position. So, from our perspective, the growing interest down there is positive. But I think, again, we like what we have, and we think we create value through the drill bit. And so, for us to develop that asset still makes a lot of sense. Operator: The next question comes from the line of Nicholas Pope with ROTH MKM. Nicholas Pope: I was hoping we could talk a little bit more about the U-development kind of reached total depth on these wells. Curious what risks you're looking at remaining as you kind of move to completion and bringing these wells online, I guess, compared to the wells that you have existing of similar lateral length, but I guess, obviously, a different geometry on these wells? Matthew Rucker: Yes, Nick, this is Matt. Thanks for the question. We did get both wells, TD and Kage starting to move into the completion phase here in the fourth quarter. I would just tell you the risk like in most horizontal well developments really on your pump down of tools and getting all the way to TD to start your perforating and your frac and then ultimately, your drill out. So when you talk about U-shaped development wells, it's really important on the front end to get your well design planning accurately. And so, the teams have done a really good job of running our torque and drag modeling and appropriately using the proper build rates to ensure that we're able to get those things down. So I see that as a minimal risk based on the well design planning that the teams have done over the last several months preparing for this development. Nicholas Pope: Got it. That makes sense. And as you look at like the kind of mile markers that we should look for, as you kind of move into production and kind of getting a sense of how these things produce, should we expect similar production rates from these wells to comparable kind of straight lateral length wells in the same region? Is that kind of how we should be comparing things as these wells start to be developed? Matthew Rucker: Yes. I think that's a good way of thinking about it, Nick. I think when you think about the perforated lateral footage on both of those essentially doubling for the footprint there, it will be very similar to the dry gas development on a straight lateral where we kind of target a capped rate per foot on our IP rates from a choke management perspective and very similar EUR per foot over the life of the well. So I would expect that to look very similar. So in our type curves on a 15,000-foot lateral, we're in that 30 million a day range. So adjusting around that for us in the choke management situation, that's what that would look like. Operator: This concludes the question-and-answer session. I'd like to turn the call back to John Reinhart for closing remarks. John Reinhart: Thank you for taking the time to join our call today. Should you have any questions, please don't hesitate to reach out to our Investor Relations team. Have a great day. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.