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Operator: Greetings, and welcome to the Veeco Q3 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Delacroix, Head of Investor Relations. Thank you. You may begin. Alex Delacroix: Thank you, and good afternoon, everyone. Joining me on the call today are Bill Miller, Veeco's Chief Executive Officer; and John Kiernan, our Chief Financial Officer. Today's earnings release and slide presentation to accompany today's webcast is available on Veeco's website. To the extent that this call discusses expectations for future revenues, future earnings, the timing and expected benefits of the proposed transaction with Axcelis, market conditions or otherwise make statements about the future. These forward-looking statements are based on management's current expectations and are subject to the risks and uncertainties that could cause actual results to differ materially from the statements made. These risks are discussed in detail in our Form 10-K annual report and other SEC filings. Veeco does not undertake any obligation to update any forward-looking statements, including those made on this call to reflect future events or circumstances after the date of such statements. Unless otherwise noted, management will address non-GAAP financial results. We encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release and at the end of the earnings presentation. Given the pending merger with Axcelis, we will not be addressing questions related to the transaction. Please note that today's call is neither an offering of securities nor solicitation of a proxy vote in connection with our previously announced transaction with Axcelis. We urge you to read the joint proxy statement relating to the transaction with Axcelis once it becomes available. With that, I would now like to hand the call over to our CEO, Bill Miller. William Miller: Thank you, Alex. Good afternoon, and thanks for joining us. We entered the quarter focused on execution, and I'm pleased to report that Veeco continues to perform well. Third quarter revenue was $166 million, exceeding the midpoint of our prior guidance of $160 million, and non-GAAP operating income was $23 million. Non-GAAP diluted earnings per share was $0.36, above the prior guidance midpoint of $0.28, reflecting continued operational discipline and strong execution across the business. This performance underscores the sustained investment in leading-edge semiconductor technologies, particularly in AI and high-performance computing. These trends are driving healthy demand, especially in gate-all-around, high-bandwidth memory and advanced packaging, where Veeco's differentiated equipment enables customers to advance their most complex technology road maps. On October 1, we announced that we entered into a definitive agreement to combine with Axcelis Technologies in an all-stock transaction to create a leading semiconductor equipment company serving complementary, diversified and expanding end markets. The completion of the merger is subject to, among other things, the approval of our stockholders and various regulatory approvals, which we are focusing on securing. We are hopeful that we will successfully bring this transaction to completion and strongly believe these 2 companies are optimal together and will drive sustainable value creation for all our stakeholders. We expect to see many growth synergies from the transaction that will be integral in driving success for the combined company. First, expansion of our served available market, which combined was over $5 billion on a pro forma 2024 basis. Second, we believe the transaction will enable a broader and complementary product portfolio and provide better solutions and services for the combined company's customers. A few items include adjacent technology steps with Axcelis' ion implantation and our laser annealing, likely providing significant opportunities to enhance device performance and yield. Accelerated development of ion beam deposition technologies, likely enabling greater market share gain from traditional deposition technologies. Third, we believe the transaction will provide expansion of the combined company's channel reach and regional leverage. Together, this will allow us to penetrate Tier 1 foundry, logic, memory and IDM customers more effectively. Fourth, the combination will increase R&D scale and enhance capabilities, which we believe will accelerate benefits to the combined company's collective customers. And lastly, with over $900 million in combined cash, we expect the combined company to benefit from a strong operating profile and the financial foundation to drive returns to shareholders. Now I'll turn to our critical role in the semi manufacturing process and provide updates on our evaluation programs for the quarter. We are the production tool of record for laser spike annealing for all leading logic customers and one Tier 1 DRAM customer. We expect to grow our penetration in leading DRAM by shipping an LSA evaluation system to a second Tier 1 DRAM customer in the fourth quarter of this year. Additionally, our next-generation nanosecond annealing system expands our capabilities to the nanosecond regime, and our systems are being evaluated at 2 advanced logic customers for advanced low thermal budget applications. These evaluations are progressing well, and we plan to ship additional NSA evaluation systems during 2026 to Tier 1 customers. We're also the market leader for IBD EUV systems for the deposition of defect-free films. Our product road map is well aligned as the industry adopts next-generation high-NA EUV lithography, and we're expanding our EUV-related business to EUV pellicles, which are increasingly being used to improve the productivity of EUV steps. Our IBD EUV system is used to form the high transparency membrane used in pellicles. Demand tied to AI and high-performance compute remains strong and is pulling innovation forward. Our next-generation IBD300 system is being evaluated by 2 DRAM customers. This technology differentiates itself from incumbent technologies through its ability to achieve superior thin film properties with lower resistance, which is essential for device scaling, performance and power consumption. Additionally, advanced packaging for wet processing and lithography continues to grow from AI-related demand. Our wet processing system orders increased quarter-over-quarter, and we see continued order activity in our lithography system. Last month, we announced multiple orders for our advanced packaging wet processing and lithography systems from a leading foundry, supporting critical end markets through AI, automotive, aerospace, defense and communications. Across our portfolio, we continue to focus on performance and yield advantages that matter most to our customers in advanced nodes. As we look ahead, we believe our portfolio enables technologies for key inflections supporting innovation in gate-all-around, high-bandwidth memory, EUV lithography and advanced packaging. These growth areas create significant opportunities in our served available markets. In annealing, we project our SAM to be approximately $1.3 billion by 2029 as devices continue to shrink and shallower anneals are required to improve performance and adapt to changing structures. For our ion beam deposition technology in semi, we project our SAM to be approximately $500 million in 2029 as the market expands to adopt EUV and high-NA lithography. This growth is also driven by the need for lower resistance metals deposition in a uniform manner required for improved device performance and power consumption. Lastly, in advanced packaging, we project SAM growth to be approximately $650 million by 2029, with growth mainly driven by wet processing systems supporting AI and high-performance computing. As we look across the business, we continue to invest in programs that position us for the next leg of growth and focus our R&D to advance the industry. I'll now turn the call over to John to walk through the financials for the quarter and provide our outlook for Q4 2025. John Kiernan: Thank you, Bill. Revenue came in at $166 million, above the midpoint of our guidance, in line with the previous quarter. Our semiconductor business reported $118 million, a decline of 5% quarter-over-quarter and 71% of total revenue. Our performance was driven by LSA, IBD EUV for mask blanks and our advanced packaging wet processing systems. In the compound semiconductor market, revenue was $11 million, down from the prior quarter, totaling 7% of revenue. Data storage revenue was $10 million, totaling 6% of revenue. And scientific and other revenue increased to $27 million, totaling 16% of revenue, driven by an increase in optical deposition systems. Turning to the quarterly revenue by region. Revenue from the Asia Pacific region, excluding China, was 49%, a decrease from 59% in the prior quarter. Sales were driven by customers in Taiwan for LSA, IBD EUV masks and advanced packaging. Revenue from China customers was 28%, an increase from 17% in Q2. Sales were driven primarily by LSA and optical deposition systems. The United States came in at 16% and EMEA was 7%. Switching gears to our non-GAAP quarterly results. Gross margin totaled approximately 42% at the top end of our guidance. Gross margin was favorably impacted by higher volume and improved product mix. Operating expenses totaled approximately $46 million, which came in favorably below our previously guided range. Income tax expense was approximately $3 million, resulting in an effective tax rate of approximately 12%. Net income came in at approximately $22 million, and diluted EPS was $0.36 on 61 million shares. Now moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $369 million, a sequential increase of $14 million. From a working capital perspective, our accounts receivable increased by $10 million to $116 million. Inventory increased by $4 million to $263 million, and accounts payable decreased by $6 million to $44 million. Customer deposits included within contract liabilities on the balance sheet remained relatively flat at $36 million. Cash flow from operations totaled $16 million and CapEx totaled $3 million during the quarter. Now turning to our Q4 outlook. Q4 revenue is expected between $155 million and $175 million. Gross margin for Q4 is expected to range between 37% and 39%, representing a decline from prior periods. This anticipated reduction is primarily driven by a shift in product mix with several discounted evaluation tool acceptances and a greater proportion of revenue from advanced packaging systems. We expect OpEx of approximately $48 million, net income between $10 million and $19 million and diluted EPS between $0.16 and $0.32 on approximately 62 million shares. I'll now provide additional commentary for each of our markets. In the semiconductor market, we see growth for 2025 compared to 2024, driven by demand in gate-all-around and advanced packaging. Additionally, we see continued momentum for our products into 2026 driven by leading-edge investments for AI and high-performance computing. In the compound semiconductor market, we have revenue growth opportunities in GaN Power, photonics and solar for 2026 after experiencing a down year in 2025. We are excited about the recent order activity and the acceptance of our new propelled 300-millimeter GaN and Lumina plus arsenic phosphide platforms, which are tailwinds for next year. After an extensive successful evaluation period, today, we announced that we received an order for our Propel 300-millimeter GaN-on-Silicon MOCVD system from a leading power IDM for AI data centers. This order cements our position as a leader in 300-millimeter GaN technology, which is at an important inflection point transitioning from 200-millimeter wafer sizes. Additional recent announcements in this market include an order for multiple Lumina indium phosphide MOCVD tools for data center optical communication solutions. We also received the first multi-tool order for our recently released new Lumina+ platform for low earth orbit space-grade solar cells. These orders support the revenue growth projected for the compound semiconductor market in 2026 with shipments principally in the second half. In the data storage market, system revenue declined in 2025 compared to 2024 as customers did not add new system capacity. However, our service revenue has increased, reflecting higher customer utilization, and we are excited to announce we recently received orders for our ion beam and wet processing equipment. We expect these orders to drive data storage revenue growth in 2026, principally in the second half. We continue to see strong demand in the scientific and other market for our research-driven applications. This segment is expected to deliver growth in 2025, supported by ongoing investment in advanced scientific innovation. With that, I'll now turn the call over to the operator to open up Q&A. Operator: [Operator Instructions] As a reminder, given the pending merger with Axcelis, Veeco management will not be addressing questions related to the transaction. We have a question from David Duley of Steelhead Securities. David Duley: My first question is on some of the 300-millimeter GaN order activity that you've seen. Is there all of a sudden new adoption in these end markets that you're referring to? I think in the press release, you talked about auto, industrial and data center. I was just wondering if you might be able to address why GaN is being adopted in these particular segments at this point. William Miller: Yes. We've had an evaluation with this leading power IDM for over a year, and we've -- it's been successful, and we just received a follow-on multi-chamber order for a pilot line tool, likely for data center applications. And they're going to pilot production in '26, and their plan is to ramp to HBM in '27. 300 millimeters, sorry. David Duley: And is there a specific reason now why GaN is being adopted in the data centers? William Miller: I think the efficiency of power conversion in the data center is a real limiting issue in the data center. And so any material that can be adopted to convert electricity more efficiently is pretty desirous. David Duley: Okay. And then, John, if you could just address the gross margin guidance. I think you mentioned increased evaluation activity as to why the gross margins would be down. But maybe just elaborate on that a little bit for me. John Kiernan: Sure, Dave. I'd be happy to. So yes, we just ended this quarter with gross margin in Q3 around 42% on the high end of our guided range. But we have guided for Q3 a less favorable -- excuse me, for Q4, a less favorable gross margin in 37% to 39% range, which is lower than we have been experiencing. And we did indicate in our prepared remarks a driver being product mix there. And within the product mix, 2 items to highlight. One, is, as you mentioned here, Dave, we're expecting some eval sign-offs this quarter at favorable pricing. Now for clarity, those are not eval related to our NSA at leading logic or eval for our IBD300 for the low-resistance metal. This is more a recurring sort of LSA type of eval and as well as an eval that we have out for in compound semiconductor for micro LED. So that's the one area. The second area is that we have in our semiconductor business, in our Q4 revenue guide, increased amount of business in advanced packaging for -- an application where the gross margins for those tools aren't as high as the company average. David Duley: Okay. And then just final question from me is you went through the segments in pretty good detail. But I was just wondering if you could elaborate a little bit more on what you would expect the trajectory of your advanced packaging business to be in 2026. I think it doubled this year. I don't imagine it's going to do that again. But what early indications do you have of growth there? William Miller: Yes. The business has doubled, Dave, and it was not easy, and I have to give kudos to our operations team in the business for ramping -- doubling the business in pretty short order there. We are actually running the business to a road map. And so we're working with, as you might imagine, industry leaders and helping them with their wet processing challenges, whether they're moving to Under Bump Metal etch, trying to solve some problems there, photoresist removal and hybrid bonding. So we feel that we've got a number of projects and programs and demo activity to sustain our position. I think it's a bit early for us to comment on the direction of advanced packaging for '26 specifically, really because the business runs on a shorter backlog and shorter lead time. So that full year visibility, we just don't have it for that segment. Operator: The next question we have is from Denis Pyatchanin of Needham & Co. Denis Pyatchanin: I think you've previously mentioned an uptick in HDD customer utilization. How are the ordering patterns near term? Is there only visible demand right now for the second half of '26? William Miller: Denis, our lead time, this is a build-to-order business, and our lead times are approaching a year, maybe a little bit less, but in that range. And so our first orders we received in Q3 for ion beam and wet processing equipment, and we're negotiating orders in the fourth quarter. So just based on the timing of the receipt of the orders kind of dictates that those would be shipped in the second half of next year. Denis Pyatchanin: Great. And on the strength in scientific, could you tell us more about that? Was that driven predominantly by Chinese customers this quarter? John Kiernan: There was some content for Chinese customers this quarter. Some of the strength in that segment this quarter also were for optical deposition tools or general industrial applications there, and there was China content with that. Denis Pyatchanin: Got it. And my last one is about NSA, maybe a little bit more high level. So I think you mentioned that it's being tested with logic customers. Do you see NSA adoption as being possible for memory customers as well? William Miller: Yes, they're actually interested in adopting it, particularly because of our NSA can anneal only very thin layer. So it's very conducive to material modification and 3D stacking, which is happening in memory applications. But yes, the evals are going quite well, moving along with the 2 that we have. We have strong pull from the third logic customers. And as I just said, memory customers are interested. Our plan would be to ship multiple nanosecond annealing tools in 2026 to a mix of logic and memory or memory. Operator: The next question we have is from Mark Miller of Benchmark. Mark Miller: Can you give us a little update on the thin metal films with IBD evals? William Miller: Yes. Yes, we're making good progress in introducing the fourth deposition technology to front-end semi. It remains an exciting opportunity. Our customers are very much engaged, and we're working together to improve or work on bringing the maturity of the product up for high-volume manufacturing as well as working with our customer to integrate the ion beam deposition technology into their existing production processes. So there's clearly still pull. We have 2 tools in DRAM, Mark, but there's definitely pull in logic and potential for evals there in the future. Mark Miller: Okay. So 2 evals with DRAM manufacturers with the IBD tools. William Miller: Yes. Mark Miller: In terms of your backlog, the visibility you have, margins are going to be down. You talked about why. But going out in the future, does the backlog look like the margins will improve when you start shipping out of it in the future? William Miller: You want to take it, John? John Kiernan: Yes. So Mark, yes, so we just said that we expect the gross margin in Q4 to be down for mix reasons. As we look out into the future, past Q4, our expectation is that we could see margin improvement in '26 over 2025 gross margin improvement. As was mentioned on the call in our prepared remarks, we're getting good visibility. We're starting to get good visibility for data storage with orders starting to come in, in Q3 and more orders being negotiated in Q4 for shipment in the second half of next year as well as orders that we've been receiving for our new products in -- for our MOCVD, which goes into the compound semiconductor market bucket. And again, on a build-to-order type of production there, and we see that in the second half of next year. Mark Miller: Just one more question, if you permit me. Your data storage orders you received this quarter for IBD and wet processing, is that from one customer or from multiple customers? John Kiernan: It was from multiple customers. Operator: At this time, we have no further questions. And I would like to turn the call back over to Bill Miller for closing remarks. William Miller: Thank you. Our results this quarter reflect strong execution and steady momentum across our business. We believe the pending merger with Axcelis represents the next phase of that progress. It will broaden our technology portfolio, expand our market reach and create multiple opportunities for revenue growth through cross-selling, integrated solutions and accelerated innovation. We're confident in the path ahead, and we'll continue to update you as the process moves forward. Overall, we're delighted with the response from our stakeholders across the board and are even more energized to deliver on the compelling merits of this strategic combination. Thank you to our employees for their hard work and dedication to Veeco, and thank you to our customers and partners for their continued trust in Veeco. Have a great evening. Operator: This concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Kurt Levens: Good morning, and welcome to the REC Silicon Third Quarter 2025 Results Presentation. My name is Kurt Levens. I'm the CEO; and with me is Jack Yun, our CFO. Today, we're going to give our usual highlights and updates as well as a financial review and then spend a few slides on our strategic direction as well as summarizing where we're at right now. Our restructuring efforts continue, and we will have an approximate 10% reduction in force in Q4 of this year. Our Moses Lake optionality costs are starting to stabilize near a lower run rate level. There are some incremental reductions that will continue, and we expect it to continue to lower quarter-over-quarter for the foreseeable future. There are still more opportunities in Butte for reduction in terms of our cost structure, and we are continuing to identify and actualize on those projects. Our markets are mixed right now, aggressive China supply in some segments and delays across new end user capacity continue. We finalized additional loans from Hanwha International and continue discussions on further short- and long-term financing options. Trade actions are still creating uncertainty as well as shifts in some of our silane gas markets. And in the quarter, the mandatory offer for shares was completed with Anchor AS assuming 60.2% ownership in REC Silicon. We're still operating in the range that we had indicated last time, and we expect Q4 to be similar from a volume perspective to potentially marginally better. There is some pickup in our non-silane silicon gases, primarily driven by our DCS, MCS offerings and the markets that they serve. PV outside of China continues to remain weak. PV cell production outside of China continues to remain weak. And utilization is low and new projects are being pushed out. Our EBITDA was negative $7.2 million. This is primarily driven by weak sales. In our Butte segment, our costs were mainly improved over the prior quarter as a result of the activities in the prior quarter being dominated by shutdown -- planned shutdown activities. Increase in silicon gas price is attributable to product mix, more higher value products relative to previous quarter and as a percent of our mix. And as I said before, in additional to the planned maintenance items, our input costs were also stable to declining for our Butte facility. Our cash balance at the end of the quarter was $10 million. Our cash flow increase was entirely driven by our borrowing proceeds. I think the important thing to note here is the amount of debt maturing in '26. We have begun discussions with entities regarding this, and we'll have more information as we go forward. Additionally, subsequent to the end of the quarter or since towards the end of the quarter, we secured a $7 million short-term loan with Anchor AS. So I think over the past year, we've had a large amount of challenges as a company. And I think that I've tried to keep us focused on the here and the now. We've talked a lot about opportunities, but I think our reality needs to still remain in how do we get from where we are now to the future state in small interval increments. Meaning what do we do this month? What do we do next month? What do we do the next quarter, for us to be able to get to that other side. Our reality is that we're in a very challenging situation. We have market softness, delays in key projects that we've been waiting on. We have aggressive competition, and we have policy turbulence. None of these things are things that we can control. But what we can control is how we respond and the amount of time we take to respond to these changing situations. We will continue to look for the correct way to respond to the changing situations while focusing on preserving our positions, increasing market share where we can and being there when these projects come into place and begin to operate. We've been working constantly towards a sustainable financial platform. Here's the -- we've said it in a number of different disclosures and a number of different times. And I want to say it again. We do not have sufficient cash to meet our debt service and other operating cash flow requirements for the coming year, even with the aggressive moves we've made in cost control and also increasing our focus on sales. We are going to continue to require additional financing beyond our existing facilities from Hanwha or from other sources of capital. We continue to discuss additional financing with Hanwha as well as evaluating a more comprehensive restructuring of our $420 million of term loans that mature next year. So this is a very serious situation for us, and it's one that we are -- along with the previous slide where I show the actions that we're taking that we're very focused on. As I mentioned in the overview, the completion of the mandatory offer was done and settled on 29 August 2025, with Anchor AS receiving a total shareholding of 60.2% in REC Silicon. During the quarter, the request for investigation process was dismissed by Norwegian District Court. And in the U.S., REC Silicon is complying with the court process for the subpoena. I want to reiterate again that in the U.S., what we are doing is responding to a subpoena for information. So in summary, we have markets that are affected by aggressive competition. We have trade policy uncertainties. We have demand that's being pushed out and delays in some of our key growth drivers. We've been very focused on cost discipline as well as trying to restructure our organization to make decision-making and actions more streamlined. In Q4, we think that we will once again be in somewhere in the same range as we have been here for the past few quarters, potentially slightly better. Our priority continues to look at how do we secure short- to midterm funding for our operations, how do we monetize noncore assets? And how do we continue to look at additional financing as well as more comprehensive restructuring. Thank you. And that concludes the presentation part of our results, and I'll take some questions. Unknown Executive: Okay. Moving on to questions that are being submitted. What noncore assets have been sold? And what future noncore assets are you looking to sell? And is there an approximate value associated with this? Kurt Levens: The noncore assets that we have sold are mainly minor property items that are no longer going to be needed for, or excessive inventory that are no longer going to be needed for operations, equipment, various other things. However, the majority of it is coming in our contemplated land disposal. We're not -- currently, we're involved in private discussions, and we're not currently disclosing what the value may be of any contemplated transaction. Unknown Executive: Are there any players that are currently delivering a commercial quantities of silane for silicon anode battery? Kurt Levens: At this time, outside of China, there is nobody who's delivering commercial quantities. All of the capacity outside of China is still being delivered to either started up -- being in the process of being started up or being delivered in -- to the pilot plants. Unknown Executive: Are you working with creating value from unused power access that you have in Moses Lake and Butte, as an example, by entering into an agreement with stakeholders with the silicon anode industry or data center industry? Kurt Levens: I'll just make it -- without going into specifics, I'll make a general comment that we are looking to leverage, again, both our land as well as access to any rights we might have or capacities we may have for any of our -- whether that's power or natural gas rights, whatever it may be. If we have it, we are naturally open to discussions, particularly with companies that would potentially want to be an offtaker of any of our materials. Unknown Executive: If data centers open near the Butte facility, how do you anticipate that will affect the electricity pricing in Butte? Kurt Levens: If it's the Moses Lake facility, is that -- did I hear that correctly? Unknown Executive: No, this question is stating there's -- data centers are considering building in the Butte area. Kurt Levens: Yes. I would imagine that we can expect that there could be some pressure on electricity prices, but we don't know that. What we have seen in general is that electricity prices in that particular region have been much more stable over the past year, particularly once we took off a large load. I think that, that our impression would be the market signal is such that it eased some of the pressure in the supply-demand picture there. But it's a market. So I don't know. I can only say that if there's going to be more consumers and there's no more production assets, then something is going to give at some point. But fortunately, I want to point out that on silane, electricity is a very small part of our cost stack. Unknown Executive: Is there any plan to sell either Butte facility or the Moses Lake facility or enter into any kind of mergers or joint venture agreements? Kurt Levens: At this time, we are not contemplating sale of any of our core operating assets or assets that we have set up in order to maintain optionality. As far as joint ventures or potential other agreements, there is nothing -- obviously, if we had something that we were in the middle of, we wouldn't necessarily disclose that until it is done. All I will say is that we are obviously open to any ideas which have the potential to create value for all of our shareholders. But an idea and a discussion is one thing, actualizing is an entirely different thing. Unknown Executive: Can you give an update on ongoing negotiations -- supply negotiations with battery anode manufacturers? Kurt Levens: All I can say is that we continue to have discussions with battery manufacturers. Say that to date, I would characterize it as the fact that they have some delays on their ends regarding their own challenges in the market space or their technologies or whatever it may be. So those are taking obviously longer. But outside of that, I'm not going to comment on specific negotiations with specific anode producers. Unknown Executive: There's been a large parcel of land in Moses Lake that's been on the market for a number of months. Is this area likely to be sold before the end of the year? Kurt Levens: A large parcel of land on the market for -- is this specific to REC Silicon or... Unknown Executive: Well, it says you have a large parcel of land... Kurt Levens: So as we stated, on the noncore assets that we're looking to dispose of is some land that we had procured for future expansion. And we are involved in discussions. I think that when we have more information as to that coming to fruition, we will disclose that. Unknown Executive: Have you heard or do you plan to sell the FBR reactors in Moses Lake? Kurt Levens: At this time, we have no plan to sell the FBR reactors in Moses Lake. I will say that if and when there's ever opportunities to somehow monetize on that, something with that, then we would probably discuss it and then that would be another opportunity. But nothing as of now. Unknown Executive: Do you have any plans to hold future presentations in Oslo? Kurt Levens: At this time, the next presentation that's contemplated is in February of 2026. And they have not made any decisions as to whether that will be in person or whether we will do it via the web. Unknown Executive: And others -- there's one more question here. You answered concerning the FBR reactors themselves. How about the patents related to the FBR reactors? Kurt Levens: Yes. I think we have stated that if there's opportunities to monetize, then, of course, we are open to discussing. Unknown Executive: That covers all the questions that have been submitted. Kurt Levens: Okay. All right. Well, thank you for your participation and questions, and we will see you next February.
Operator: Ladies and gentlemen, welcome to the Novonesis Interim Report for the First 9 Months of 2025 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Tobias Cornelius Björklund. Please go ahead. Tobias Björklund: Thank you, operator, and welcome, everyone, to the Novonesis conference call for the first 9 months of 2025. As mentioned, my name is Tobias Björklund. I'm heading up Investor Relations here at Novonesis. In this call, our CEO, Ester Baiget, and our CFO, Rainer Lehmann, will review our performance for the first 9 months of the year as well as the outlook for 2025. Attending today's call, we also have Tina Fano, EVP of Planetary Health Biosolutions; Henrik Joerck Nielsen, EVP of Human Health Biosolutions; Andrew Taylor, EVP of Food & Health Biosolutions; and Claus Crone Fuglsang, Chief Scientific Officer. The conference call will take about 45 minutes, including Q&A. Please change to the next slide. As usual, I would like to remind you that the information presented during the call is unaudited and that management may make forward-looking statements. These statements are based on current expectations and beliefs, and they involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statements. With that, I will now hand you over to our CEO, Ester. Ester, please. Ester Baiget: Thank you. Thank you, Tobias, and welcome, everyone. Thank you for joining us this morning. Please turn to Slide 3. Thank you. We continue to deliver on our promises, and on the back of a strong first half of 2025, we delivered organic sales growth of 8% in the first 9 months. The third quarter was stronger than expected, including some positive timing effect and grew by 6%. Growth was broad-based and mainly volume-driven as pricing contributed by around 1%, both in the first 9 months and in the quarter. The exit of certain countries impacted organic sales growth negatively by around 1 percentage point in the first 9 months and by around 2 percentage points in the third quarter. Emerging markets were particularly strong at 12% growth, driven by increased local presence and tailored solutions for different customer needs. We continue to invest in these markets to further drive growth and fulfill our strategic goals. Since late 2024, we have made significant investments in customer-facing activities with commercial resources in emerging markets growing at more than twice the rate of developed markets. Growth in developed markets reached 6% with solid performance in both Europe and North America. Sales synergies are well on track and contributed close to 1 percentage point with positive impact across the businesses. The integration of the Feed Enzyme Alliance acquisition, which closed on June this year, is progressing as planned, and we are already now seeing the benefits from a strong Biosolutions portfolio and being closer to customers. Performance since closing is in line with expectations. We launched 4 new Biosolutions in the quarter, bringing the year to 19 in total. As an example, in Food & Beverages, we have launched innovation that tapped into higher consumer demand for healthier and more nutritional products, including high-protein solutions. Another example of innovation, tapping into growing consumer demands includes high-performance solutions for quick and cold wash cycles in Household Care. The adjusted EBITDA margin for the first 9 months of the year was 37.3%, an increase of 1.3 percentage points compared to last year. The margin includes significant currency headwinds, showing the strong underlying operational performance, while also we continue to invest for growth. Central to our growth performance and strong performance is Novonesis' unique ability to deliver solutions that enhance productivity, enhance efficiency, quality, bring health benefits and sustainability for our customers and consumers. While our Biosolutions typically account for a small portion of our customers' costs of goods sold, they play a significant role in enabling value creation. Additionally, our well-diversified presence across industries and geographies provides resilience and strength to our overall performance. After strong 9 months performance, including favorable timing in the third quarter, we'll leave the bottom end of the range and now expect organic sales growth to be between 7% to 8%. This includes an indication of mid-single-digit organic sales growth for the fourth quarter. We expect the adjusted EBITDA margin to be at the lower end of the 37% to 38% range, continuing to absorb the significant currency headwind compared to the initial outlook for the year. I'm also pleased that the strong earnings translate into healthy cash generation. And with that -- with this, let us now look at the divisional performance in more detail. Let's start with Food & Health Biosolutions. If you could please turn to Slide #4. Thank you. The Food & Health BioSolutions division delivered 9% organic sales growth in the first 9 months of the year, and adjusted EBITDA margin was 35.6%, an increase of 30 basis points. In the quarter, organic sales growth was 6%, including the negative impact of around 5 percentage points from the exit of certain countries. For 2025, we expect this division to deliver organic sales growth within the same range as for the group with relatively stronger growth in human health. Please turn to Slide #5. Thank you. Food & Beverages delivered 8% organic sales growth in the first 9 months and 5% in the quarter, including the impact of exiting certain countries. Growth was mainly driven by volume, where pricing contributed positively and in line with group level. Growth in the first 9 months as well as for the third quarter was anchored across most categories with continued strong momentum in Dairy, including positive impact from timing. Performance was mainly driven by upselling and strong customer adoption of innovation. In Fresh Dairy, we continue to see increasing demand for our tailored solutions in the high protein space and in bioprotection, supported also by healthy underlying global demand for yogurt. Additionally, in Cheese, customer conversion contributed to growth. Baking, Meat and Plant-based solutions also saw strong growth mainly driven by innovation and increased penetration. The Beverage segment declined, impacted mainly by lower end market volumes. Synergies contributed to growth and in line with expectations, supported by cross-selling and increased commercial scale across Food & Beverages. On the innovation front, we launched 2 new products in the quarter, making it 10 in total for the first 9 months. Growth in 2025 in Food & Beverages is expected to be broad-based, including a positive impact from synergies. Please turn to Slide #6. Thank you. Human Health delivered 10% organic sales growth in the first 9 months of the year and 8% in the third quarter. Again, growth was mainly volume-driven and negatively impacted from the exit of certain countries. The release of deferred revenue contributed around 1 percentage point to the growth for both periods. In the first 9 months, the development was driven by a strong performance in both Dietary Supplements and Advanced Health & Nutrition. Synergies contributed positively to growth and in line with expectations. Dietary Supplements grew across regions, led by solid momentum in North America. Performance in Advanced Health & Nutrition was supported by Advanced Protein Solutions, as we continue to ramp up revenue with our anchor customer. Growth in Early Life Nutrition was led by HMO. In the third quarter, growth in Dietary Supplements was driven particularly by strong performance in North America across subcategories with Women's Health and the Healthcare Practitioner Channel as a strong contributors. In Advanced Health & Nutrition, the drivers for the third quarter were similar to those for the first 9 months. For 2025, growth in Human Health will be driven by a continued positive momentum in dietary supplements, supported by a positive impact from synergies and by Advanced Health & Nutrition, including the continued progress with our anchor customer. Deferred revenue is expected to contribute around 1 percentage point for the growth for the sales area. Please turn to Slide #7 for -- and let's look at Planetary Health. Thank you. Planetary Health Biosolutions delivered 8% organic sales growth in the first 9 months of the year. The adjusted EBITDA margin was 38.7%, an increase of 2 percentage points. In the third quarter, organic sales growth was 6%. For 2025, we expect this division to deliver organic sales growth around the low end of the group with relatively stronger growth in Agricultural, Energy & Tech. Please turn to Slide #8. Thank you. Household Care delivered 7% organic sales growth in the first 9 months of the year and 6% in the quarter. Growth was mainly volume driven and with positive contribution from price on par with the group level. Emerging markets contributed significantly to the strong performance, both in Laundry and Dish, supported by solid growth in the developed markets. Performance was driven by increased market penetration as well as innovation. Growth in the third quarter was positively impacted by timing, easing the impact of end market normalization in developed markets. On the innovation front, we launched 1 new product in the third quarter, Pristine Advance, as part of the Freshness platform. This launch targets consumers seeking energy-efficient, time-saving laundry solutions, as it delivers deep cleaning and fresh results even in quick and cold washing cycles. Key growth drivers for the year continue to be innovation, increased penetration, pricing as well as industry volume growth, where we see a normalization in developed markets through the second half of the year. Please turn to Slide #9 for Agriculture, Energy & Tech. Thank you. Agriculture, Energy & Tech delivered organic sales growth of 8% in the first 9 months and 7% in the third quarter. This was driven by a strong growth in energy and supported by tech and agricultural. Growth was driven mainly by volume, and pricing contributed positively, in line with the group. Growth in energy was led by Latin America and India, driven by increased ethanol production capacity and a strong growth in Europe. Growth in North America was also supportive, driven by greater adoption of innovation and growing ethanol production volumes supported by increasing exports. Additionally, a ramp-up in second-generation ethanol and penetration of Biodiesel Solutions also contributed positively across geographies. Growth in agricultural was driven by both animal and plant, while performance in Tech was led by increasing demand for solutions for biopharma production. Growth in the third quarter was driven by similar factors, as those for the first 9 months, including a strong performance in Energy, supported by Agriculture. For 2025, growth in Agriculture, Energy & Tech is expected across all industries, supported by a positive impact from synergies. Growth is expected to be led by Energy. And now, let me hand over to Rainer for a review on the financials and the outlook for 2025. Rainer, please? Rainer Lehmann: Thank you, Ester, and good morning, everyone, and welcome to today's call also from my side. Let's turn to Slide 10. Please note that for the year-on-year comparison figures presented today, we have used pro forma figures as our baseline comparison for year-to-date 9 months numbers. The corresponding IFRS-based figures are available in the statement released this morning. Q3 year-on-year figures are IFRS based and fully comparable. In the first 9 months, sales grew 8% organically and 7% in reported euro as currency provided a 3 percentage point headwind while M&A impacted development positively by 1 percentage point, driven by the Feed Enzyme Alliance acquisition we finalized in June. In the third quarter, sales grew by 6% organically and by 4% in euro. Currency headwinds continued to be significant and amount to 5%, but were offset partly by the 3% positive contribution from the Feed Enzyme Alliance acquisition, which was in line with expectations. Turning to our profitability. The adjusted gross margin was 58.9%. This is an improvement of 250 basis points year-on-year. Lower input costs, including the cost of energy as well as economies of scale and productivity improvements led to the strong development. Pricing and synergies also had a positive impact, while currencies impacted negatively. The adjusted EBITDA margin was 37.3%. This was 130 basis points higher than the first 9 months of last year and explained by scale, the improvement in gross margin and synergies, countered by strong negative currency effects as well as expected reinvestments to support growth. Please note that the divisional adjusted EBITDA margins for the quarter are slightly impacted by minor year-to-date adjustments, reflecting divisional performance. Needless to say, though, that both divisions continue to deliver strong profitability. We continue to invest in our business. And as Ester mentioned, we are further stepping up our commercial presence and customer-facing activities, particularly in emerging markets. Special items were around EUR 50 million and primarily consists of transaction costs related to the Feed Enzyme Alliance acquisition. It also includes integration expenses as well as some initial expenses for the new global ERP system related to the combination. The diluted adjusted earnings per share was EUR 1.19, an increase of 20% compared to first 9 months of last year. If we adjust for PPA amortization, the earnings per share were EUR 1.54, which also represents an increase of 20% compared to the year before. Operating cash flow amounted to EUR 193 million in the first 9 months, which is an increase of around EUR 90 million compared to last year. This was driven by the improvement in net profit, partly offset by an increase in net working capital, mainly from higher inventories and increased receivables resulting from a strong sales performance. Due to the still low CapEx activities, which we plan to ramp up in Q4, free cash flow before acquisitions increased by 16% to EUR 668 million for the first 9 months of the year compared to EUR 576 million last year. With this, let's now turn to Slide #11 to talk about the outlook. Please note that the outlook is also based on current levels of global trade tariffs and current foreign exchange rates. And as Ester mentioned, we're lifting the bottom end of the range of the organic sales growth outlook and now expect 7% to 8% for the full year, with an indication of mid-single-digit organic sales growth in the fourth quarter. This is a result of a strong first 9 months performance, including favorable timing in the third quarter. Growth will continue to be driven mainly by volumes and with a similar positive pricing impact of around 1% across both divisions. Sales synergies are still expected to contribute around 1 percentage point to the organic sales growth for the year. For the adjusted EBITDA margin, we expect to be at the lower end of the 37% to 38% range. This includes significant currency headwinds of around 1 percentage point compared to our initial expectations as our adjusted EBITDA is fully impacted by currency fluctuations. As a reminder, please note that we show the FX hedging gains and losses as part of the net financial items below the EBIT line, protecting our net profit. In conclusion, and based on the results from the first 9 months of the year, we're in a strong and confident position in our ability to achieve our full year outlook. With this, I will hand back to Ester for a wrap-up. Ester? Ester Baiget: Thank you. Thank you, Rainer. Could you please turn to Slide #12? Let me summarize our message here today. Novonesis' diverse portfolio of innovative biosolutions, broad market reach and unique scalable production setup continue to drive strong performance. With the results we're presenting here today, we show that we continue to deliver on our promises with the strength and the resilience of our business model. We continue to execute successfully on our strategic priorities, positioning ourselves firmly to deliver on our 2030 targets. And with that, we're now ready to open for Q&A. Lorenzo, if you could open the Q&A, please? Operator: [Operator Instructions] The first question comes from the line of Thomas Lind from Nordea. Thomas Lind Petersen: So 2 questions from my side. The first one is regarding pricing. At the CMD last year, you said that you were aiming for pricing up until 2030 of 1% to 2% annually. This year, it's 1%. But given the tariffs impacting your business, I would assume that you would take price to sort of offset some of the impact here. So maybe going into -- also to '26, is it fair to assume that 2% pricing in '26 is more likely than the 1%? And then the second question is just regarding your 19 new product launches here in '25, which is impressive. But still, it seems a little bit like a slowdown, at least when comparing obviously to the impressive 45 product launches last year, and then, just 4 here in Q3. I would assume that given the revenue synergies, we would see sort of a ramp-up in product launches or at least that's just my expectations. But yes, if you could put a few words on that, that would be great. Ester Baiget: Excellent. Thank you very much, Thomas, for these very good questions. Let me start with the comments and questions on pricing, and then, I'll pass it to also to Claus to bring further color on innovation. It is true. We're very pleased with our 8% growth year-to-date, robust growth, mainly volume growth and also from pricing. And this is a growth -- the quality of that growth year-to-date, it gives us a very high level of comfort. We grow across all geographies, across all segments, also with double-digit growth in emerging geographies. The 1% price, it is an area that we committed to. We see the impact translating down in the bottom line. And regarding your question on tariffs, it's important to mention that most of what we produce in -- that we sell in North America, it's produced in North America. And then where it's not, then we see also pricing as a driver of ensuring that it's a net neutral effect for the year, which we continue to stay committed to. Moving forward, we are in a really good place of comfort, mainly particularly on the volume growth, the underlying strength of our business model, where pricing will continue to be a driver of growth. And yes, on the 1% to 2% CAGR for the period on pricing that you indicated to for the strategic period. Then, regarding innovation, before I pass it to Claus, I would like to remind you that -- and please let's all remind us that the solutions that are less than 5 years old, they continue to contribute to whom we are with more than 25 -- more than 20% of our revenue is for new launches. And the quality that we bring in continues to be the driver of growth. We enable value growth for our customers through innovation, through solutions that they lead to higher yield, higher efficiencies, higher productivity, differentiated claims. And then I would invite you to look, yes, at the 19 year-to-date, but for sure, the continued contribution that innovation puts on the strength and the quality of our growth. Claus Fuglsang: Yes. Thank you, Ester. The 19 launches year-to-date is actually on plan and what we expected. We expect some acceleration here in Q4. It's not about hitting the same number as last year, but the impact, of course, it makes in the market in terms of sales growth and contribution to revenue. So we are pretty happy with the performance. As Ester said, we are well above the 20% of sales from new products. So thank you. Operator: The next question comes from the line of Thomas Wrigglesworth from Morgan Stanley. Thomas Wrigglesworth: Two from me, if I may. Firstly, on Household Care, could you break out the difference in performance between emerging markets and developed markets? Obviously, there's all the data we see in developed markets from your customers is obviously looks very volume negative. So it would be great to know the kind of split of growth between those 2. And secondly, on the Dairy performance, how much of the growth in Dairy do you think was a function of pull forwards? And associated with that, as you win a customer adoption, is there a kind of a preloading sale that takes place that means that growth becomes harder and harder because as adoption rates and penetration increases, you effectively have a high base, and there's less people to adopt in the future? So I'm just kind of trying to get a sense of where we are in that high protein adoption phase as you see it today. Ester Baiget: Thank you very much, Thomas. I will let Tina bring color on your question on Household Care, and then, Andrew on Dairy. Tina Fanø: Yes. Thank you so much, Thomas. So the performance in emerging markets is a key growth driver in Household Care. And it is a result of the strategy we have had for a number of years, where we have been investing in order, both on innovation and also on feet on the ground in order to cater for these markets. So Household Care is significantly outgrowing the developed markets in Household Care. In terms of their relative size, I assume you know the split between emerging markets and developed markets for the group, and Household Care is a bit more exposed than group to the emerging markets. Andrew Taylor: And then thank you. This is Andrew, and thank you. In terms of your questions on Dairy, a couple of things, so we did see some positive timing effects in Q3 as some of the ramp-ups from our customers, especially in North America, came a bit quicker than we had expected. And then, if you kind of take the second piece of the question, because they're clearly related on the loading, I would separate it into 2 types. So there's sort of the new innovations that you're driving across the Dairy value chain. So things, for example, solutions for high-protein yogurt, those tend to have a natural cycle, but there's many of them over time. With regards to productivity, and then, also DVS conversions, we've talked about before, those do have a bit of a loading, but none of them is big enough to really drive a huge preloading effect overall for the business. And the exciting part is we see a continued pipeline of those opportunities over time. Operator: The next question comes from the line of Georgina Fraser from Goldman Sachs. Georgina Iwamoto: One of them is a follow-up, if we could hear a little bit more about Dairy, and strength there is particularly impressive. And I'd love to hear a bit more about what you're seeing in emerging markets and the sustainability of those trends medium term. And then second question is on Beverages. So I think it's the only market that you're seeing that looks a bit weak. It's declining. Should we expect these trends to continue? Or do you have any product launches or customer wins up your sleeve? Ester Baiget: Thank you, Georgina. We feel also very pleased about where we are and particularly on starting to see the fruits of the seeds that we put in the past. We have been investing in emerging markets. We have been investing in innovation, and we see, reflected in the numbers, the translation of those investments into growth. And now, I'll pass it to Andrew. Andrew Taylor: Yes. Thank you, Ester. So taking those 2 things in turn. So with regard to emerging markets, the drivers there are a few things. One is just the fundamentally quicker underlying volume growth of emerging markets vis-a-vis domestic markets -- or sorry, developed markets. The second thing that I would call out specifically is we have been investing in emerging markets over the years. We are seeing the benefits of having local presence, being able to go more direct because that actually just leads to a quicker share as well as the overall market growth. And the third thing I'd highlight, which is a bit different, is there's parts of the Dairy market that are relatively newer in big parts of Asia. So for example, cheese in China. Cheese in China, we're seeing good growth in off a small base. But because we have leadership in that technology, we're able to be that partner of choice in China. So the combination of those 3 things is really what we're seeing. With regards to Beverages, I think everyone's seen there's challenges in the alcoholic beverage market across the piece. We are not immune to those volume challenges. We're working really hard, though, to actually drive better both penetration of the existing solutions, but launch the next generation of solutions. That, of course, takes time, but we're working really hard to continue to grow in Beverages. Operator: The next question comes from the line of Alex Sloane from Barclays. Alexander Sloane: The first one, actually, a follow-up on Dairy, in the first half, you talked about sort of new enzyme solutions to help maximize whey byproduct value streams for cheese customers. I mean, clearly, we're seeing we've very strong demand for whey right now given added protein formulation trends in food. So I'm assuming there's quite a lot of customer appetite on this. I appreciate it's pretty quite early days, but maybe, Andrew, you could talk to the traction you're having here and in terms of customer engagement and timing around this commercialization opportunity, it would be great. And you did flag some cheese conversion tailwinds in the U.S. So it would be great if you could remind me where you are in terms of kind of global conversion to DVS cultures in cheese, which I think has more headroom than yogurt. And then, if I could squeeze in 1 more for Rainer, just in terms of the cost outlook into '26, how is that looking on energy and sugar, please, based on the sort of hedging you have, assuming the latter, maybe some tailwind? Can that offset residual FX pressures that you might be facing on the margin side in the first half? Ester Baiget: Thank you, Alex. Those were 3 questions, the way I count them, but let's move ahead with that. Beautiful that you double-click on Dairy and the impressive results that we continue to outgrow the markets that we are present. And this is a simple formula. We enable value creation, value growth for our customers through yield, through productivity and also through differentiated claims on health, on high protein. And by staying very close with our customers, also in emerging geographies, I mean, we out -- in China, for example, we're growing in a declining market. That's the formula that's driving the growth. But I'll pass it to Andrew and Claus to build up on your first question, and then, Rainer afterwards. Andrew Taylor: Thank you. I'll take the first part of the question and then turn to Claus. So in terms of the whey solutions, I think the way that Ester put it is exactly how we see it, which is our customers are looking for increasing productivity and increasing valorization of some of the things that historically have been treated more as offtakes. So we have a lot of interest from our customers around the world on this. And this is where being that preferred partner is so important. They're only going to work -- the best customer is only going to work with 1 player on this, and we really have invested heavily over the years to be that 1 player. Maybe, Claus, you can talk a little bit about the status of the technology. Claus Fuglsang: Sure. It's still early days. While we do have technology that will modify solubility of proteins with this, whey is about protein and protein solubility and functionality, it's still early days. We see the customer pull and interest in collaboration on innovation, but we also expect that we will need to develop new solutions while we'll start, hopefully, getting traction on existing. Andrew Taylor: And then taking your second question before turning it back to Ester, we do see significant headroom still in the DVS conversions. That conversion rate is about 60% around the world. Obviously, higher in developed markets, lower in emerging markets, and that's where our direct presence in those markets is so important. Rainer Lehmann: So Alex, coming to the -- of course, I can't give you a guidance for 2026, right? We're all aware of that part. But if you think about it right now, we obviously benefited from quite some lower energy. I don't think this is going to go any lower, to be honest. So that gives you an indication there. And actually, we do not hedge raw materials on our normal production. So there, we basically are buying on the normal market, and we have to see how this develops, to be honest. And these are uncertain times. But, of course, also you've mentioned the FX, the U.S. dollar, which came down quite significantly and actually in the last days. Let's see how this -- it's quite a volatile environment, but we will be able with our also scale to actually counteract that. Claus Fuglsang: Maybe a quick comment. We can also -- that's the good thing about our technology, it's versatile, and we can actually change between certain types of raw materials. So it's not necessarily glucose. It can be other input costs in terms of carbon. Operator: The next question comes from the line of Lars Topholm from DNB Carnegie. Lars Topholm: Congrats with a very good quarter. Two questions from me, please. I wonder on Household Care, if you can comment on how coming bans on microplastics is affecting your business now? And maybe for now, this is mainly Europe, I guess. But also, how you see this as a potential driver for the U.S.? And then I wonder what the status is on HMO approval in China. Ester Baiget: Excellent questions, Lars. Tina and Henrik, please. Tina Fanø: Yes. So let me start with the Household Care. So in general, as you also know, Lars, and we've talked about a number of times, the -- one of the strategy in Household Care is, I would say, that 3 elements: differentiation, allowing new claims for our customers, it is a matter of replacing chemicals, and then, it's a matter of the investment in emerging markets. And you are hindering on #2 here with replacement of other ingredients. And a ban on microplastics is exactly talking to that tendency. So with our technology base, we are capable of replacing a number of compounds in the detergent matrix, including things leading to microplastics. And that is also one of the key growth driver we have seen, not only in developed markets, but in fact, also in emerging markets because there is a wish to go for more cleaner formulas, to go for quicker and faster, and at the same time, lower temperature washing. Lars Topholm: And Tina, in terms of penetration by those technologies, where are you on the curve? Is this in its infancy? Or are you already there? Or how should we think about this looking maybe 3 or 5 years ahead, please? Tina Fanø: It is in the early days. And it keeps evolving also, what it is we can replace. As you know, I have been in the industry for many years. And if you think about what we thought we could replace 20 years ago, this is completely different, so it is in its infancy. Henrik Nielsen: And your question on HMO in China. Good question. It's the largest market in the world on infant, as you know, and the most premiumized. Recently, we have seen now recipes approved, which is what everybody initially was waiting for with HMOs. So now HMOs can actually make their way into infant formula and into the market. We are the only player that has 5 HMOs approved in China. We are not yet in a recipe in the market, but we're working with all the leading players in China to get into products. It's difficult to say now when that will happen. But the good news is that the market is now open. Operator: The next question comes from the line of Nicola Tang from NBP (sic) [ BNP ] Paribas. Ming Tang: First, I was wondering if you would be able to quantify this impact from the pull forward of orders in Q3. I was just trying to have a better understanding of the underlying growth. And how do you actually know, particularly in Household, that it was a pull forward rather than just an indication of better demand? And do you have a view on current inventory levels for your customers across the wider business? I was wondering if there's any areas where customers might have built more safety stock given the tariff uncertainty. But equally, have customers actually reduced inventory too much, and so, we're having to pull forward orders as a result of that? And the second thing I wanted to ask about, I think now there's about 300 basis points difference in EBITDA margins between the 2 divisions on a year-to-date basis. I was wondering if you see any structural reasons why the Food & Beverages and Human Health profitability will be lower going forward? Or do you expect both divisions to hit your 39% target by 2030? Ester Baiget: Thank you very much, Nicola. We're really pleased on the performance that we had year-to-date with 8% growth. And yes, this is including some timing effects in Q3. And with that, we also aim to mid-single-digit growth for Q4. It's important to mention when we -- what we feel very pleased about is that we continue to deliver on our promises and what we said we would do. We said we would have a stronger first half than the second half, and that's where we are in. And also, we said, and we continue to say, we are very close to our customers, and we are there to enable that growth. We have been investing across the whole globe and particularly in emerging geographies on driving growth. And we see some timing effects from 1 quarter to the other. There has been in Dairy, maybe on some -- in cheese on the transformation being a little bit ahead from one quarter to the other, it's okay, we are very close to our customers and whenever that happen, also in emerging geographies, maybe a little bit faster than 1 quarter to other. We don't look for the quarter. We're here for the full year. And the lifting of the low end of the guidance and the comfort of how we're going to finish the year strong, including the impact of emerging -- of exiting certain countries, all in that together, leading to your second point of the dynamics in the market. We live in the same world that you live. But at the same time, we continue to see the strength of the drivers that trigger the underlying growth of our business. We enable value growth for our customers, and that's strong. That's today, and we feel very comfortable on -- we're not going to go into the guidance for next year, but we feel very confident on delivering on the strategic targets that we committed on the 6% to 9% growth until -- CAGR until 2030. Then the profitability of the business, strong and bold across all areas. And I will pass it to Rainer to build on that. Rainer Lehmann: So regarding the differential in the 2 divisions regarding profitability, yes, you basically answered -- your answer was in your question, right? Because it's clearly on the Human Health and HMO side. There we have a dilutive impact, that is known, that, of course, over time. And then with scale, we will improve the profitability. But let me remind you that really both divisions run in a very high profitability, especially compared also what else is out there. So yes, we're going to improve, it's going to improve and it's going to -- the gap is going to narrow, I would say. Operator: The next question comes from the line of Sebastian Bray from Berenberg. Sebastian Bray: Can I start with the financial items line? And what would be expected for '26, because the consensus seems to only have a modest step up in this? And my understanding is that there are EUR 20 million to EUR 30 million of FX hedging benefits, and you have the annualization of the EUR 1.3 billion of debt that was placed to purchase the DSM Feed Enzyme business stake. What level of financial items cost step-up would be reasonable in 2026? Could it go from, let's say, EUR 75 million all the way up to EUR 105 million, EUR 110 million? And my second question is on the bioenergy market. This seems to have been fine in Q3. It's not really commented upon in the release, but -- is anything changing there? Is, basically, Novonesis still taking market share of everybody? Is 2G ramp-up proceeding as expected? Any changes incrementally on what's expected as we move into 2026? Ester Baiget: Rainer will -- thank you, Sebastian, and Rainer will answer your first question, and then, Tina build on Bioenergy. Rainer Lehmann: So my answer is actually going to be only very limited because I'm not going to give you -- or can give a guidance for a specific 2026 on the financial items. We'll do that once we finish the year, and then, of course, publishing in February and then giving the outlook will, as we do always, give an indication of our finance line items. But generally, your line of thought goes, is in the right direction. Tina Fanø: And on Bioenergy, you are right on the market in Q3. And also, if you look in the beginning of the year, there is growth in the North American market. I assume that's the one you're referencing, Sebastian. But overall, in that industry, I think it's important to think about the diversification story we have talked about so many times. So it's the geographical diversification, which is helping us, both in the quarter and year-to-date. You have heard me talk about India as well as Latin America as key growth drivers. We have also talked about the feedstock diversification, where we -- and also both year-to-date and especially in the quarter, we see good growth from biomass or second-generation ethanol as well as biodiesel. So all of that is contributing to the growth. North America is a more -- it's a big part of our business, but it is a more slow in growing, where we are growing roughly in line with market. If you think about specific market developments, I would say -- the fundamentals remain the same. We do see both India and Brazil talking about higher blend rates for first-generation ethanol. 2G is also continuing to get online. You know we have plans both in Brazil, India and also in Europe. And biodiesel plants is also coming on. So the growth drivers remain intact, and they are all supporting the growth year-to-date. Operator: The next question comes from the line of Chetan Udeshi from JPMorgan. Chetan Udeshi: I had actually 2, both are related in a way. One of the things -- or one of the trends we've seen over the past year in the broader specialty chemical ingredient market is increasing competition from China, India, and whereas you guys are growing very, very fast in emerging markets, and I'm -- I mean, I'm sure based on what I've seen, there are regional players that you compete with in both India and China. So I'm just curious what sort of regional competitive dynamics do you see across your businesses because it's quite interesting that you're growing so fast in emerging markets where others are actually seeing much more competition. The second question related is -- we saw IFF announce a collaboration with BASF on the detergent enzymes and solutions side of things. Do you have a view on what that might mean in terms of competition for Novonesis in the Household Care market down the line? Ester Baiget: Thank you, Chetan. Very good questions. We're pleased on our growth in emerging geographies, and we see it as an outcome of self-help efforts that we have made in the past. And we also see it as a -- simply the outcome of the strength of our solutions and being close to our customers in a market, which is in demand of new answers. Our solutions enable higher yields and productivity, are also in emerging geographies and also differentiated claims for consumers that they are seeking for new answers. And we have been investing in the last years on more boots on the ground to be able to play and co-create with our customers, particularly in emerging geographies. Powder lab in India for Household Care or in Latin America or baking lab in Turkey or more capability for Dairy in China, these are self-help efforts that we have made that we see them reflected now in growth. We see -- of course, we live in the same world that you see, and we see other players in the industry. But the formula of success for our customers, it is listen, understand their needs and then provide them with bio-based solutions that enable them growth through high efficiencies, through bringing health claims, through bringing solutions that they would not be able to do without our products. And that's the model that we are investing combined with a robust global asset footprint that we supply reliably, and we are there with our customers to deliver that growth in a resilient and predictable way. And I'll pass it to Tina on Household Care. Tina Fanø: Yes, and I'll be relatively short, Chetan. As we talked about also in the question from Lars Topholm earlier, what we are doing, and let me focus in on that compared to what others are doing. So what we are doing is we invest in innovation. We invest in innovation with our customers, and that includes replacing chemicals. So we go in and replace polymers, we go in and replace brightness, microplastics and so forth. And that is one of our growth drivers in Household Care. That is the winning strategy as we see it. Ester Baiget: One last question, please. Operator: Our last question comes from the line of Soren Samsoe from SEB. Soren Samsoe: Congrats with the result. So first, on Dairy, just if you can indicate a bit more on how your growth is because it must be quite strong double digit given that you have almost 10% growth in Q3 and that brewing is negative. Then, also, given that milk prices are very low than we have historically seen, sometimes cheese manufacturers producing for inventory, is that giving you a temporary boost in Dairy at the moment? And then secondly, on sales and distribution costs, they're going up quite a lot, but maybe you can give us -- or quantify how much is up if you adjust for DSM? And also what it is that you're investing in commercially, that could be interesting? Ester Baiget: Thank you so much, Soren. Andrew, Rainer, please. Andrew Taylor: Yes. On Dairy, the exciting part is our growth is broad-based. So if you look across both geographies as well as the large applications of cheese or fresh dairy, we are seeing good growth in most places. That's really driven by a couple of things, one of which we talked about earlier, which is penetration essentially and underlying market growth, especially in the emerging markets. The second is some of the trends that we're seeing on things like high protein. And the third is, of course, the continued productivity. So we are -- remain excited about the growth coming in to the remainder part of this year and into the next several years. But, of course, that we're trying to drive that market penetration through new innovations we have with our customers on all those places and really position ourselves as the market leader. Rainer Lehmann: Soren, regarding the increase on the S&D cost sales ratio, of course, there is a part of DSM in there. We're not going to specify it directly. But keep in mind that really -- this is a result out of continuous investing in emerging markets, right? What we said we did in the past, and we are going to continue to do so throughout the strategy period. We give you an indication what the overall inorganic contribution is, and it's accretive to the overall EBITDA. So basically, there you also can back into what you think might be the impact on the operational expenses overall. It's not just S&D. Ester Baiget: Excellent. Excellent answer. Thank you very much all for your questions. We're closing the day and looking forward to continue to interact with you within the next days moving forward. Thank you so much.
Operator: Hello, and welcome to the Commerzbank AG Conference Call regarding the third quarter results of 2025. Please note that this call is being transmitted as well as recorded by audio webcast and will subsequently be made available for replay in the Internet. [Operator Instructions] The floor will be opened for questions following Bettina Orlopp's and Carsten Schmitt's presentation. Let me now turn the floor over to our CEO, Bettina Orlopp. Bettina Orlopp: Good morning, everyone, and welcome to our earnings call. Our growth story in Commerzbank continues, and we have achieved the best 9 months operating result in the history of Commerzbank. This strong momentum also drives our outlook. With increased expectations for net interest income, we are very confident to deliver on our targets in 2025. I will present to you the financial overview after 9 months of this year and the key strategic topics before Carsten will walk you through the financial performance of the third quarter. Let me start with our view on the last 12 months. It was a special journey that we embarked on. Based on an exceptionally good team spirit, we created a very strong momentum for Commerzbank. We developed our momentum strategy with ambitious targets for 2028, 50% cost-income ratio, 15% return on tangible equity and 100% payout each year. In this process, the extremely high commitment of everybody involved was as important as the bare numbers and targets. And this has translated into strong focus on delivery. The success is impressive. 13% loan growth in Corporate Clients, 8% growth in fee income and a 11% increase in total revenues are proof of the strength of our Team Yellow. This is, however, only possible because we have a strong and robust business model that meets the needs of our clients. We further strengthened our client franchise and are proud of the deep relationships -- deep client relationships, I have to say, that are underpinned by many awards we have won. The very good performance and positive prospects have also driven our share price, which has almost doubled in the last 12 months. Based on our team spirit, our well-established client relationships and with some support from macro developments, I see a lot of further potential to be lifted. Our focus on shareholder value will also be further strengthened by the employee share program, which has started in October and aims to make every employee a shareholder of Commerzbank. Now let us have a look -- a closer look at the 9 months financial performance of this year. The material growth in fee income and around EUR 500 million higher revenues in mBank, including less burdens from the provisions of FX loans have led to the record operating result after 9 months. Together with high cost discipline, this growth is reflected in the cost-income ratio of 56%, which is exactly where we wanted to be on the path towards increasing efficiency going forward. In terms of return on tangible equity, we have achieved 10% after 9 months when excluding the restructuring charges. The double-digit return level is our new baseline for growth from 2026 onwards and demonstrates the significantly increased strength of Commerzbank. The high revenue growth of 11% is based on our significantly increased fee income. But equally important is a very successful management of net interest income in an environment of significantly lower rates compared to last year. The decrease of just 1% in NII provides us with lots of confidence for the next quarters. At the divisional level, the somewhat lower net fair value result in Corporate Clients has been broadly offset by the strong fee income in PSBC, and the group overall benefited from the strong trajectory in mBank. So the first 9 months have been very successfully -- successful financially. And this also applies to the implementation of our strategy. Let me highlight five areas in which we have made significant progress. First, on customer focus. Since last month, the new client coverage model in PSBC Germany is live. Key elements are personal one-on-one relationships for affluent clients and more time for high-quality advice in wealth management. Second, on growth. Based on our deep client relationships in Corporate Clients, we are the leading go-to bank. This has led to significant capital accretive loan growth of 13% in the last 12 months. Carsten will further elaborate on this. Important to note is that this growth is thanks to strong ties with our clients rather than any pricing concessions. Third, on AI. We already reported on use cases such as fraud detection and AI-assisted documentation for advisory calls with Corporate Clients. One of the latest applications is the AI enhancement of our KYC processes. Fourth, on costs. The implementation of the restructuring program is fully on track. The latest milestones have been the successful completion of all negotiations with the workers' representatives and the offering of part-time early retirements to a selective group of people. The acceptance rate of almost 50% is very high. And fifth, on capital. In Q3, we have successfully completed our first SRT of the year. The EUR 3 billion notional and EUR 1.6 billion RWA relief came at low cost in the area of 1% of RWA. This is very capital efficient. And in placing the first loss, we also achieved some risk mitigation. We plan for further SRTs in the weeks to come. All these achievements and the financial performance contribute to the confidence of the regulators into Commerzbank. This is reflected in our improved SREP results with a 10 basis points relief in Pillar 2 requirement. Looking into the next years, our regular planning update has confirmed our strategy. A few topics of special strategic importance have been identified and addressed. First, we stay focused on our growth path and pay special attention to the German stimulus package. This is a meaningful additional catalyst for our financial performance. Second, AI is one of the most important drivers to transform our bank and ensure increasing efficiency levels. What we have seen so far is just the beginning, and we will further invest heavily into AI. One example is the support of our staff in the advisory center. Live transcription of calls, proposals for client solutions and support for outbound calls will contribute to increasing efficiency and client satisfaction. And third, we strive to optimize the deployment of capital above 13.5%. Besides capital return by means of dividends and share buybacks, this includes the exploration of further organic growth opportunities as well as inorganic options such as bolt-on acquisitions. In an ongoing screening, all options must meet our investment criteria in terms of business fit and value accretion. Now back to macro and the German stimulus. The German investment package for defense and infrastructure, combined with legislative changes such as taxation relief and depreciation rules will significantly support our growth ambitions. Within our GDP forecast of 1.2% for 2026, we expect a considerable fiscal stimulus of 0.8% of GDP. The recently weaker German economic data do not contradict the expectation that a more expansionary fiscal policy will boost the economy. The budget for 2025 and the law on the extrabudgetary fund only came into force at the beginning of October. Hence, the positive impact will only be visible in future economic data. Furthermore, the federal government has shifted a considerable amount of investment spending from the core budget to the extrabudgetary fund in the budget for 2026. This increases the federal government's financial leeway and it can quickly increase other expenditures. This will help the economy in 2026 and 2027, even if the extra spending is partially directed at consumption instead of investments. The halving of the ECB deposit rates to 2.0% also points to higher economic growth. The positive view into 2026, however, still needs to translate into higher economic activity of corporates and especially the German Mittelstand. In this regard, the highest business expectations since 2022 according to the [ ifo] survey are positive. So sentiment has improved, the Mittelstand still remains cautious when it comes to investments in Germany. Bureaucracy energy prices and shortage of skilled workers still weigh on the business prospects of many corporates. Government-induced reforms to tackle these issues are important to unfold the huge potential of the stimulus package. Now let's move on with our own capital return program. We are very well on track and plan for a steady increase in capital return. Our currently active EUR 1 billion buyback program for 2025 is progressing well, and we have applied for a second tranche of up to EUR 600 million. Once we have a clear view on the full year results, we will decide on how much we will propose as dividend for 2025 and what the exact size of the second share buyback will be. Both steadily increasing dividends and the flexible use of buybacks will remain integral parts of the capital return program. Returning 100% of net profit after AT1 translates into attractive capital return yields of 8%, increasing to 11% over the next years. This is a key element of our strategy and our equity story. Let me now conclude with our outlook for 2025. Based on the strong performance after 9 months, we raised our outlook for net interest income from EUR 8 billion to EUR 8.2 billion. Furthermore, we improved our expectation for the risk result to below EUR 850 million. We stick to our cost-income ratio target of 57% and our target for the net result of EUR 2.5 billion, which translates into EUR 2.9 billion when excluding the restructuring charges. And we consider this to be the floor of our full year expectations. And we maintain our expectations for the CET1 ratio of at least 14.5% at the end of this year. Looking at 2026, our view is also very positive. The strong NII trajectory and the macro tailwind from the German stimulus forms significant support for our momentum strategy. With the presentation of our full year results next February, we will provide the full view on our outlook for 2026. Now let me hand over to Carsten for the financial performance of the third quarter. Over to you, Carsten. Carsten Schmitt: Thank you, Bettina, and good morning, everyone. It is my pleasure to present the results of the quarter. Let's start with a brief overview. Based on strong revenue growth, the operating result is up 18% compared to Q3 last year. The net result is lower, but only due to a one-off tax effect from DTAs driven by the reduction of the German corporate tax rate from 2028. Net RoTE thus came in at 7.8% for the quarter. For the whole financial year, we are on track to reach our RoTE target despite the tax effect; thanks to the good underlying performance of the business. The CET1 ratio of 14.7% is 18 basis points higher than in Q2 and fully in line with our target of at least 14.5% by year-end. I will now go through the details, starting with revenues. In the quarter, we achieved a 7% increase in revenues compared to last year. Net interest income is holding up very well, being on the same level as Q3 last year despite significantly lower ECB rates. In net commission income, we have maintained our momentum with income growth in line with our target of around 7% year-on-year. While opposing effects are largely canceling out, the net fair value result is marginally negative due to a minus EUR 34 million valuation effect from our holding in eToro. Other income, excluding FX loan provisions, mainly stems from a positive hedge result. Now [Technical Difficulty] in more detail. All customer segments grew their business year-on-year with mBank additionally benefiting from a one-off from the cards business. Corporate Clients generated good revenues in the generally slower summer quarter. Trade Finance has increased revenues despite the ongoing weakness in exports, and Capital Markets had a very healthy syndication business. The biggest increase came from Lending, where fee income linked to loan origination was significantly higher, in line with volume growth. Green Energy was especially strong. Private and Small-Business Customers in Germany continued to grow the fees from Securities business, both from securities volumes and transactions compared to last year. In Payments, the higher account fees that were introduced at the end of Q2 are starting to contribute. We have finished the first round of reach out to customers with a good acceptance rate. It has also resulted in customers increasing volumes. Asset Management benefited from higher transaction fees at Commerz Real and growth with wealth management products. With our ongoing initiatives, we have maintained momentum and are on track to reach our growth target for the year. Let's move on to interest income. We again had some headwinds from rates. In Q3, ECB rates were on average 25 basis points and Polish rates 50 basis points lower than in Q2. Nevertheless, net interest income is nearly on the same level as in Q3 last year. This clearly demonstrates the resilience of our business model. In Corporate Clients, net interest income is up compared with Q2 and Q3 last year. Lower funding costs for trading positions and higher income from the lending business were the main drivers. The lower funding costs linked to lower ECB rates are, however, partly offset in net fair value of trading book positions. In PSBC Germany, net interest income is up year-on-year and on the same level as in Q2. The effect of lower ECB rates and our investment in promotional offers for new deposits were offset by increased contributions from the replication portfolios and mortgages. In mBank, the lower NII results mainly from the cut in policy rates. The effect has been offset by higher net fair value from derivatives. In Others & Consolidation, NII is also lower, mainly due to rate cuts. Again, there is a positive offset in the net fair value result from derivatives. Looking at volumes, we had a very strong quarter. Corporate Clients has continued to grow the loan business with all customer groups. The loan volume is now up 13% year-on-year. The deposit volumes have been stable. PSBC Germany has maintained stable site deposit volumes and increased call money by almost EUR 8 billion with the promotional offers in July. This strong inflow has led to an expected uptick in the average deposit beta to 42%. In the mortgage business, the volume of new contracts has increased further, indicating a recovery in demand as house prices have stabilized and interest rates have reached a steady level. The outstanding volume is somewhat lower due to seasonally higher early repayments. On the next slide, I will give you more details on the loan growth in Corporate Clients. As mentioned, Corporate Clients is well ahead of its 8% annual growth target and achieved this growth based on our diversified franchise. This franchise extends to customers worldwide who have a connection to Germany. It also includes the foreign activities of German companies. As expected, with the sluggish German economy, there has been only moderate growth with corporates in Germany. In contrast, demand from the public sector has picked up over the last quarters. Another area of growth has been green infrastructure, both inside and outside of Germany. We have steadily grown the portfolio over the last years. We expect this to continue despite the changes in the political environment, given the economic attractiveness of the projects we are involved in. Also, demand outside of Germany has been healthy. Around 80% of the growth has been equally spread across Europe and the U.S. and the rest came from Asia. The new business has been diversified by sector with the largest demand from energy, chemicals and consumption. Finally, in line with our Momentum strategy, we expanded our relationship with Institutionals, especially financial institutions in emerging markets in loan and trade finance products. All this business has been generated at attractive risk-adjusted margins as we maintain our focus on the RWA efficiency of our client relationships. Looking into 2026, we expect demand in Germany to pick up as the extra spending by the German government should start stimulating the economy. The significant growth we have seen in renewable energy and in financing for the electricity grid as well as guarantees for the defense projects are first halving us. We are, therefore, confident that we will maintain our profitable growth trajectory. This brings me to the next slide with the outlook for NII. On the back of the successful loan growth and deposit management of the last quarters, we again raised our NII outlook from EUR 8 billion to around EUR 8.2 billion for the year. We believe that we have reached the trough in interest income in the second half of this year. For Q4, we do not expect significant deviations of the main drivers and net interest income should therefore be on the same level as in Q3. We anticipate an ongoing increase in contributions from the replication portfolio, offset by slightly higher deposit beta and continued volume growth. The contribution from mBank will be somewhat lower due to the expected rates development in Poland. 2025 proves that our business model is holding up well even during a rate cut cycle with ECB rates on average around 1.5% lower than in 2024. While lower rates have reduced NII in 2025, we also had a positive effect in the net fair value of around EUR 300 million. For 2026, we expect ECB rates to remain at the current level. We, therefore, do not anticipate the contribution of positions that are rate sensitive to ECB interest rates to change significantly, neither in interest income nor in the fair value result. With an expected EUR 2 billion NII in the fourth quarter, we, therefore, start with a baseline of EUR 8 billion NII for 2026. From this starting point, the main drivers of net interest income in 2026 will be rising contributions from the replication portfolios and continued growth, partially offset by headwinds from the beta and rate cuts in Poland. In total, these drivers should contribute approximately EUR 400 million, resulting in an expected net interest income of around EUR 8.4 billion. This is a good basis to reach our profitability target for 2026 and subsequent years. Now to costs on Slide 19. We have continued to manage our operating expenses in accordance with our target cost-income ratio of 57% for 2025. The main driver of costs, excluding mBank, has been personnel expenses. Half of the increase is attributable to planned increases and half to valuation effects of a higher share price on equity-based compensation. Additionally, in H1, we had impaired intangibles of EUR 65 million of Aquila Capital, which is reflected in the cost line. mBank has, as planned, a higher cost increase from significant investments in business growth. Additionally, compulsory contributions were higher. For Q4, we expect higher costs than in Q3 as there will be some seasonal effects, further growth in mBank and higher personnel costs as we continue to ramp up shoring and sourcing centers to transfer further tasks currently done in Germany. After booking the momentum restructuring expenses in Germany in the first half of 2025, we booked the majority of the provisions for staff reductions at our international locations in Q3. In Q4, we expect an additional booking of less than EUR 20 million. The next slide covers the risk result. The risk result came in at EUR 215 million. This is fully in line with our expectations. The portfolio continues to be resilient. And while the -- while we expect a somewhat higher risk result in the longer fourth quarter, we are very confident that we will end up below EUR 850 million given the good performance so far. As this has been a topic recently, we have added a slide on our NBFI portfolio in the appendix. This portfolio mainly reflects our well-established Institutionals business in Corporate Clients, which we are very comfortable with. Our exposure to private credit is not noteworthy. We have no direct exposure to U.S. private credit markets. This concludes the view on the key line items. I've already covered the main drivers of the excellent operating results and will therefore focus on the tax rate. With 36%, the tax rate was well outside our normal range of 25% to 30%. This is primarily due to a change in the German tax law. From 2028, the corporate tax rate will be reduced in 1% steps from 15% to 10% in 2032. While this will be positive long term, it reduces the current value of future tax credits. We, therefore, had to reflect this in the DTAs that we hold and is a one-off event. In case the proposed tax increases in Poland come into law, we will have an opposite effect in Q4 with a write-up of Polish DTAs. Overall, we expect the 2025 tax rate to be rather in the upper half of our expected range of 25% to 30%. The next slides cover the results of the operating segments, starting with Corporate Clients. As already mentioned, Corporate Clients had a good performance in the quarter, increasing the operating result by 15% year-on-year. Revenues benefited from the strong loan growth and the good Capital Markets business. This is most visible in International Corporates with 14% higher revenues and the strongest loan growth. In Mittelstand and Institutionals, the business has also performed well. However, the effect of lower rates on deposits could not be fully compensated. And finally, the risk result has remained well contained, supporting the operating result. PSBC Germany has also improved its operating results, both year-on-year and quarter-on-quarter. As mentioned, the main revenue drivers have been the Securities business, the new account fees as well as some contribution from loans and deposits. In Private Customers, the investment and promotional offers had the expected impact in Q3 and will start to pay off in 2026. Asset Management held revenues on the level of Q2 in the rather slower summer months. mBank has maintained its profitability nearly at the record level of Q2. As expected, provisions for FX loans have been lower than in the previous quarter, and we expect Q4 to be the last quarter of sizable provisions. In September, mBank published its new strategy until 2030. mBank targets continued growth with the ambition to reach a 10% market share in Poland. With this growth and a target cost-income ratio below 35% before banking tax, mBank will materially contribute to the financials of the group. For 2026, mBank aims to start paying a dividend. This will ultimately benefit Commerzbank shareholders as it supports our capacity to distribute capital. Others & Consolidation reported an operating loss of EUR 53 million in the quarter, nearly on the same level as Q3 last year. Year-to-date, the operating result is plus EUR 66 million, in line with our expectation of a more or less neutral result for the full year. Revenues are slightly higher than Q3 last year with lower NII compensated by the fair value result. Compared to Q2, there has been some additional valuation effects. Most noteworthy has been our stake in eToro. In Q2, we booked a gain of EUR 63 million following the IPO, while we needed to book a valuation loss of EUR 34 million in Q3 as the share price fell during the quarter. We will also see some effects in Q4 depending on share price performance. On the next slide, I will cover the RWA and capital development. The CET1 ratio stood at 14.7% at the end of the quarter, up 18 basis points from Q2. There were two main drivers. Risk-weighted assets are lower as RWA from loan growth were more than offset by an SRT issuance and model effects. We plan to issue further SRTs in Q4, optimizing the return from the loan book of corporate clients. At the same time, capital has increased as the deductions from Prudential Valuation were lower due to decreased market volatility after spiking up in spring of this year. In line with our distribution target of 100%, we have not included the quarterly profit for the calculation of the CET1 ratio. In total, we have already dedicated EUR 2.1 billion for distribution to shareholders in the first 9 months of the year. The MDA has gone up from 10.2% in Q2 to 10.4%. The reason is the introduction of a countercyclical buffer in Poland. A similar impact is expected in Q3 next year when the Polish countercyclical buffer is increased further. Finally, we have received the SREP letter from the ECB. Our 2026 capital requirements were lowered by 10 basis points. For us, this is a recognition of our solid business model and our increased resilience in recent years. As we must hold only part of the regulatory capital requirements as CET1, the MDA will be reduced by around 6 basis points effective from January. The outlook for 2025. As already mentioned, we have improved our outlook for NII from EUR 8 billion to EUR 8.2 billion and for the risk result from around EUR 850 million to below EUR 850 million. We confirm all other targets. We continue to expect growth of the net commission income of around 7% compared to last year, a cost-income ratio of 57%, a net result of around EUR 2.5 billion, and a CET1 ratio of at least 14.5%. We will provide our outlook for 2026 alongside the full year results in February. We clearly see upside of NII -- on NII compared to our original plan that we published in February and expect support from an improving macro environment. Thank you very much for your attention. Bettina and I are now looking forward to taking your questions. Operator: [Operator Instructions] The first question at this point comes from Benjamin Goy, Deutsche Bank. Benjamin Goy: Two questions, please, on net interest income. The first, thanks for Slide 17, the breakdown on the Corporate Clients growth, but maybe you can speak a bit more about your growth expectations for corporates in Germany and when this is going to inflect, whether it's early '26 or a bit later? And then secondly, you also mentioned that your '26 NII is likely impacted by higher deposit beta, which you consistently -- I think, conservatively assumed. So just wondering what increase you have expected? And how much was actually the comdirect campaign in July increasing the deposit beta last quarter? Bettina Orlopp: Thank you, Benjamin. So I mean, what is the outlook for corporates in Germany? You see that the growth is also already now in Germany when it comes to public institutions and also partly Green Infrastructure. But the majority we expect for 2026, one factor will be clearly the stimulus package of the German government. But then also given the improving business sentiment, which we see, there should be also more activity, specifically from Mittelstand clients for Germany. And there is apparently also the Made for Germany initiative, which means to have significant investments in Germany in the coming years. And on NII 2026, I hand over to Carsten. Carsten Schmitt: Yes. Thanks, Benjamin. Let me start with the increase in the deposit volume that we've seen in the third quarter. As you asked for it, so in July, we increased our deposit volume by around EUR 8 billion from the offers that we had out via comdirect. This led to an increase in the beta. On the personal customer side, we expected this, which is why you also see the beta coming up in Q3 to 42%. We've now said that we expect a slight increase into Q4, which is not stemming from the personal customer business, but rather from the Corporate Clients side. Given the generally lower rate environment at the moment, it becomes harder to actually fully transmit the rate cuts into the client business. And hence, you have a structural increase of the beta from that side. So for the full year, we are still expecting an average beta of around the 40% mark we indicated beginning of the year, potentially minimally higher. And for '26, as you asked for the development towards the EUR 8.4 billion NII, for '26, we expect that the current rate environment actually will come with the same strain on the corporate client beta. On the personal customer side, as mentioned, we expect this to come down again in Q4 and then manage it as we go in the quarters of next year. Operator: The next question comes from Tarik El Mejjad, Bank of America. Tarik El Mejjad: Just a couple, please. On cost savings, can you update us a bit on the progress on the different initiatives you've launched with your CMD earlier this year and how you're confident to deliver especially the trajectory on that? And second one on the capital. So if I understand well, by year-end, we will have a better view on the mix between the cash and buyback. So you say paying 100%, is it possible to pay more than 100% if you are above 14.5% CET1? Because we know that it will be EUR 1.6 billion or so of buyback, and then the components on the cash, given where you trade, could that be higher to lead you more than 100% from this year? Because I think that now what we need to look at is the 14.5% CET1. Bettina Orlopp: So Tarik, thank you for your questions. On cost savings, we make very good progress. First, when it comes to the restructuring program itself and the headcount reductions, we concluded all necessary negotiations with the workers' council, and we have already announced all structural changes, and we are in the process of implementing them. And we also started with one instrument, which is kind of a part-time retirement program, which has a benefit that people stay on for the next 1 to 3 years, so you can really manage transition and then they will go in the passive retirement phase. And we had a very high acceptance rate higher than we expected with 50% of the people we address that to. And then all other social instruments are also now available. And therefore, we are very much developing according to plan. When it comes to the necessary measures, when it comes to efficiency, streamlining, AI showing, we are also showing exactly the progress we expect. We are delivering AI use cases day by day. One can really say there's a lot of speed in that. And also the sharing activities are ongoing. We have already hired a number of people in Sofia, in KL for the different teams. So all well underway and on track. When it comes to capital, actually, I mean, we are paying more than 100% because we have the benefit that we can exclude the restructuring costs from our payout ratio. So if you take really the net result after restructuring costs, we will pay out more than 100% this year. But we will stick with 100% net income after AT1 before restructuring costs because that is exactly what we aligned also with the regulator as a basis for our share buyback requests. But the clear mix between dividend and share buybacks, we will finally decide. When we see the results, it's clear that we want to show a very attractive dividend as well. We now had EUR 0.30, EUR 0.65. And apparently, we want to have a further increase also given that share price has nicely improved over the last months, and it will be very attractive, and it will be a very attractive mix. And as said, the EUR 1 billion share buyback program is currently underway. The next one we have just applied for and then the rest, we will update in February. Operator: The next question comes from Jeremy Sigee, BNP Paribas Exane. Jeremy Sigee: Two questions, both on capital, please. Firstly, is there anything specific coming in Q4 that would bring the 14.7% down to 14.5%? Or does the sort of greater than 14.5% mean actually it could stay at 14.7%? So anything specific you're expecting in Q4? And then the second question I had was on your Slide 6, when you talked about sort of future strategy elements, topics of special strategic importance for the coming quarters, you mentioned optimizing deployment of capital above 13.5% target. Are there any new ideas that you have in mind or any new areas of focus? Or are you just reflecting something that's already a core plank of your strategy? Bettina Orlopp: Thank you, Jeremy. I mean on capital, we always know that a 0.1% up and down can also be just reflected by currency changes, FX changes and stuff like that. But overall, we expect more growth to come in Q4, and that will have an impact. There will be also more SRTs to come, but that's the whole story around that. When it comes to future capital deployment, I mean, we're thinking about investments all the time. The whole discussion around AI, specifically Agentic AI is accelerating. So we definitely also think to invest more into it to accelerate certain things. And then we explore -- as we have said beforehand, we explore different M&A opportunities to make sure that we can strengthen our business model. But the problem is they have to meet very strict criteria because we have very clear targets out there when it comes to 2028. So it needs to be value accretive and supporting our growth ambitions, but also our profitability ambitions for the years to come. Operator: The next question comes from Kian Abouhossein, JPMorgan. Kian Abouhossein: The first one is related to loan growth in the Corporate Clients where you have given very helpful details on Slide 17. Can you talk about the asset spread margin environment in the different areas? And what are you doing differently versus peers, which is driving this very strong growth rate that we are seeing? And the second question is on PSBC deposits, where we've seen also very strong growth. And should we be looking for more flattish growth going forward? How should we look around deposit growth in PSBC? And in this context, you mentioned that the structural hedge could grow from EUR 147 billion, which was flat. Wondering how should we think about the deposit growth and in conversion, the structural hedge? Is there any guidance you can give us? Bettina Orlopp: Let me start off with the PSBC deposit growth. I mean, the deposit growth has been very much supported by the attacker products, which we have seen in July. We now have stopped them. But overall, when you look in our plans, that has not changed. We plan for an average deposit growth of approximately 2%, and that is also very much coming by what our clients do, but also we definitely want to grow with our client base. And for the rest, I hand over to Carsten. Carsten Schmitt: Yes. Maybe to then also add to your question regarding the structural hedge position. We have an unchanged position regarding the replication portfolio coming from Q2 to Q3. And as you know from the slides, we have EUR 147 billion currently in this portfolio. Given the changed deposit structure that we're having now or size of the portfolio, we will, of course, look at potentially increasing this. So this is something we'll decide during Q4 and then update you on it. I would also like to remind you that we have in total EUR 200 billion plus in deposits that we can model and always sort of remain a distance to what we actually have in the model. So there is room to look at that, and we will do this during Q4. Then on your first question regarding loan growth on Corporate Clients and the margin development, I would like to pull this into two directions a bit. First and foremost, you've seen that we saw a healthy loan growth, especially on the International side. We grow the portfolio on that end, as mentioned, has good margins. The business is contributing. So we are actually seeing a healthy increase. And it is mainly coming, quite frankly, Kian, from our point of view, coming from the deep relationships we have with our customers and the international presence that we are offering with our outlets internationally. So that basically allows us to accompany them whenever there's financing needs coming up. And looking a bit more into the domestic part and the growth, especially when it comes to the public sector, to the municipalities, we interpret this as the first pickup of the infrastructure packages that also have been announced by the government. This business is a fantastic business when it comes to the risk position of the book. It, of course, also comes at slightly lower margins. But I would also like to say that in this space, municipalities -- or not necessarily only the municipalities, but also municipalities [ operates ] like suppliers, et cetera. And those usually from a margin perspective, go a bit more into the Mittelstand territory. So hence, growth in the book at good margins and rather accreting to the RWA efficiency of the book. Operator: The next question then comes from Borja Ramirez with Citi. Borja Ramirez Segura: I have two, these are on the NII. Firstly, I would like to ask on 2026, could you disclose the deposit beta that you are assuming? Because I think there was some comment on corporate deposit beta rising maybe because of higher -- of lower margins. But then also the retail deposit beta, I think maybe that's maybe improving as your attacker products are repriced at lower rates. So that would be my first question. And then my second question would be if you could kindly provide a bit more color on the moving parts in the 2026 NII. For example, I think there is -- I think you guided for EUR 300 million of benefit from the replication portfolio in 2026. In NII, I have slightly higher EUR 400 million because you [indiscernible] and also you increased the portfolio. So if you could kind of add more details there, please? Carsten Schmitt: Borja, thank you very much for the questions. Let me start with the first one on the deposit beta. Again, I would like to start with 2025. You've seen that we came sort of from a low level, which was steadily increasing over the year as expected. Q3 is now a bit higher coming in mostly because of the attacker products we had out in July. And as mentioned, we expect actually the private customer beta to come down again in Q4. So the main driver for the slightly higher beta that we expect for the end of the year comes from the Corporate Client business. All in, the beta, as mentioned earlier, will remain actually at a level of 40%, maybe 40.5% for the year as we expected. And running into '26, the beta from an expectation perspective will likely be driven by the Corporate Client side, where we see basically an unchanged beta landscape compared to Q4. You mentioned briefly sort of the impact from our attacker products on the personal customer side. I would like to make the point, the deposits that we actually got in beginning of July are term deposits. And while that always has a short-term impact on the beta, the longer-term benefit of actually having these deposits in the bank actually will be contributing in '26. Then the second question on the EUR 400 million increase of NII in '26. We will expect for '26 a pretty much unchanged at least ECB rate environment. So expect this to be flattish. The replication portfolio actually will be the driver with the investments and the position we have in the replication portfolio, we do see the stabilization effect. And as you've also seen in the last quarters, we continuously actually increase the average return out of that portfolio. So that will be the main driver. And then, of course, we will see growth effects and a slight negative coming from mBank given the Polish rate environment and expected a slightly higher beta next year. But that's the main drivers for the EUR 400 million so that we will see a positive development from EUR 8.2 billion, sorry, to EUR 8.4 billion next year. Operator: Okay. Then I think the next question comes from Tobias Lukesch, Kepler Cheuvreux. Tobias Lukesch: Also quickly touching on the NII again and the outlook for '26. You guided for this EUR 8.4 billion. I was just wondering what the net fair value expectation is in your old strategy at the CMD at EUR 0.5 billion, but you also had EUR 0.4 billion for '25, which is now still confirmed at EUR 0.3 billion. So I was just wondering if this still holds up and what your total view on this combined revenue contribution is. And secondly, basically on the cost side. So if I understand your guidance correctly now for '25, you have this EUR 200 million more in NII. At the same time, a EUR 70 million tax effect leaves us with EUR 140 million, which is more or less eaten up by higher costs. On the share price, I mean, one could hope it, but it's rather unrealistic to see the same compensation potentially for next year. So I was just wondering like what you see in terms of like this kind of cost development, how it will come back and how you will steer that basically into the future? Carsten Schmitt: Yes. Thank you very much, Tobias. Starting with the NII for '26, and you referred to specifically regarding the net fair value. So for '25, so for this year, we have a net fair value contribution, which is linked as we always refer to it to the NII to the degree of EUR 300 million. This is a change coming out of last year. So the reason why we listed this explicitly when going into the year and guiding for the NII was that in the rate declining environment, we wanted to also express it's not only the NII, but also partially contribution from derivatives that help us on the NII side. Now going into '26, we are guiding the NII for EUR 8.4 billion, but we expect a flat rate environment and hence, also no significant movements on the net fair value result stemming from the NII position. Hence, EUR 8.4 billion and at the moment, flat, so no additional contribution from the net fair value for '26. Then towards your second question regarding the cost side. I think you went through that quite nicely. We have some effects that you listed, which we also mentioned in the speeches regarding our '25 development. When we look at the operational, let's say, cost level and development that we're seeing in the bank, we're seeing a very disciplined way the bank is managing its costs at the moment. So looking into '26, we are basically very confident that we are running with the level that we have guided in the Capital Markets Day. As you know, we're steering for cost-income ratio. 56% is the target that we set for next year. And at this point, we hold clearly towards that 56%. Tobias Lukesch: If I may, again on this net fair value. I'm a little bit puzzled, to be honest, because with the CMD, you guided for EUR 8 billion NII in '26 and EUR 0.5 billion net fair value, which makes EUR 8.5 billion. If I understand you correctly, now you're guiding for a combined EUR 8.4 billion only for next year. And also again, on the '25, I don't get this unchanged EUR 0.3 billion net fair value result. I mean we're at a negative minus EUR 60 million, if I'm not wrong. And that would indicate a kind of EUR 350 million contribution in Q4. So how is that to read and to square? Carsten Schmitt: Yes. I think that's a super fair question. So first of all, Tobias, on '26, to be absolutely clear, we have EUR 8.4 billion expected NII and unchanged net fair value expectation of EUR 0.5 billion. So that stands. I was referring mainly to the net fair value we expect from the NII side. So for '26, no change in the net fair value guidance to be absolutely clear here. Then coming back to '25, the net fair value, in essence, is made up of multiple positions. One position is the net fair value, which we have from interest rate-related positions. That is the EUR 300 million that we mentioned. These are included as one portion of the net fair value, and they hold. We see them at the moment in the books. And given the current rate environment, we don't expect them to change towards the end. What's also included in net fair value is then the positions from our Capital Markets business, that is contributing to it. And the third position, which is contributing to net fair value is general valuation effects. And those have to be seen in combination with the other income. And if you combine those positions, so the net fair value that we have as a run rate at the moment, the other income and if you exclude from that the FX mortgage provisions which we hold for mBank, then you actually end up with a value around the EUR 250 million mark for '25. And hence, we stand with that guidance. Operator: The next question comes from Riccardo Rovere, Mediobanca. Riccardo Rovere: Again, on NII. If you look at the loan book, EUR 263 billion at the end of the 9 months is -- this is the average, is 2.5% higher than the average since the start of the year. And then in 2025 -- '26, you're going to have a support from the fiscal boost in Germany, 1.2% in GDP. This is real, then you add 2 percentage points from inflation. So the loan book will continue probably to grow in Germany. I don't know if it's 3.5% or something like that is reasonable or not. And then you have Poland, which is supposed to grow more than that, while your NII is supposed to grow 2%. So you are implicitly plugging in a fairly decent, I would guess, margin compression. While the rates are supposed to be stable, at least in Europe, but Europe is 70% to 75% of your business and Poland is 25%, 30%. So given that in 2025, your NII guidance went from 7.8% to 8%, then 8.2%. I'm just wondering whether the approach you have in the 9 months '25 when you set the 8.4% is with some caution, some prudence as you have constantly done throughout 2025. This is the first question. The second question I have is on the call money, core deposits in PSBC. As I understand, the promotional offer was in July, if I understood it correctly. So that means that the impact on NII should more or less be fully visible in this set of numbers. More than that, why are you gathering this -- why you're doing this promotional offer still? And then the other question I have is on the medium- to long-term funding, the amount has gone up dramatically over the past -- since the start of the year is almost, if I'm not mistaken, kind of EUR 20 billion or so, kind of EUR 18.5 billion in debt securities. It went from EUR 45 billion, something like that EUR 53 billion to more than EUR 70 billion. What is -- why has this gone up so much? And what is the spread that you get? Because the feeling I have is that then you invest in debt securities on the asset side. And I was curious to know what kind of debt securities this amount of money is invested in. That's just to have an idea. Bettina Orlopp: Yes. Thank you, Riccardo, for your questions. And specifically the first one, as you know, we like this wording of floor. And yes, we are always conservative, and you know that. So when it comes to next year, what are the driving factors? So first of all, we plan for another 8% loan growth in Corporate Clients. That's for sure, and that will be also supported by everything we see in the moment when it comes to the stimulus package. And I think we have proven nicely that we are able to organize that given the 13%, which we have shown year-to-date. However, what you need to keep in mind is two things. One is clearly Poland, which will also see nice growth on the loan side, but we will -- we expect a further decrease in interest rate levels there that will have a negative impact. And what Carsten said before on the deposit beta that you need to take the fourth quarter basically as something which will also drive then the full year 2026, and that will be a slightly higher deposit beta on [Technical Difficulty] which we have seen for this year. That is at least our assumption, and that is also the assumption which we have embedded in our plans back at the Capital Markets Day. If you look in this document, we always spoke about 41% for this year. Now it's 40% most likely, which would then go up to 44% until 2028. And that's just a reflection. It's lower than we thought, but there is still some increase in the deposit beta. When it comes to the -- so yes, you can say that the EUR 8.4 billion is clearly, again, a floor number and nothing else. And when it comes to the call money, we have that in July. We stopped the program actually after 3 weeks because we had so much inflow. But most of this money runs until January, February. And in the moment, we do only have our normal offers out there and nothing specific. And on funding, I hand over to Carsten. Carsten Schmitt: Yes. On the funding side, Riccardo, we had planned -- in terms of debt instruments, we had planned for around EUR 10 billion-plus for the full year, and we're currently standing at around EUR 11 billion in terms of funding. In terms of the spread across different instruments, we actually had a wide variety in the market this year from AT1 to AT2 issuances, et cetera. So basically, we had the full spread and made use of the market environment to do our regular sort of refunding activities. So actually, the funding plan is pretty much in line with our plan. We extended it a bit in Q4 effectively to make use of the current market environment. And also, I should say, looking a bit back into the first half of the year, we know that the markets are not always there when you want them to be there. So we basically looked a bit into stabilizing the funding position, but pretty much in line with the plan, maybe a bit on the upside. Also, given the current market environment and the spreads that we are seeing -- attractive spreads for the re-issuances, so generally, you can expect that we improved our funding cost position overall in the book throughout this year. And given that we hold the margins actually on the asset side steady, this will be contributing to our business plan. Riccardo Rovere: Very clear. Just maybe a quick follow-up. On the loan growth in PSBC Germany, the book is fairly stable at EUR 125 billion. Do you expect that the easing by the ECB is going to have an impact at some point in 2026 here? Bettina Orlopp: You mean on the private client side? Riccardo Rovere: Yes, exactly. On the retail side in Germany. Bettina Orlopp: Yes. I mean what we currently see is already much more activity again. So the mortgage activity has increased. Basically, it's back to the levels which we have seen pre-COVID. And there's just a time effect in there because people start a mortgage, but then until they really take the money, it takes a while because its most of the time, just paced in construction. So yes, we expect a loan growth for next year also on the PSBC side. Operator: The next question comes from Anke Reingen, RBC. Anke Reingen: There's two areas, please. The first is just coming back on the very strong corporate loan growth in Q3. Some of this seems to be a bit more short term in nature as in Working Capital and Trade Finance. And given Q4 is normally seasonally a bit weaker, I just wanted to confirm that you expect there shouldn't really be a reversal in Q4 from these levels. And then secondly, you talked at the beginning about your wealth management initiatives. And I just -- I'm sorry, I'm not -- can't really fully remember, but what you mentioned, is this incremental to your plan? And maybe can you just sort of give us an indication of how much it currently contributes to your revenues and what you sort of like size as an opportunity? Bettina Orlopp: First, we do not expect any reversal on the loan growth for the fourth quarter. And second, on wealth management, I mean, this is a core element of our Momentum strategy. So it's fully embedded in the plans. It's -- I mean, one of the factors which should drive our net commission income, the 8% or 7%, the 8%, which we have seen year-to-date, but also the 7% we expect for the years to come. And what we have now done is we basically intensified the coverage of clients. So there are more relationship managers to cover these groups of clients. We have wealth management centers. We also have new locations. We opened a number of new locations in Germany this year, and they will be a significant driver for the net commission income growth. We do not really say how much percentage-wise it is. Operator: The next question comes from Máté Nemes, UBS. Mate Nemes: I have two of them, please. The first one would be a follow-up on deposits, specifically the strong call money inflows. Can you talk about the retention rates that you've observed on such attacker products once the high interest period ends in the past 1 to 2 years? Would love to know what is your experience on that front, how sticky those new funds are? The second question would be on the risk result or risk costs and specifically your guidance. So in the first 9 months, you had EUR 515 million in risk results. And clearly, you revised your guidance down for the full year to below EUR 850 million. I'm just wondering what prevents you from being more specific on the full year risk results. It seems like there is an awful lot of room between the current result and the upper end of the guidance. Would you expect anything sort of inorganic in the fourth quarter, any model changes? Why not, let's say, a somewhat more precise lower guidance? Bettina Orlopp: Well, thank you. Yes, on the call money, the inflows and now you're asking what do we expect. I mean we can only speak for the past programs because the attacker products, which we have laid out in July are running, as I said, until January, February. So we will only see in the new year how sticky it is. You really have to differentiate between the two client groups, Commerzbank clients and comdirect clients. Commerzbank clients actually, whatever we get there is more sticky than on the comdirect side. And at the comdirect side, we also have more of these, I call them, interest rate hoppers. But still, we have been pleasantly surprised by the stickiness of how many clients still also keep their money with us. That is also due to the fact that most of the time, we also couple that with really client onboarding. We have a very attractive brokerage offering at the comdirect side, and that is clearly something which we combine also with new clients. So overall, so far, we have been rather pleasantly surprised on how much call money stays with us after the attacker products. But the risk result, I mean, totally clear, we see it the same. However, it's a long quarter, and this is why we, as always, stay a little bit cautious. We do not see anything specific. We do not expect anything specific, but it is a long quarter, which runs until February. So we're just leaving a space. There are not specific model changes planned or something like that. I mean there's always a time there are model updates, but nothing specific here. And that's also very confident. I mean, we wouldn't have changed it to below EUR 850 million if we would not believe that it comes lower than the EUR 850 million, which we originally laid out. But how much in total, we really will see in February when the quarter ends. So I think we are at the end of this call. Thank you very much for your questions. We are looking forward to further discussions with you and wish you now a great and sunny day. Thank you.
Operator: Hello. Welcome to the IMCD 2025 First 9 Months Results Conference Call hosted by Marcus Jordan, CEO; and Hans Kooijmans. [Operator Instructions] I would now like to give the floor to Marcus Jordan. Mr. Jordan, please go ahead. Marcus Jordan: Thank you very much, Elba. Good morning to you all, and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooijmans for the 2025 first 9 months results, which we published in a press release earlier this morning. The first 9 months of 2025 were generally characterized by challenging market conditions as a result of continued macroeconomic uncertainty, particularly around tariffs across all regions. This resulted in softer demand across a number of markets, limited order visibility and just-in-time deliveries. Moving on to the first 9 months numbers. You will find a summary of our financial results on Slide 4, whereby considering these continued challenging macroeconomic conditions, I am pleased with our gross profit growth in the first 9 months, which is up 5% on a constant currency basis to EUR 927 million. This increase is driven by a combination of organic performance, successful acquisitions and resilient gross profit margins. EBITA also increased by 1% on a constant currency basis to 340 -- sorry, EUR 394 million. And our cash flow of EUR 284 million was a bit lower compared with the first 9 months of 2024, driven by a combination of a slightly lower EBITA and a modest increase in working capital investments. As we mentioned in the half year call, we are actively working on reducing our inventory amount back to historical levels, but I also want to stress how important it is that during these uncertain times, we have inventory in place to fulfill the demands of our customers. If we now look at M&A, we announced 4 acquisitions in the first half of 2025. And in Q3, we were very happy to add another 2. In August, we announced the acquisition of Tillmanns in Italy, which operates across a broad way markets, including coatings and construction, food and nutrition and water treatment. Tillmanns have 78 people and had a revenue of EUR 143 million in 2024. I'm very proud of this acquisition as we've become a real powerhouse for our partners, teams and suppliers in Italy. In October, we also announced the acquisition of Dang Yong FT in South Korea, a company active in beauty and personal care with 14 people and EUR 34 million in revenue. We strengthened our position in South Korea, which, as you know, is one of the most innovative and largest Beauty & Personal Care markets in the world. On a full year basis, these 6 acquisitions will add around EUR 340 million revenue and 185 employees based on their last full year numbers before acquisition. Looking at our business segments. We have seen pharmaceuticals, food and nutrition, having the most solid performance in the first 9 months and our Beauty & Personal Care and Industrial segments being generally soft in demand across the 3 regions. Related to demand, we get a lot of questions around Chinese competition in our various markets. And during this year, it is fair to say that we have seen more competition from China. And whilst we are somewhat protected from this due to our specialty focused portfolio, we have seen some pricing pressure, primarily on the semi specialty components of our portfolio and especially in the APAC and LatAm countries. It is important to highlight that competition from China is nothing new to us. And we -- and as we have done throughout the history of IMCD, we regularly review the portfolio we have in all countries and markets to ensure we are for the longer term competitive and where necessary, adapt our portfolio accordingly, again, with the long-term growth of the company in mind. To summarize, despite the ongoing uncertainties in global trade and tariffs, our business model has shown resilience during the first 9 months of the year. We are further intensifying our efforts to drive cost effectiveness and commercial excellence throughout the company and ensuring that we have the right people and the right positions for the future. We are in the process of further strengthening our sales organization, both those on the road and inside sales specialists. At the same time, we're taking advantage of our digital initiatives to optimize other areas of the business. Overall, this will result in a reduction in the number of FTEs going forward. We are well positioned for the future through our adaptable specialty-focused portfolio, geographic and market diversity combined with advanced digital and supply chain capabilities, and we remain confident in the strength and long-term outlook of our asset-light business model. I would now like to hand over to our CFO, Hans Kooijmans who will give you an update on the numbers. Hans Kooijmans: Thank you, Marcus, and good morning, ladies and gentlemen. And I will, as usual, briefly summarize IMCD's results for the first 9 months before we go to Q&A. And I would like to start on Page 7 of the presentation. On this page, you can see ForEx adjusted revenue and gross profit both increased with, respectively, 6% and 5% compared to last year. Despite the challenging conditions, Marcus just mentioned, we still achieved a modest level of organic gross profit growth, along with a 4% increase as a result of the first time inclusion of acquired businesses. Gross profit in percentage of revenue slightly decreased to 25.2%. And about half of this 0.2% decrease is the result of the negative impact from acquisitions, acquisitions with, on average, a lower gross profit margin than group average. Furthermore, we saw the usual fluctuations in our product mix, currency impacts and changes in local market conditions. Then ForEx adjusted operating EBITA, which increased 1% to EUR 394 million. And this increase resulted from an organic decline of 3% that was more than compensated by the positive impact of the first time inclusion of the acquisitions. The reported EBITA and conversion margin both decreased. And this is mainly the result of gross profit growth that could not fully compensate inflation driven on cost growth. When you look at the cost growth, the year-to-date organic own cost growth came down to just below 4%. And compared to September 2024, the number of full-time employees normalized for the impact of acquisitions slightly decreased. ForEx adjusted net result on the next line, that decreased 9%. And in our trading update, we usually don't break down this difference in detail. However, it's fair to assume the main factors are similar to what you saw in our half year results, lower reported EBITDA and higher finance costs as the main drivers. And these higher finance costs in year-to-date 2025 are mainly the result of a bit more ForEx losses and lower gains from fair value adjustments of deferred considerations. Further, we reported and will report additional cost related to one-off adjustments to the organization. And these additional cost items are partly compensated by lower tax cost. At year-end, you could expect higher than usual additional costs related to one-off adjustments to the organizations. You know and we told you before that we are always cost conscious and prudent with our cost structure. However, as indicated also by Marcus, current market conditions, but also opportunities as a result of our digital investments allow us to reduce our fixed cost base and adjust the organization to changes in market conditions. Then on free cash flow, we reported cash conversion margin of 71%, which is slightly lower than the same period of last year. As mentioned in our previous call, we took additional measures to reduce our working capital investment, why we are careful to carry sufficient stock to fulfill our customer requirements. In our previous call, when we discussed the end of June figures, we reported that our working capital days were 6 days higher than the same period of last year. End of September, we were able to reduce this gap to 3 days. And we feel confident that we will report at year-end, a cash conversion ratio somewhere around high 80% or a low 90% number. Then on the next page, Slide 8, you will find a summary of a few key figures split into the various regional operating segments. When looking at top line and gross profit, we were able to grow organic as you can see in all 3 regions despite these difficult market conditions. We also had quite some currency headwinds when translating local results into the euro, most significant in APAC and the Americas. This currency translation impact is easy to quantify and report it as a separate line, but more complicated is calculating the operational impact of these currency fluctuations. It's obvious that these currency fluctuations had a negative impact in regions where it's common to quote in dollars and invoice in local currency. Therefore, it's fair to assume that these currency fluctuations this year negatively impacted our results in LatAm, APAC and a few EMEA countries. On the bottom of this slide, you will find EBITA margin conversion margin per segment, and we report a negative development in 3 of the 4 segments. And the only positive exception is Holdings where the cost in percentage of revenue ratio slightly improved due to lower holding cost. EMEA reports the biggest EBITDA and conversion of deviation compared to last year. And as mentioned in previous call, you should keep in mind that the majority of the global business group costs are reported in the EMEA region. And this then automatically leads to, in general, higher cost base. The biggest swings in results during the year were reported in the Americas and Asia Pacific. The America and APAC reported, respectively, a positive 21% and 7% organic EBITA growth in the first quarter, which turned into a minus 4% and minus 3% year-to-date September. Marcus gave you already a bit of color on the background. On Page 9, a summary of IMCD's free cash flow. The absolute amount of free cash flow was EUR 16 million lower than last year, and the cash conversion ratio was 71%. And lower EBITDA, a slightly higher working capital investment were the main drivers of the difference compared to last year. As mentioned before, we are confident that we will report at year-end a cash conversion ratio somewhere around the high 80% or low 90% number. Page 10, update on net debt and leverage. By net debt at the end of September was close to EUR 1.5 billion, slightly lower than end of September last year and EUR 228 million higher than the end of December. The year-to-date increase of our net debt position was, amongst others, impacted by a combination of on the one hand, positive operating cash flows, combined with cash outflows of EUR 281 million as a result of acquisitions and EUR 127 million dividend payment. Our reported leverage ratio, including the full year impact of acquisitions done was 2.6x EBITDA, which is similar to the leverage based on the definitions in our loan documentation. And then last but not least, on Page 12, you will find our outlook for 2025, and I assume everybody has already read the text in the press release. Therefore, I don't want to repeat it again loud. And I would like to hand over to Elba, the operator, to open the lines for Q&A. Operator: [Operator Instructions] Our first question comes from Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: I have 2 questions, please. So firstly, could you talk a little bit about how pricing has developed over the quarter? We had talked earlier in the year about stabilization, but I'm just wondering now how the combination of tariff-driven inflation and some of the increased competition you mentioned is driving pricing and how that has trended relative to your expectations? And then secondly, just on the competition from Chinese suppliers. We -- I think we spoke about this at the half year. So could you talk a little bit about how that has developed during Q3? Have you seen that competition step up, particularly as tariff noise has increased? And do you expect that to continue for the foreseeable future? And in that context, you mentioned keeping the portfolio under review. And so are there any structural changes that you're considering if you assume that, that competitive pressure will continue? Marcus Jordan: Annelies, thank you very much for the questions. I think in terms of pricing, what we can say there is that we haven't seen any real significant change during the quarter. We've seen, I would say, a little bit more normal pricing behavior where for some product lines, we've seen small increases. But also related to your second question, we have continued to see pricing pressure in certain areas and business lines on the semi specialty side from China. So I would say nothing, I would say, changed significantly since the last quarter. And then moving on to competition from China. Again, I wouldn't say that we've seen a very significant increase in the third quarter versus what we've seen in the past. I think generally, we have seen more competition this year than last. But I think also important to stress, as I mentioned, Chinese competition is nothing new. And I think then related to the structural change and how we review the portfolio. I think important to mention that we've had Asia sourcing offices in place in India and China for more than 20 years. Historically, those were very much focused on some of the product lines that actually were predominantly manufactured there. Pharmaceutical actives is a good example. But as you can imagine, we also use those sourcing offices sometimes to look at what are the white spots that we've got, particularly in countries that we're maybe freshly entering into. And so we do keep a very close eye on what is happening within the, let's say, China manufacturers looking at our portfolio. Still remaining very loyal to those long-term partners that we have and always been, I think, looking at the long-term growth of the company, making sure that we don't do knee-jerk reactions for what could be short-term market conditions. But again, I think the beauty of our business model is we've got a very agile product portfolio. We can adapt where we need to. But again, let's be cautious and make sure that we're doing that with a very long-term view. Operator: The next question comes from Matthew Yates from the Bank of America. Matthew Yates: I'd really like just to continue on the theme of that competitive pressure really. Looking at your Asian performance, it would be helpful to unpack that a little bit. I mean flattish top line feels respectable in light of the tariff uncertainty that the world is operating in, but then the 13% decline organically in EBITA suggest some competitive pressure or investment that you're making to drive future growth, I don't know. But when -- Marcus, when you talk about portfolio review, that to me, just sounds like walking away from business and accepting that there are product lines that are no longer profitable for IMCD to operate in. Is that fair? If so, how much of the portfolio are we talking and is there anything else you can do to sort of reinforce the business model and the pricing pressure you have in light of these challenges, I appreciate you're saying there's nothing new, but equally, at the same time, it does feel like it's intensifying or accelerating. Marcus Jordan: Okay. Matthew. Maybe if I speak a bit about the first point first and the Asia Pacific numbers. And I think the standout there, Matthew, is related to India. where we do see, I would say, quite a softness from a performance perspective during the third quarter. And if we dig a little bit deeper into that, I think that we can talk then the most, I would say, the largest effect is related to pharma. So I think we all saw the pharmaceutical tariff discussions, which took place during the third quarter that, of course, I would say, in general, quite some uncertainty. There was a big pharmaceutical exhibition in Frankfurt called CPHI last week. We had the opportunity there to speak to a broad range of our own suppliers and customers. I think everybody saw the same trend of that softness in the third quarter, but pretty much everybody is also speaking confidently that, that will be turned back to some kind of normality during Q1. So I think that this is a short-term thing. I think with regards to then walking away from certain business, that's definitely not the case. I think, firstly, if you look again at those long-term supplier relationships, which we have, also important to state that with the partners that we have, a lot of those partners also have assets in China. So they're able to also keep competitive. When we talk about reviewing the portfolio, again, this is nothing new. We constantly country by country, look at what are the white spots that we've got, how can we strengthen the business, how can we strengthen the portfolio but also looking at which, again, nothing new is are there pieces of business or particular product ranges where we can't be competitive. And typically then, that business has already deteriorated or is very small. So it's more a case of looking at how do we boost the business and grow the business again for the future rather than walking away from business that we have. Operator: The next question comes from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi: Just a couple for me, please. Can you maybe discuss how conversations with your customers are progressing? Are you seeing any signs of volume stability on a sequential basis at this point? And any color on the order book would also be helpful. And if you think about the gross margins in this quarter, it has deteriorated quite significantly versus the first half trends. You mentioned half of it was M&A. But the rest, is that basically the price pressure that you saw effectively? Marcus Jordan: Firstly, I would say, on the customers and kind of the volume stability or outlook, whatever, I would say that there's no change, unfortunately, in terms of the visibility that we have. So still, a very volatile order book, I would say, minimal forecasting, a lot of just-in-time deliveries. So I would say unfortunately, no general improvement there. And on the gross margin percentage, I think Hans kind of already covered that where I would say that there's nothing exceptional there. A little bit of dilution from the M&A impact, maybe product mix to a certain extent. But I would say nothing material. Operator: The next question comes from David Kerstens from Jefferies. David Kerstens: I've got 2 questions, please. First of all, on the stable organic revenues in the third quarter, that seems like a good performance against a substantially tougher comparative. I was wondering, can you highlight maybe some product market combinations where you see this improvement sequentially relative to the second quarter? Then the second question is on the balance sheet with leverage going up to 2.6x EBITDA and the Tillmanns acquisition not yet closed how do you see that leverage ratio develop into the fourth quarter towards the year-end and after the closing of Tillmanns? And does that still leave you with sufficient headroom for further M&A going into 2026? Or would you temporarily allow higher leverage given the short-term unfavorable market conditions? Marcus Jordan: I think with regards to the stable organic growth, I think behind the scenes, there's obviously an awful lot of work going into making that happen. I think if there's a market which has maybe stood out from a stability perspective, it's the food and nutrition space. I wouldn't say that there's a significant change between the quarters. But out of the different market segments, that's the most stable and robust that we've seen for this year. And then on the M&A and leverage, Hans? Hans Kooijmans: David, Hans here. On the leverage, I don't want to predict the leverage number for year-end, and you're right, I still need to pay. And I also need to close Tillmanns that we expect to do in the last part of this quarter if we get all the formalities done. If and when that happens, yes, leverage will move around that 2.6 number. I expect, so sufficient room to do further M&A. Typically, working capital will come down towards year-end, what we indicated as a cash conversion ratio should lead to an additional cash inflow. So I'm not concerned at all about our firepower. Operator: The next question comes from Nicole Manion from UBS. Nicole Manion: Just one question from me, please. Can you elaborate a bit on your comments around the cost base and particularly FTEs? Obviously, there seems to be a nod to the volatility of the environment at the moment. But you've also linked, I think, to ongoing digital initiatives, which might suggest it's a bit of a longer-term project. I'm not sure if you can share any more details here or whether this is something you're looking at across regions, what's in scope? Yes, any sort of color would be helpful. Marcus Jordan: Great. Thank you, Nicole. Yes, as I mentioned, it's not something new, but it's fair to say that we are intensifying our efforts to really drive that cost effectiveness. But also making sure that we're delivering premium customer service. And as we've spoken about before, the expectations of customers that they are evolving this omnichannel way of working. And for us, that means very critically, making sure that we've got very highly skilled technical development resource on the road, visiting those customers face to face, but also having very highly qualified inside salespeople so that regardless of the way that the customer wants to interact, they've got immediate contact, and we're able to react in a very timely and effective and efficient way. So what we're doing is really looking at making sure that we've got the right people in the right positions to really, again, be the leader from that sales excellence perspective to drive the long-term growth but also using the digital tools that we're very proud of, basically to optimize other areas of the business. And I think if you look at just one example, but through the use of AI and different topics, things like the marketing side, the way that we're able to handle that and to drive that in a more efficient way, I think that's a good example. So again, it's not something new to us, but it's fair to say that we are intensifying the focus there, also because of the pretty challenging market conditions that we face. But again, I think what is important is looking for the long-term growth. Operator: The next question comes from [ David Simmons ] from BNP Paribas. Unknown Analyst: So just coming back on the gross profit. So you mentioned some impact perhaps from M&A and maybe some impact from mix. I'm just curious, given that you're trying to bring down inventory and you've done a better job on free cash flow conversion in the third quarter, is there any inventory effect on gross profit margins at all? And then maybe a little bit of a sort of outlook question, again on gross profit margins. Do you expect the sort of -- I mean we didn't really see any pressure on gross profit margins in the first half or flat year-on-year, but they're down 90 bps in Q3. Would you expect that to reverse in the quarters ahead? Or is that sort of new level based on different mix and the different -- and new M&A you've done for the next few quarters? Hans Kooijmans: David, I answer, I understand your question. And if you look historically at IMCD's numbers, there is always quite some volatility in the margin percentage between the quarters, and there is no exception in this year. And it's often driven by slightly changes in the product mix, M&A having, in this case, a bit of a negative impact on the overall margin percentage, for sure here and there on the more commoditized products. There was a bit of pricing pressure. That played a bit of a role, but that also already happened in the previous quarter. At the end of the day, it is not so much about permanently increasing your margin percentage. It's more about growing the absolute amount. So the focus of our salespeople is always linked to having an absolute amount of margin target and not the percentage target. And if this is the new normal, I don't think so, but let's see what the future will bring. Operator: The next question comes from Eric Wilmer from Kempen. Eric Wilmer: I got 1 question. Does the ongoing demand pressure and competitive pressure as European manufacturers have any implications for the level of outsourcing that they work with? Some manufacturers, I think, including today have announced new incremental cost savings measures? So could this actually be perhaps another source of outsourcing. And does the growing Chinese presence gives you leverage towards your existing suppliers potentially for a larger share of wallet? Marcus Jordan: Thank you, Eric. I mean, this very much depends on a supplier-by-supplier basis. But as I think we've spoken before, the general trend is to outsource a greater percentage. And I think that as our suppliers go through these tough market conditions, I mean, we do hear about quite some redundancies and headcount reductions that they're making. And they really then, I think, value us even more as their outsource sales and marketing partner. So yes, I think it's fair to say that in general, there are greater opportunities when there is more market uncertainty, but it differs supplier by supplier. But we're in continual discussion with not only our existing suppliers, but also potential new ones to look at how can we further expand the relationships, both geographically and across more product lines. Operator: [Operator Instructions] The next question comes from Carl Raynsford from Berenberg. Carl Raynsford: Just 2 from me, please. I just wanted to ask about your comments around food and nutrition being the most stable end market segment this year. Previously, pharma was seen as a -- I'll paraphrase this, by far the best performing segment, judging by comments from yourselves and peers in the first half. But it feels that there's been a significant slowdown in Q3 based on your comments sort of more around food and nutrition now. Is that a fair assumption? And then the second question, I just wanted to focus on the comment around decreasing FTEs over time again. Presumably, you mean decreasing the absolute number even as revenue increases. This business has always been about relationships and sales and high service levels and the AI opportunity in theory was useful for cross-selling. So could you discuss why you think you can maintain the same levels of sales and relationships alongside an increase in cross-selling and at the same time decrease the number of FTEs and able to be on the road, use omnichannel ways of working and the same service levels really? Or just considering your answer to Nicole's question earlier, is it more on the marketing side, you're considering that. Marcus Jordan: Firstly, on the first question related to food and nutrition and pharma. As I mentioned before, we did see in Q3 a bit of a softening in the pharma market, but predominantly in the India space because of the tariff conversations. So because of that and also the feedback that we had at CPHI last week, that was the reason for my comments of not including pharma in that. But I mean, overall, pharma, when you look at it across the year, it's still performing well versus last year. But as I said, a bit of a softening in the third quarter, but we expect that to come back relatively short term. In terms of the service levels, I think it's really important, again, to reiterate that, if anything, we're further investing in the commercial organization and infrastructure. So when you look at the FTE reduction, that's definitely not reducing the people out on the road. It's not the people that are interacting with customers or suppliers. It's really looking at how can we bring better efficiency through the digital tools and more of those, let's say, support functions. Hopefully, that helps. Carl Raynsford: That does, indeed. Very reassuring. Operator: The last question comes from Stefano Toffano from ABN AMBRO ODDO. Stefano Toffano: Yes. And Hans, 2 questions remaining for me. And apologies if the first one is already answered, but I missed it. Regarding the Americas, can you maybe provide a little bit of just some highlights, some light on what you are seeing there in terms of end markets and also the consumer, how the consumer is behaving. And the second question is more of a general question. I mean you obviously throughout the years have seen quite some cycles. Is there anything different in this cycle compared to the past cycles where you say, well, this might be here to stay. This will continue to have an impact or is it just one of those cycles where you say, give it or take or whatever 1, 2 years, we will definitely go back to a normal environment? Marcus Jordan: Thank you, Stefano. I think with regards to the Americas question, I think the standout there, if you look at, let's say, more soft performance, I think the 2 countries maybe that we mentioned, and it's for different reasons. I think the U.S., in general, from the demand side, consumer confidence, we see that as being soft at present. And then Brazil is one of the countries when we speak about Chinese competition and maybe greater competition in that semi specialty space in APAC and LatAm. I would say, within the LatAm region, Brazil definitely is one of the countries which has been the most affected there. And then coming on to the cycle difference, I do think that this is very different to what we've experienced in the past because we're not going through a normal kind of market cycle. I think that there are these kind of shock waves that come in through things like the tariff discussions, where we're kind of getting back to a more normal kind of market cycle as we were coming through the end of last year and the beginning of Q1 and you saw the performance, I would say, more normalizing. But then the shock wave of tariffs and then the uncertainty around it, also with the continually changing messages about what is the tariff percentage, but also what are the products included in the categories within the tariffs. So I think that we just need some kind of clarity and stability on those kind of topics. And then hopefully, we'll get back to a more normal type of market cycle. Operator: With that, due to time constraints, I will give the word back over to Mr. Marcus for any closing remarks. Marcus Jordan: Great. Thank you. And on behalf of Hans and I, a big thank you all for joining the call this morning and for your questions, and we wish you all a very good day. Thank you very much.
Remon Vos: And good morning, and thanks for joining on this Q3 call, talk about the results and the things we have been busy with over the past couple of months and maybe start with talking about CTP, a growth company. We enjoy growth. We like growth, and we see growth opportunities to continue to develop, build for our clients and secure new business. So, growth comes from supply chain professionalization, if you like. So, we have seen obviously many events over the past decade and you could maybe conclude or say that this whole supply chain becomes more professional. So, companies adapt or adjust to different market circumstances or different events, which we have seen over the past years. We benefit from that in different ways. That's one, supply chain. Second is Nearshoring. We continue to see manufacturing coming to Central Europe for the region, for Western European countries as well. But we also see growth in the markets of Central Europe. So, the consumer spending, maybe when I came here first in '95, 30 years ago, Central Europe was about low-cost manufacturing. In the meantime, of course, with all the GDP growth, which we have seen over the past decades, the local population have money to spend and they do spend. And obviously, that results in demand for property warehouse, for example, e-commerce, et cetera. We see also growth coming from defense industry. There's a lot of talk about it. But in the meantime, we've also seen some concrete demands in our German portfolio. For instance, there is multiple companies who are involved in the defense industry, and they ask for more space. So, that's good. So, we continue to see mostly from existing clients, strong demand from a diverse tenant base, it's including retailers, pet food manufacturers, semiconductor business, but also demand from automotive-related industry, maybe moving from West Europe to Central Europe to Eastern Europe or Asian companies coming in and set up business in Europe for the European market. In numbers, we signed 1.6 million square meter over the past 9 months in '25. This is 6% up compared to what it was in 2024, 6% plus. And we have done that at 6% more rent. So, our rent average per square meter per month has grown with 6%. Again, we look also forward to continue this trend. And typically, we close a lot during the last part of the fourth quarter of the year as we've done last year and the years before. So, we're on schedule to close more leases by the end of the year. Stable, consistent growth, 2/3 of our business comes from existing clients, our partners, long-term clients, loyal clients. It's also them who help us grow in new markets. We get 99.8% of all the rent which we charge is being paid, retention rate, 85% and 80% of all the new construction happens in existing business parks. Our integrated business model combines the operator. So, I'll talk about how we break down our different business lines. The operator is the income-producing part of the business. Those are all the properties which we have built over the past years is good for EUR 780 million of rental income around that number. The second activity, the developer with 2 million square meters of properties under construction with a land bank of 26 million square meter. Those are the people who are busy with building property, constantly improving the quality of the property, come up with different property concepts and innovations, make the properties consume less energy, less maintenance cost. You want generic design buildings because the building will last beyond the lease term of the first tenant, et cetera, especially nowadays with so many changes going on, it's very important that you get the property right, the location right, and to make sure that you have amenity services, utilities, electricity on site in those business parks to make sure that your clients grow. And that's what happens. The last, if you break it down and say, okay, we have this operator income-producing developer construction. The last bit, maybe most exciting part is the growth engine. We have been growing beyond the markets where we are active. Remember, the IPO we did also to raise capital to get access to capital, affordable, cheap capital to grow our business beyond, and that's what we continue to do. This year, we delivered 500,000 square meters, a bit more 0.5 million square meter. Mostly pre-leased. We do 10.3% yield on cost. And who are those tenants? It's LPP for Bucharest, Hitachi for Brno, Japanese client, long-term client, but also Zoomlion in Tatabánya in Hungary. This is one of our Chinese clients. Thank you very much to the clients for the continuous support, commitment and loyalty and thanks for working with us. We've been able to complete these projects on time and in budget. Again, end of the year normally is a lot of projects come to the market. We have 2 million square meters under construction, 2 million. Not all of that will be complete by year-end, but many will and the rest will go to 2026. When all of the stuff which we build and complete this year comes to the market and is leased, and we are another EUR 165 million of rental income at 10% yield on cost, we are well underway to hit the EUR 1 billion of annual rent by 2027. That is our target, and we are on schedule to hit that target. A couple of highlights maybe on different markets. What we see good is Czech, stable. We've been here for a long time. It's our home market, good occupancy, good returns. Poland, relatively new for us, largest economy, of course, in Central Europe, quite important to be there. We've done well, more than we planned. So, quite happy with that. Germany, as well, we see more demand over the past couple of months also turn into deals. We signed the lease contracts, which is good and also makes us positive for the future. Some of you had the opportunity to visit us at our Capital Markets Day in Wuppertal in September. So, you have also seen our projects in Mülheim, Aachen and of course, a couple of other places. So, it looks like over the past years, we have been able to put a team together. We have secured land and permits that we now can go ahead and build those properties and lease them, which we look forward to doing. Yes. So, we actually think it's just the beginning of CTP. I think it's more complicated probably to come from 0 to build 10 million or 15 million square meter portfolio than it is to double from 15 million to 30 million square meter. Let's see, we have systems in place. We have a fantastic team of people, great relationships with clients, but also with the local authority. So actually, we look forward to hit that 30 million square meter one day. We target for 2030. Let's see how far we get. So far, it looks good. Maybe a couple of things about the new markets. I wanted to talk about Italy, which is another European market, Northern Italy, where we have many clients coming from that part of Italy. We now have an opportunity to get started with some projects, which we look forward to doing, and we hope some of them will already be complete next year in 2026. So that will happen. We think it's a next logical step in the region. We obviously already active in Germany and Austria and yes, in Italy, Northern Italy, we see some good opportunities to introduce our full-service business park concept. We'll start with some smaller projects maybe, but there's also an opportunity to accelerate and to come up with a different entry strategy similar to what we have done in other countries, Germany and Poland over the past years. And then Asia, we definitely like to have a closer look at the opportunities in Asia as we think our company and our clients don't stop in Europe. They go beyond. They are often global players, and they have asked us whether we would be willing to support them in Asia and Vietnam to be exact, and we have been spending the past 12 months looking at opportunities. And we became more positive and enthusiastic about the idea of doing a project in Vietnam. So, we expect more to come from that. Don't expect huge things. We will start with one project and maybe do a second. We learn by doing with existing clients, with pre-leases, but definitely it's an opportunity, it's 100 million population, early 30s average age, so young, very productive with huge FDIs, not only from the consumer electronics industry, but also LEGO and Volkswagen Skoda have just opened up a plant or building a plant. So, many opportunities we see there, which we want to have a close look at. Happy to answer any questions. I think, I'll hand over to Maarten for now with some more details on the financials, and then I'm here later. Thank you very much for your attention. Maarten Otte: Moving on to the financial highlights. The like-for-like rental growth came to 4.5% in Q3 '25, while occupancy remained stable at 93%. The net rental income increased 15.4% to EUR 549 million as we continue to reduce our service charge leakage. The NRI to GRI ratio, therefore, improved to 97.7%, while we also continue to improve our EBITDA margin. Annualized rental income increased to EUR 778 million, illustrating the strong cash flow generation of our portfolio. The company-specific adjusted EPRA earnings increased by 13.1% year-on-year to EUR 305.2 million. While the group's EPS amounted to EUR 0.64, an increase of 7.2%. Thanks to the deliveries and net development income being backloaded to the fourth quarter, the group is on track to reach it's guidance for the year. Now looking at the valuation results. For the Q1 and Q3 results, only the investment properties under development are revalued. Valuation results in the first 9 months of the year came to EUR 802 million. Of this, EUR 385 million was driven by the construction and leasing progress on our developments, but EUR 373 million came from the revaluation of outstanding portfolio and EUR 43 million from our land bank. The total gross assets value now stands at EUR 17.7 billion, up 10.6% from full year '24 and 16% year-on-year. CTP's reversionary yield stands at a conservative 7% and we expect further yield compression and positive ERV growth in line with inflation or slightly ahead of inflation for the rest of '25. This is also illustrated by the new leases signed in the first 9 months of '25, where rents are 6% higher than the new leases signed in the first 9 months of '24, which is supported by the undersupplied nature of the CE markets and industrial and logistics space per capita is only half compared to the U.K. or other Western European markets. The transaction markets continue to recover across Europe as there's more clarity around funding costs. We expect an increase of transactions into next year, especially on the private equity side, where funds are coming to maturity. We expect to see more turnover. This will offer opportunities for us. We also remain active in the market for land acquisitions, plenishing the land bank in our existing markets, growing the land bank in countries that we entered recently like Poland, which we plan to enter like Italy and Vietnam, while maintaining our disciplined capital allocation. Our EPRA net tangible asset per share increased from EUR 18.08 at year-end '24 to EUR 19.98 at the third quarter, representing an increase of 10.5% since the beginning of the year. Year-on-year, the increase was 14%. With this NTA growth and our dividend, we delivered a total accounting return to our shareholders of 70% in the last 12 months, highlighting our superior return profile, which is unique to the real estate sector. And now I hand over to Richard. Richard Wilkinson: Our funding strategy remains centered on maintaining a stable investment-grade rating. And we are very happy that our improving credit metrics were recognized by Standard & Poor's with their upgrade in September. We focus on ensuring access to multiple sources of liquidity, meaning attractive funding is available at all times. We have a geographically diversified investor base, now further strengthened by Asian investors added in 2025 and a growing share of unsecured debt towards our target of 80%. Thanks to our highly accretive developments and proactive debt management, our interest coverage ratio increased to 2.5x. Our normalized net debt-to-EBITDA remained stable at 9.2x, and our loan-to-value stood at 45.2%. We expect loan-to-value to return to our 40% to 45% target as our development pipeline is completed and revaluation gains are fully booked. As presented during our Capital Markets Day, with our market-leading development yield on cost of over 10%, every euro we invest in our pipeline increases our ICR and decreases our net debt-to-EBITDA, allowing us to grow at our 10% to 15% annually while improving our overall cash flow credit metrics. This was also highlighted by Standard & Poor's on their upgrade of our credit rating to BBB flat with a stable outlook in September. Moody's have a positive outlook on our credit rating, confirming the positive trajectory of our ratings. In the first 9 months of 2025, we signed EUR 1.7 billion of unsecured debt to fund our organic growth. This included EUR 1 billion in dual-tranche bonds issued in March, an inaugural JPY 30 billion Samurai loan equivalent of EUR 185 million and a EUR 500 million syndicated term loan facility signed in June, which had commitments of over EUR 1.2 billion. Together with the 6.5-year, EUR 600 million bond we issued in October, this continues to demonstrate our ongoing strong market access. We continue to actively manage our funding costs. And over the past 12 months, we have renegotiated or repaid EUR 1.6 billion of our most expensive bank loans, including the prepayment in June of EUR 441 million of expensive unsecured debt. CTP maintains a conservative debt profile. The EUR 272 million of bonds maturing in June and the EUR 185 million maturing in October were both repaid from available cash. Looking ahead, maturities remain limited over the next 3 years with a EUR 350 million bond due in January '26 and a EUR 275 million bond in September '26. Our cash position stands at EUR 1.1 billion, including our EUR 1.3 billion RCF, our liquidity totals EUR 2.4 billion, more than sufficient to meet our cash needs for the next 12 months. The average debt maturity stands at 4.8 years and the average cost of debt at 3.2%. This represents only a minimal increase compared to year-end 2025 as our current marginal cost of funding remains below 3.5% for 5-year money. We remain confident in the outlook for CTP. We have a strong tenant lead list. In addition to what we have already pre-let within our development pipeline, we have 151,000 square meters pre-let for future projects for which construction has not yet started. We continue to see rental growth across all of our markets, supported by the nearshoring trend and ongoing e-commerce growth, particularly in the CEE region. Our tenant-led development pipeline remains highly profitable. With our industry-leading yield on cost of over 10%, we are able to deliver sustainable and profitable organic growth, while maintaining a robust financial position. We confirm our EPS guidance of EUR 0.86 to EUR 0.88 for 2025, which due to an intended acquisition in Romania not proceeding, is now expected to come in towards the lower end of that range. Thank you for your attention. We now welcome your questions. Operator: [Operator Instructions] Our first question comes from Marios Pastou from Bernstein. Marios Pastou: I have two questions from my side. So, I see leasing is up over the first 9 months. It's marginally down in Q3. I think you mentioned that you want to have a good final quarter, but I also see that last year, that final quarter was also very strong. So, do you expect to be up in terms of leasing volumes for the year as a whole? And then secondly, can you just remind us why the intended acquisition in Romania didn't proceed as planned? Maarten Otte: I will take the last question on the Romanian acquisition first, and then I'll let Remon comment further on leasing. So, it comes back to antimonopoly reasons where there were two restrictive conditions for us. So, we decided not to go ahead with it. We see enough opportunities in terms of acquisitions across Europe. We continue to buy land. So, we always do also relative capital allocation where it doesn't make most sense for us. In the end, with the restrictions here, it didn't make sense. So, we decide to prefer to invest in other opportunities. Operator: Our next question comes from John... Remon Vos: We didn't answer the second part of the question with regards to leasing. If you like... Operator: Apologies. Continue. Remon Vos: No, I can give some color on that. Anyway, with reference to what Maarten just said, well, even if we wanted to buy, we can't buy, because that is very complicated with the competition and antimonopoly whatever, which actually is not bad because there is other places where we can invest money. That's why I think, we waste a lot of time on that P3 acquisition, which didn't happen. But as I said, at the end, maybe it's even better without. With regards to the leasing, yes, as stated, we continue to see demand and that will turn into deals over the rest of the year. And yes, which is good. So that is often the case that fourth quarter is more takeup than first or second. I don't know exactly why that is, but it has been historically like that, and we think that trend will continue for '25. Yes. So, we did sign some leases just now in Poland, which is good. And in Romania as well, in Germany. So yes, overall, relatively positive, I would say, I think, and we are on schedule to hit the occupancy target for end of '25. Operator: Our next question comes from John Vuong from Kempen. John Vuong: On Vietnam, you said that you -- well, that we shouldn't expect huge things with only one or two developments. So just trying to understand here, over what time line do you expect to start these developments? And if you're really excited about the opportunities in the country, why only start with one or two and not with like a park strategy like you are in Europe? Remon Vos: Good question. Well, it's definitely going to be a park concept. So, we think of using or doing the identical thing or similar thing to what we do in Europe. So, park concept and business park, full-service business park with different property types. But -- so that is definitely the case. But you need to also get ready in terms of setting up a team. And so, we are now in the middle of recruiting people for our Vietnam office or Vietnam team. And that will take a bit of time. So, that's why I think, honestly, the recruitment process has started. We have met people. People came over to visit us in Europe in order to make themselves familiar with what we do, how we do it to get to know other people in the organization. So, it's also part of the recruitment process. And yes, it takes time until these people will actually join, which some of them will join in Q1, beginning of next year, Q1 of '26. And simultaneously, we have agreed an option on four land sites, and that would give us the opportunity to develop around 300,000 square meter. It will be very nice. And I think some of that we can start next year in '26, but those buildings will come to the market in 2027. And so, that is what I think now. So, that means 300,000 square meter, EUR 150 million. I think construction cost will be a bit lower in Vietnam, what you see at the moment it's going to EUR 500, it's more going to be like towards EUR 400 per square meter. And we think of, of course, doing that at 10% plus yield on cost, so above 10% yield on cost. But that is the base plan. And maybe we see opportunities to accelerate and to grow more through some acquisitions as we have done before when we entered a new market, that we do our organic growth, buy land and develop or maybe here and then buy something which would help us get a bit more volume. But yes, so that is how we see it now. So, we will need time to get familiar with the market, to put up a team, to get started. And we want to do that carefully. And -- but once we get going, so from '27 onwards, maybe there's an opportunity to do 200,000, 300,000 square meters per year, maybe. The market is big enough by 100 million people, there is hardly any stock. There are, of course, a couple of players, that's GLP or SLP, they have been -- they are Frasers, Mapletree. It's not -- so there is, of course, a significant amount of developers. But if you look at the stock compared to the amount of inhabitants, 100 million people. And if you look at all the opportunity, then the market is very -- yes, it's at the beginning. And as I explained, demand coming from our clients, we think it's a good opportunity to proceed with. But that's how I can -- I will continue, of course, to update you on how far, how quick we can get. But that's for now how I see it or how we see it. John Vuong: Okay. And just on the 10% yield on cost, is that net of land leases, given that you cannot own land in Vietnam? Remon Vos: Correct, it's 50-year leasehold or concession. So, what if we calculate as very primitive and as very simple. So, we add the concession cost for 50 years. Then on top, we add cost for everything related out of pocket to develop the property, so infrastructure, construction costs and all of that. So yes, that is included. And we think yield on cost in Vietnam is more towards what we do in Serbia. So, well above the 10% yield on cost. John Vuong: Okay. Great. So right. Remon Vos: It's included. Richard Wilkinson: But John, so in Serbia -- in Vietnam, like Remon says you're looking at kind of like Serbian type of relationship where you're developing at trying to get to 12% and revaluing 8.5%. Operator: Our next question comes from Suraj Goyal from Green Street. Suraj Goyal: Just a quick one. It's on leases again. So the new leases signed at rent levels 6% higher than last year. But it seems lower in Serbia, Hungary, Romania and Bulgaria. I appreciate there may be some nuances here, but would you be able to just share some color as to why this may be the case. Maarten Otte: That's always what we say. Some years will be up, some years will be down. It depends a lot on which leases you are signing, especially for the smaller markets, it depends a lot on which projects are coming online and when they are exactly coming online, in which quarter you are signing the leases. To be honest, you always see volatility. Last year, for example, we did less leases in Czech. This year, Czech in terms of absolute amount of leases is doing very well. Same with what we had in Hungary. Hungary, we did last year, a bit more leases, this year, a bit less. That's the normal business cycle. You can lease the space only once. You try to lease at the highest rental levels possible to what we think our clients which add value for us long term in our park model. So, it really depends on what is the opportunity building set you have for leasing. So, there is no -- if you look across the markets, there is no structural trends in either one of them that is really for us a point of concern. Some markets are better than worse. That's year-on-year. Overall, what you see is, we do more leases, we do them at higher rents, and that comes really back to the demand drivers, which are long term, and they won't change from one day or another. The demand drivers that were in place last year are still in place, and it comes back to the nearshoring, that comes back to the growth in domestic consumption, et cetera. But it depends a lot on which quarter you sign with specific deal. That's always been the case also if you look back historically. So overall, that's what Remon also said, we are confident in our occupancy targets to hit by year-end. And the leasing is progressing well towards that. Also, that's why we confirmed basically the guidance for our deliveries between 1.3 million and 1.6 million square meters for the year. So, we are very well on track. And with the amount of hope that we are doing and the conversations that the team on the ground has, we have confidence in getting there. And some markets will contribute a bit more than others, but that's normal. Operator: Our next question comes from Steven Boumans from ABN AMRO, ODDO. Steven Boumans: I have two. So the first one, a follow-up on the expected leasing numbers. Do you think that the average rent per square meter will rise above the EUR 6 per square meter per month for Q4? And what about '26? Maybe that's the first one. I do another. Remon Vos: It would be good if they are above EUR 6. In some markets, they will be. I don't know, maybe Maarten has the average number. Where do we see rental growth? We see a lot of rental growth in the German Deutsche Industry portfolio. Remember the old buildings we bought or older buildings we bought. Of course. Why is that? Because we bought relatively cheaper. When we bought, the rents were quite low, EUR 3.5, so let's say, EUR 42 per year. And that we see that going up to, yes, EUR 70, EUR 60, EUR 70. That's true. We have to also invest in those big properties. But just yesterday, we did a deal at that kind of number. So it's around EUR 6 per square meter for the Deutsche Industry. I think we see rental growth throughout -- also Romania because the other question was that, we do less in Romania. I don't think so. We have seen a lot of rental growth in Czech. So yes, Czech, I would think it's EUR 6. Maybe, Maarten, you can add some on that, whether it's EUR 72 or EUR 70 per year on average, maybe throughout the portfolio. I mean, big box logistics in Bucharest, you will not get to EUR 6 for sure, but something smaller in Czech, you will definitely get to EUR 6. Poland, you will not get. Although the -- by the way, the small stuff we do in Warsaw, so we have SBU, small business units. Obviously, that is higher than EUR 6, but those are small units of 1,000, 2,000 square meter units. So, lower than 5,000 square meter units. The square meter price will be significantly higher than a large 10,000, 20,000, 30,000 square meter warehouse building. So, I think there is also the difference in the rent per square meter per month. But that is going quite well, the smaller units, which also, yes, we like because there is good demand for it as part of the -- what's going on in the region of Central Europe, and of course, you have small and medium-sized companies, that segment is growing. But there's also big multinationals taking smaller units here and there. Yes, so then they pay more rent. Maarten, do you have some more details on the average? Maarten Otte: Yes. You can see that also in the presentation. If you look on -- Steven, if you look on Slide 10, you see exactly the rents that we are making per country. Whether we in the Q4 will be above EUR 6, like Remon said, it depends a lot on which market we are signing. If we are signing more in Czech, yes, we will be above EUR 6. If we sign more in other markets, it will be a bit harder. But that's normal. So what we are looking is what is the real underlying rental growth country-by-country. And that's ultimately -- that comes back to the 6% that we are showing. And smaller countries, as I said before, it depends sometimes a bit on location, because whether you're leasing the capital city, whether you lease indeed, like Remon said, smaller units or bigger units. So in Poland, we have, for example, seen the increase there. So, the leases which we did this year were on average at EUR 5.50. But that includes some smaller stuff, includes, in some cases, some extras that we do for tenants. But on average, Poland, we see some rental growth coming through. Romania as well, if you look an underlying, while if you look maybe to the absolute figures, they look flat, but that because there is a big unit again in this year's numbers. So big units typically pull it slightly down. But if you look -- and I know it's harder for you than for us, because we look at it on a unit-by-unit basis when we are doing the deal, when the leasing team sits down to speak to the tenant, we look, okay, what is the ERV of the unit. We continue to track towards that. And then, when we -- we look on that detailed level, we continue to see the rents creeping up in countries like Romania, in countries like Poland, in countries like Serbia, et cetera. Steven Boumans: Okay. To ask a bit differently. So -- and to fully understand. So, like-for-like growth per country is, let's say, inflation like, maybe a bit more, but let's say, inflation. And then the mix you don't want to commit that, that will change materially as of today. So, the mix should be broadly similar. It could be a bit better or a bit worse. Is that correct? Maarten Otte: Yes. That's correct. Look, what we see is -- what we said is we expect market rental growth indeed to grow in line with inflation. The mix depends indeed where we sign leases. That's hard for us to commit. If you look on a year or 2-year basis, yes, we can give a rough split, but not on a quarter-by-quarter. That doesn't make sense. That's not also how we run our operations. So, that's harder to determine. But the underlying rental growth remains there, and that's also the confidence we have, and that's also -- you see reflected in the like-for-like rental growth coming through in the P&L. So, it's not only the market rent. It's also if you look to the like-for-like when we are really capturing the reversion of leases coming up for expiry. Richard Wilkinson: Yes. Steven, I think that the big picture is, we see increasing demand, and we see that increasing demand at higher rent levels pretty much across the markets in which we operate. If you look at the more granular data, you will find something that looks a little bit worse. But the overall trend is the one that we would try and highlight, which is continuing strong growing demand and that at higher rent levels. Operator: Our next question comes from Vivien Maquet from B Degroof Petercam. Vivien Maquet: I hope you can hear me. I have two. Maybe on the first one, it's a follow-up on Vietnam. Just wanted to understand a bit what will be your target in terms of tenants? I would assume that you will mostly look for existing tenants that you already have in CEE for the first project. And secondly, what level of pre-let will you feel comfortable before launching such a project? Remon Vos: Thank you. Yes, we hear you loud and clear. Good questions. Indeed, so what we want to do in Vietnam is very similar to what we do in Europe, full service business parks, whereby we offer a variety of different property types. In Vietnam, they use the word ready-built factory and they use a ready-built warehouse, and they refer to build-to-lease. And we call it a little different. We say CT box, CT Flex, CT Space, but it's similar. So let's see -- let's test the market. We want to go out with a pilot. Yes, around 50% pre-lease. I think that is the kind of thing. But as I explained, the four of the locations which we have secured, you could do 300,000 square meters of total lettable, say, assume that you can start construction mid of next year, second half next year. You may start initially with 100,000, 50,000, let's see, in one location. And locations, I referred to maybe also a bit more to explain. And we are -- we do a paper. I think we have a paper, Vietnam paper, which we can share with you. It's going to be online. So, also to get a bit more background on what is the economy like, FDI, what is the market like and why do we see opportunities and where do we see opportunities. But to explain a little bit, we could talk about one location close to Hanoi in the north of Vietnam, which historically, it's a concentration. There's a lot of people living there. As I mentioned, total 100 million people in Vietnam. So in that part, in the northern part, a couple of dozen million people, so it's quite large. But more importantly, there is many of our clients with different activities. So, if you refer to the Vietnamese semiconductor industry, companies like Wistron or Foxconn, who are our clients, they have facilities in that part of Vietnam already. Historically, because they have a China Plus One policy, many of those, which means that not all of the manufacturing facilities are in Vietnam or in China, some in China for Chinese market, some outside of China for South Asian market. And that is -- those are Taiwanese clients who we have been working with for more than 20 years, especially in the Czech Republic. Anyway, those are there, and they have suppliers and subcontractors and all of that ecosystem. And that's one of the target groups, which we would, which we talk to and say, okay, yes, we will build properties in and around Wistron, Foxconn facilities in the region of Hanoi. But in Hanoi, obviously, you can imagine there's also consumer spending. So there's also FMCG, there is a need for warehouses. There is e-commerce. There is all kind of that. So, our clients who are involved in 3PL logistics -- involved in 3PL logistics or supply -- so that's the kind of ecosystem of the clients we have, which we will plan to work for in Vietnam. So yes, indeed, mostly existing clients, but could, of course, also be new clients. But there's many of our existing clients who have facilities in Vietnam or who are considering opening up facilities in Vietnam. Vivien Maquet: Thanks very clear and looking forward for the Vietnamese paper. Then second question is on, I think that you commented that you expect very strong ERV growth for H2. As I remember, we don't value the standing assets in Q3. So just to understand in which country you expect the biggest ERV growth? And how is it based to your recently signed lease? I think that we comment a bit on the rent level left and right, but just wanted to get from a valuation perspective, when do you see the biggest discrepancy between what you -- at what level you are leasing and what the valuers is assuming as ERVs? Maarten Otte: Yes, sure. So, what we said is that, we expect to grow it in line with inflation or slightly ahead of inflation, the ERVs. And that comes back to where we are signing the rents as we are continuing. As I said earlier, to sign the rents 6% higher. We also have indexation coming in. So, we see market rents growing in line with inflation or slightly ahead. If you look on a country level, there will be less ERV growth in Czech. In Czech, the opportunity for us, we have commented on that before, is more to capture the reversion because in Czech, we have one of the largest reversionary embedded potential as the market rent there already has grown quite a bit. And of course, with our leases, when they are 10 years or 15 years, it can take some time a while before you can capture that. So, you need to go through the world. And we expect more ERV growth in countries like Romania, for example. So, the more upcoming markets. We'll also see some ERV growth in Poland. In Poland, there will be really a divergence between the new and the old. There has been different build quality. As you know, we are a long-term owner. We commit to locations. We build buildings that will last because we have the commitment to own them long term, both vis-a-vis our tenants, but also vis-a-vis our municipalities. While in the past, the Polish market was more dominated by trader developers. So, what you see there is more a divergence where you might have given more incentives on really older product or lower quality product. While if you look to new product that is coming to the Polish market, you can lease at good rates, and that's what you also see reflected in the rental growth that we are doing. So, there will also be some ERV growth. But in general, also across some other markets like Serbia, we expect some ERV growth to come, Bulgaria. Hungary, I don't think so. Hungary is a bit more vacancy at the moment, especially around Budapest, but there is also a split between the region and Budapest and the other areas of Hungary see a bit stronger rental growth than Budapest at the moment. So, there's always those local factors. But on average, we expect to grow in line with inflation or slightly ahead of inflation. Vivien Maquet: And if I may squeeze a very quick third question. You could deliver up to 1 million square meter in Q4. Just wanted to understand how much of new projects you expect to launch in Q4? Keeping, I would say, the 2 million square meter of development pipeline, I would say, unchanged? Or could it be split a bit more into the beginning of 2026? Maarten Otte: It will be relatively unchanged. I don't expect our pipeline to materially change. It comes also back to next year because for next year, as you know, we guide to 1.4 to 1.7 million. So we also need to start those projects. Simple projects will take us 9 to 12 months. If you have a simple logistics building. In some cases, you can even do it a bit quicker. But there are more complicated projects if you do some extras for tenants, et cetera. So, we will always run a pipeline, which is slightly ahead of next year's deliveries, taking into account the time to complete. Operator: Our next question comes from Frederic Renard from KC. Frederic Renard: Just two questions on my side. The first one is on the reversion, which has come down 120 bps Q-on-Q since Q2. Can you comment maybe on that? And then second question is on occupancy rate. You are still at 93% versus the target of 95%. I see that client retention is at 82%. It's a good level, but it's for me the lowest figures you had over the last 2 years. So, is there more downside risk on occupancy rate than upside risk? And then have you any specific concern on some countries? Maarten Otte: So regarding the reversion, that's partly driven by the fact that we don't reset ERVs in the third quarter. In the third quarter, as you know, we don't revalue our portfolio, only the developments. So, if you don't reset your ERVs and we are capturing reversion as leases are coming up for maturity, naturally, the reversionary potential comes down in those quarters. It's more a mathematical effect than anything else. Then your question regarding occupancy, yes, we remain stable around 93%. And that's also what we explained during the Capital Markets Day. The two main markets which are below are the two market entries, Germany and Poland. Poland, we expect end of this year to be more around 90%. And then into next year, we will keep up to the 95% target. Same with Germany. So that's part of the market entry strategy. We target to be around 95%, especially for our mature markets. In some markets, you even would want to be a bit above. And why do we target around the 95%, maybe also good to remind you, that's really to have the growth opportunity with existing clients. We want to have always some space available to grow with existing clients in our existing parks, because that gives us -- if a tenant comes to us and say, I want to expand in an existing park, that gives us much more negotiation power than when you have to build a new unit. So, that's why we always target around 95%, and that's why our pipeline deliveries, we target to be 80% to 90% to always have that space available to grow with existing clients. If you also put it in perspective, on a yearly basis, we will sign more than 2 million square meter. If you look to the occupancy, if you take it from our portfolio, if you take 5% of a portfolio of 30 million square meter, that's 700,000. We leased 3x as much in a year. So actually, yes, we have a bit of occupancy, but that gives us an enormous amount of flexibility. And given the amount of leasing that we are doing, that's not a concern for us. It's just an opportunity to have those long-standing client relation and to leverage that to drive rents higher. Then on your last question or last part of your question, which was the retention rate. Retention rate was indeed slightly lower this year, correct. No fundamental issues, but there are, of course, sometimes you can have individual tenants who decide to leave. For example, if 3PL has a client and they want to consolidate or they want to move to a different location, they might terminate. It's not a reflection of your business, but it's more a reflection of sometimes the change in supply chains. Of course, we try to keep all our tenants. Sometimes actually, also, for example, we see in Germany, it's sometimes better to replace tenants if we really want to capture that upside potential, for example, in the Deutsche Industry portfolio. So, there we are sometimes actually happy when people move out and we can replace them for a higher paying tenant. So it's always a case-by-case analysis, of course, that we are doing. The absolute figure is slightly lower, but there is no fundamental underlying driver, which would mean that the rent retention rate will be lower going forward. It depends on the leases we signed in the quarter. Remon Vos: Yes, I can confirm that. So, I can just confirm Maarten said some of the leases we had to terminate in Germany, because we -- yes, the relationship was not great, and we felt that we would be better off with a new tenant in that building, doing some refurbishment and get more rent out of the property. So that happened in Germany and is still happening while we speak, which is part of cleaning up the portfolio in Germany. And also with regards to vacancy, yes, we have been at around 93%, 95%. Sometimes also, you don't need to be in a rush to lease it immediately. Sometimes certain areas need some time for the market to absorb some space. And then I'd rather have 6 months of vacancy cost and then do a better deal as pushing down on the rents. And so, we also need to balance and understand the market. And if there's no demand, there's no need to push, then you'd rather wait until there is demand or until the market has been able to absorb the space, which was available. But I think overall, also, we see from a supply side that yes, here and there, some of our peers and colleagues stopped or slowed down or there is no land or things like that, which is good. So long term, you -- we believe that these properties, which we have built are good quality properties, and they will continue to generate and produce income, which values may go up and down, it depends on the interest rates and so on and so on. But the income from the property so far has always grown, and we continue to see that. And that is more important to build the cash flow and to make sure that we create this income in time at the correct level. So yes, you play with the supply and demand and balance around the 93%, 95%. But yes, not huge. And overall, good, we are gaining market share, which is good, which also later on give us more opportunity to grow rents. It's good. Frederic Renard: And maybe just last one on my end. Can you remind us the size of the acquisition in Romania that you didn't do? What was again... Maarten Otte: The quantum of investment was around EUR 250 million. Operator: Our next question comes from Eleanor Frew from Barclays. Eleanor Frew: A few questions go one by one. So just to confirm, was the Romania acquisition explicitly baked into your guidance? And is the acquisition not happening going to impact your GLA target for the year of 15 million square meters? And moving forward, do you have any annual acquisition assumption guidance we could use? Maarten Otte: In terms of GLA, that's mostly driven by our development. So, we confirmed our guidance on terms of development between 1.3 million and 1.6 million square meters, which means indeed, like Remon already mentioned, we will deliver nearly 1 million square meters in the fourth quarter, which will bring us probably rounded towards 15 million, whether it's exactly 15.0 million or whether it's 14.9 million or 14.8 million, we'll see. It depends more on where we end in that range of the deliveries. That's ultimately the key one. So, that's with respect to the GLA target. If you look to acquisitions, no, we don't guide for a specific amount of acquisitions, because it's really opportunity driven. If we talk land, yes, we will do each year around 200 million, 250 million, in some years, maybe 300 million of land. Because that's a lot of individual plots and that as I said, it's part of replenishing the land bank in some of the existing markets, but also growing the land bank in markets which we entered recently or plan to enter. So, that is a more stable acquisition pipeline on the land bank side. On the standing assets, it's really opportunity driven because, yes, we like to do acquisitions, but they need to make sense in capital allocation. So, that's why we don't guide for a specific target. We will be there opportunistically. We are not the ones who want to pay a full price. We want to do things which make strategically sense for us. We can do things off market. That's much more our sweet spot in terms of M&A rather than committing and then forcing ourselves to buy 600 million of standing property per year, that will not drive shareholder returns for us. We need to be focused on what makes sense, where is pricing realistic and where can we add value. Because we are not an investor in buying simple core product, there needs to be value-add opportunities. Richard Wilkinson: Yes. And I think, Eleanor, you asked if the Romanian acquisition was part of our EPS guidance for this year. Yes. And that's also why we say that as a consequence of the Romanian transaction, not happening, we now expect to be at the lower end of our guidance range. Eleanor Frew: Great. Then on the reasoning for that portfolio falling through, does that impact your growth plans otherwise in Romania, i.e., is that region now saturated for you? And is there a risk on future permits maybe? And then on top of that, are there any other markets where you have a position that could prevent you from acquiring in scale? Richard Wilkinson: No, I don't -- it won't affect our ability to continue to grow organically in and around our existing parks by land to start new parks. So, that we don't see that as an impediment to continuing to grow our business in Romania through 10% plus yield on cost developments. And we don't have any other market where we would think that we would have a problem. Operator: [Operator Instructions] Our next question comes from Wim Lewi from KBC Securities. His question is, on Italy, can you give more details on tenants targets, greenfield versus brownfield? What is your SQM GLA targets for the next couple of years? Will you consider buying a standard asset portfolio? Remon Vos: Yes, thanks for the question with regards to Italy. I don't know how you see it, Maarten, but I think it's a bit too early. We don't go -- we don't disclose too much details there. What we can say is that, we have been looking at Italy for the past years. And we -- as we communicated back in 2021, when we did our IPO, we said, okay, we would like to go to Western European markets, which we said initially, we're going to look at the Netherlands and Germany. Germany worked out well. Poland, less. Happy with the ALC property in Amsterdam, which is -- there's been some good take-up, and that's okay. But besides that, we have done very little in the Netherlands. No, it's not the place where we see opportunity. So, we put -- we slow down. But we always communicated we wanted to do more in Western Europe. And Italy has been on our wish list. We now see a good opportunity to enter. I think we are ready for it in terms of -- we have the money, we have the capacity, we have the team. But more importantly, we have also identified the opportunity. So, what we have done in the meantime, we have established a small team of people. We currently work on securing land. And yes, and it's not in any of our pipeline projects. So, it's the base plan, the 26 million or 20-something million square meter land bank. There's nothing in Italy. It doesn't include Italy, so it's on top. But I think we will keep the good news for later. That's what I think, Maarten, let me maybe add or comment on anything you want to share at this moment. Maarten Otte: Yes. So, we'll announce the transaction when it's there. We always announce it when we have -- when we close something. But in general, we are looking at broader opportunities. Where we add most of the value is through land, whether that's greenfield or brownfield, we can do both. It comes back to what is the location. That's a key thing. Whether it's greenfield or brownfield is not a massive factor in that. It's just a bit different in terms of, do you have to take in account demolition costs, et cetera. We are looking for the right locations in Italy, which can give us a kick start. And we are looking for sizable opportunities where we can develop our park model, which is important for us. So, not only small land plots, but more sizable ones in line with our strategy. What we see in opportunities in Italy is a couple of things. There's a very strong manufacturing base. And if you look to our portfolio, we do a lot in manufacturing. Roughly 50% of our portfolio is manufacturing. So, we see opportunities there as many of our peers here in Italy are more focused on logistics. So, that's an opportunity for us. We see some opportunities in more some smaller business units closer to town. Italy has quite a lively SME environment. So -- and then, you know what we have done, for example, in Brno. So, you can think of doing certain of those projects here in Italy. So that's the opportunities that we see and that is the land plots we are looking for. And as part of each market entry, we are looking at, of course, a broad set of opportunities. And hopefully, we can update you later this year more specifically. Operator: Our next question is from Alvaro Mata from Santander AM. Their question is, the 93% occupancy looks a bit lower than others. I wonder if there is a specific reason for that. Any explanation would help. Your LTV at 45.2% continues to be a bit higher than your target of 40% to 45%. When shall we expect a decline and to what level? How important is this for you? ICR at 2.5x is in the low side. Do you expect an improvement in 2026? Remon Vos: No, the LTV is not of our concern. And the vacancy is around 93%, 95%. We talked about it before. We're not going to repeat. Also historically, has been around the same number. We wait for a good moment to do good deals at higher rents. And for the rest of the questions, I refer to what has been previously discussed. Thank you. Richard Wilkinson: Yes. Regarding the ICR, I think we reported earlier that we already took most of the repricing from the higher interest rate environment that we have today compared to the environment 2019, 2020, 2021. We see our ICR bottoming out at 2.5x. That's also what the rating agencies are saying, and we've consistently highlighted that everything that we invest in developing a 10% plus yield on cost is incremental to our ICR. That's also one of the reasons that the rating agencies are comfortable with where we are. And despite that ICR of 2.4x at the time, Standard & Poor's gave us a rating upgrade. So no, we don't see any problem with those ratios, and we expect that to improve over time. Operator: Our next question is from Jesse Norcross from ING. The question is, how big is the defense spending opportunity in Europe and Germany for the logistics sector and for the CTP in particular? What kind of timeline? And on Moody's, how confident are you of getting ratings upgrade there? Or is this not a priority at this point in time? Maarten Otte: So rating upgrade is always a priority. I think -- and we are happy with the upgrades we got from S&P to BBB flat, which I think reflects our ambition. We want to be a solid BBB flat company. We think that reflects the underlying of our business with the stable cash flow that we are each year able to generate, where Remon also referred to. We target to have a rental income of EUR 1 billion by 2027, which gives us an enormous amount of stability for the group, and a very good coverage basically of our ICR and net debt-to-EBITDA. So clearly, it's a priority for us to also work on Moody's. I cannot speak about the time line. We plan to deliver on the plan like we always do. Moody's has given us a positive outlook, but it's ultimately up to them, of course, to take the action. We work as hard as possible to get there. And then, I'll let Remon comment on the defense opportunity. Remon Vos: I don't know. Operator: Our next question is from [indiscernible] from ESP. Do you maintain the target level of deliveries for FY '26 within the 1.4 to 1.7 mn SQM range? Maarten Otte: Yes, we do. We have confirmed the guidance we have given at the Capital Markets Day. No change. We are on track for this year. So, we are also -- with the leasing we are doing on track for next year. Operator: Thank you. We currently have no further questions. So, I'll hand back to the CTP management team for closing remarks. Maarten Otte: Thank you all for attending. If there are any follow-up questions, don't hesitate to reach out to us. We are also doing quite some of the conferences and roadshow in the coming days. So, we're always happy to continue the dialogue with our investors. So thank you for now.
Operator: Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies Third Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Karina Calzadilla, Head of Investor Relations. Please go ahead. Karina Calzadilla: Thank you, Jacinda, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Third Quarter 2025 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the third quarter of 2025. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investors section in our corporate website. During the call, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements, depending on a number of factors, which are set forth in our public filings with the SEC and listed also in this presentation. In addition, non-GAAP financial measures will be discussed during the call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and Co-Founder; and Kyle Piskel, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad? Chad Robins: Thanks, Karina. Good afternoon, and thank you for joining us on our third quarter earnings call. I'm pleased to share another quarter of strong execution and accelerating momentum across the business. We delivered meaningful wins, sustained growth and further strengthened our financial position. Let's now turn to Slide 3 for a summary of this quarter's highlights. The MRD business delivered major profitability milestones. This quarter, adjusted EBITDA was $7 million, reflecting strong sequential growth. Also this quarter and ahead of plan, the MRD business became cash flow positive, a significant achievement that underscores the strength and scalability of our model. MRD revenue grew 52% year-over-year, driven by robust increases in clinical volume and ASP. This growth reflects expanding clinical utility and broader integration of MRD testing into patient care. Clinical validation continues to deepen. The NCCN guidelines were updated again this quarter, this time in CLL, incorporating MRD-guided treatment options, providing more specific direction on testing frequency and supporting clonoSEQ ID testing at diagnosis. Operationally, we're scaling efficiently. With clonoSEQ now running on the NovaSeq X Plus, we're realizing meaningful cost efficiencies and expanding gross margins. Total company sequencing gross margin improved 10 percentage points year-over-year to 66%, and our focus on operating discipline is paying off. Operating expenses remained stable sequentially, while cash burn continued to decline. Through the first 9 months of the year, we reduced cash burn by 51% versus last year, ending the quarter with a strong cash position of $217 million. Given this performance, we are again updating our full year guidance to reflect a higher MRD revenue range, lower operating expenses and a reduced annual cash burn. Kyle is going to cover the details shortly in his prepared remarks. Let's now turn to Slide 5 for a deeper look at the MRD business. clonoSEQ clinical revenue had impressive growth of 83% year-over-year and 18% quarter-over-quarter. We saw broad-based volume expansion across all reimbursed indications, delivering over 27,100 tests, up 38% versus prior year and up 7% sequentially. By indication, multi myeloma remained our largest contributor, accounting for 42% of U.S. clonoSEQ volume, followed by ALL at 32%, CLL at 10%, DLBCL at 9% and MCL at 5%. This volume growth continues to align with our strategic priorities. First, blood-based testing now represents 45% of volume, achieving our full year goal ahead of plan. And in multi myeloma, blood-based contribution reached 24%, up from 21% last year. Second, community-based testing represents 31% of total clonoSEQ volume with increasing contribution from Flatiron integrated accounts. Third, NHL testing expanded to 15% of total clonoSEQ volume, led by DLBCL and MCL sequential growth. Fourth, ordering HCPs grew 38% year-over-year to more than 4,100 with sequential growth of 9% in academic centers and 12% in community practices. And finally, we tested over 19,400 unique patients in the quarter, a 41% increase year-over-year and 8% sequentially. In addition to volume growth, we saw continued improvement in ASP with U.S. clonoSEQ ASP increasing to over $1,340 per test, reinforcing our confidence to achieve full year average ASP of $1,300 or higher. During the quarter, we achieved several policy wins, including our first large commercial payer coverage in DLBCL and 2 major payers in CLL, bringing our total CLL covered lives to over 260 million. We continue to improve cash collections and expand our reimbursement footprint with new payer contracts. Overall, all ASP metrics and contracting initiatives are trending in the right direction, positioning us well to reach our long-term ASP target of $1,700 to $1,800 per test. Let's now turn to Slide 6 to review progress on EMR integrations. Our EMR integration efforts continue to gain momentum across both academic and community settings. These integrations are a key driver of volume growth and support 2 other important strategic initiatives. The first is to build a scalable moat around clonoSEQ, protecting against new entrants and minimizing disruption from account turnover. And the second is to maximize clonoSEQ's usage across the care continuum by directly embedding into EMR-driven workflow, which translates into more tests per patient. Since last quarter, we've completed 11 integrations, 7 academic and 4 community with 6 of our top 10 accounts now integrated. Among accounts integrated with Flatiron last quarter, volume in these accounts grew 17% sequentially and now represent 24% of our community volume, up from 20% prelaunch. We're also leveraging integration to enable serial testing plans with many ordering providers at Flatiron integrated accounts selecting recurring testing at 3, 6 or 12-month intervals. Importantly, nearly 40% of our commercial tests this quarter came from integrated accounts, which contributes to -- which continues to outpace growth from nonintegrated accounts. Looking ahead, we plan to further expand our EMR footprint and expect continued acceleration from integrated accounts with fewer ordering discrepancies and deeper account retention. Let's turn to MRD Pharma on Slide 7. Our MRD Pharma business delivered a solid quarter with revenue up 11% year-over-year, including $6.5 million in milestone revenue. Multi myeloma remains the largest contributor to our biopharma portfolio at over 60% of our active trials, followed by CLL at 17% and ALL at 9%. We ended the quarter with a backlog of more than $200 million, reflecting strong partner demand and sustained program activity. clonoSEQ is most well established as an endpoint in multi myeloma, where the ODAC and CHMP votes reinforce its role in assessing treatment response and supporting accelerated approvals, particularly in the frontline setting. The momentum is now extending to other lymphoid cancers and driving diversification across our portfolio. Endpoint qualification efforts are underway in CLL and DLBCL, which are already translating into results. 2025 CLL bookings are more than twice what they were last year. Currently, the FDA is accepting MRD as an endpoint on a case-by-case basis in other lymphoid cancers. Of our 19 ongoing primary endpoint studies, 12 are in multi myeloma, 6 are in leukemia and 1 is in MCL. While recent agency news views on surrogate endpoints have introduced some uncertainty, we remain confident MRD will gain broader acceptance as an endpoint for accelerated approval in other lymphoid cancers. As the first and only FDA-cleared MRD assay, clonoSEQ holds a distinct and durable position to capture this market. In summary, MRD is a strong growth engine with multiple levers to increase penetration. Now let's turn to Immune Medicine on Slide 9. Our Immune Medicine business is executing across our 3 strategic priorities. First, we continue to generate large-scale, high-quality proprietary data to develop a digital TCR antigen prediction model. We're making good progress by using our data to train and improve the accuracy of our models. As we deploy these models, we see promising results in multiple immunology applications. One of these applications included the ability to select the best TCRs to use in cancer cell therapy products in partnership with Genentech. Earlier this quarter, we announced the conclusion of our partnership with Genentech following its internal portfolio prioritization. As a result, Adaptive is released from exclusivity and any further obligations related to this partnership. Importantly, the scientific and technical progress we've made along the way allowed us to significantly accelerate both our data generation and our AI/ML modeling capabilities across multiple use cases. We are deploying our knowledge and infrastructure that we built towards multiple high-value partnership opportunities. Second, for our T cell depletion antibody program, we are on track to establish a preclinical data package in our lead autoimmune indication. This quarter, we selected our lead antibody candidate. This key milestone is based on robust potency and other functional characterization data that we generated this year. We've also started planning for CMC tox work, which represents a key step towards IND-enabling studies for this lead T-cell depleting antibody in autoimmunity. As we continue to execute on these 2 focused R&D priorities, we remain financially disciplined and are on track to achieve our 2025 cash burn target between $25 million and $30 million. Now I'm going to pass it over to Kyle to walk through the financial results and updated full year guidance. Kyle? Kyle Piskel: Thanks, Chad. First, I will go over the financial results, including $33.7 million of noncash revenue recognized this quarter from the remaining amortization of payments previously received from Genentech. Total company revenue for the third quarter was $94 million, representing a 102% increase year-over-year. Total company adjusted EBITDA was $28 million compared to a loss of $14.3 million a year ago. Interest expense from our royalty financing agreement with OrbiMed was $3 million, which was $700,000 higher than interest income. Net income from the quarter was $9.5 million. Now and as shown on Slide 10, the revenue and adjusted EBITDA figures, which I will be discussing forward are presented excluding all noncash revenue from Genentech in all periods presented. Looking at this quarter's performance on Slide 10. MRD revenue grew 52% year-over-year to $56.8 million, with clinical and pharma contributing 67% and 33%, respectively. clonoSEQ test volume, including international, increased 38% versus last year to 27,111 tests delivered. U.S. ASP grew 28% to over $1,340, reflecting continued strength in cash collections and improved pricing through our various contracting initiatives. MRD Pharma revenue grew 11% year-over-year, inclusive of $6.5 million in milestones. Immune Medicine revenue from pharma and academic services was $3.4 million versus $5.5 million a year ago. Turning to gross margins and expenses. Total company gross margin, again, excluding Genentech revenue, was 70%. Sequencing gross margin, which excludes MRD milestones, was 66%, up from 56% a year ago. This improvement was driven by operating leverage in the lab from higher volumes, stronger pricing across both clinical and pharma and efficiency gains from the NovaSeq X implementation. Total operating expenses, including cost of revenue, was $83.7 million, up 6% year-over-year and flat sequentially. The year-over-year increase was primarily driven by higher SG&A expenses related to our expected EMR and reimbursement efforts and higher cost of revenue from volume growth, partially offset by lower R&D expenses. Turning to profitability. As shown on the segment reporting table at the bottom of the slide, the MRD business delivered positive adjusted EBITDA of $7 million compared to a deficit of $6.1 million a year ago. Immune Medicine adjusted EBITDA deficit, again, excluding the Genentech revenue, was $10 million versus $8.7 million in Q3 of last year. At the total company level, adjusted EBITDA, excluding Genentech, was a loss of $5.8 million compared to a $17.8 million loss a year ago. Total company net loss for the quarter was $24.2 million, again, excluding Genentech. Turning to our full year 2025 updated guidance on Slide 11. We are raising our full year MRD revenue guidance to a range of $202 million to $207 million, up from the prior range of $190 million to $200 million. This increase reflects stronger-than-expected clinical revenue performance in Q3 and higher MRD milestone revenue for the year. With sustained clinical volume momentum, we now expect to deliver approximately 104,000 tests for the year, exceeding our prior growth target of 35% over 2024. We also expect MRD milestone revenue between $18 million and $19 million, up from our previous $14 million to $15 million range. Overall, this outlook implies 39% to 42% total MRD revenue growth year-over-year and 38% to 42% growth for the MRD base business, which excludes milestones at the midpoint. We are also tightening and lowering the top end of our total company operating expense guidance, including cost of revenue to $335 million to $340 million from our previous range of $335 million to $345 million. We continue to expect roughly 69% of expenses from MRD, 23% from Immune Medicine and the remainder from unallocated corporate costs. Further, we are also narrowing and lowering our full year company cash burn guidance to $45 million to $50 million from the prior $45 million to $55 million range, driven primarily by higher MRD revenue. We expect approximately 15% cash burn from MRD, still anticipate $25 million to $30 million from Immune Medicine and the balance from unallocated corporate costs. It's encouraging to see the MRD business generate positive cash flows, achieve positive adjusted EBITDA on the base business, all while continuing meaningful top line growth. With that, I'll hand it back over to Chad. Chad Robins: Thanks, Kyle. Our results this year highlight the strength of our strategy and the discipline of our execution. MRD is now a profitable scaling business that is delivering consistent growth and margin expansion and Immune Medicine continues to advance key R&D programs and unlock new partnership opportunities for future growth. We're confident in our trajectory and are well positioned to finish the year strong with a solid foundation for long-term value creation. With that, I'd like to now turn the call back over to the operator and open it up for questions. Operator: [Operator Instructions] Our first question comes from Mark Massaro at BTIG. Mark Massaro: On the strong beat and raise. Just a question maybe to start. It looks like your MRD pharma business is becoming a little more recurring in nature than it was maybe a year ago, and it's actually starting to look linear, increasing about $1 million a quarter. I'm not expecting this to continue in a linear way. But can you just give us a sense of the $200 million you have in the backlog, how should we think about that backlog being released, say, over the next several quarters? Susan Bobulsky: Thanks for the question, Mark. Thanks, Chad. Thanks for the question, Mark. So I think first, I'd just say that we are pleased with the performance of the business, and we will reiterate our anticipated revenues for the year. We think that the ODAC, the CHMP decisions in multiple myeloma as well as our strong pipeline in NHL and CNR increased accelerated progress in leukemia this year, all point to a strong potential for 2026 and beyond. We do expect -- we haven't provided guidance next year, but we do expect continuing growth in a similar range to where we've been this year. And I think the backlog, which we will recognize generally over a 5 to 7-year time frame, it is a strong backlog going into the year. And our new bookings have also been quite strong, and we expect that to continue given the role of MRD potentially as an endpoint in additional indications beyond multiple myeloma in the coming years. Mark Massaro: Okay. That's helpful. It's great to see the 38% growth in MRD volume. I guess as -- I'm not asking for hard guidance on 2026 or anything. But based on the fact that you've got Epic integrations, not just Epic, but other EMR integrations, you've got blood increasing, you've got community penetration increasing. You're testing a lot of new patients. There are a lot of drivers that are working in your favor. Is there any reason to think that perhaps a 30% bar is something that you can perform against in 2026 in terms of MRD volume growth? Chad Robins: Mark, thanks for your question. As you mentioned, we're not going to specifically yet come out with 2026 guidance. I can just say all of the kind of underlying factors that you mentioned give us great confidence in the trajectory of the business in 2026 and beyond, and we will provide more specific guidance shortly. Operator: Our next question comes from Sabu Nambi at Guggenheim. Subbu Nambi: So again, in the spirit of just trying to model on clonoSEQ ASPs, can you help us think about next year? I know your long-term target is $1,800. But as we think about next year, it appears clonoSEQ is well on track to hit your target this year. How much should ASPs continue to lift from here? Kyle Piskel: Yes, [ Subu ], I appreciate the question. Look, I won't give a firm number yet on 2026. But what I can say is with the profile of the business and $1,340 in Q3, feel confident about the exit rate that we're going to exit the year at. With the momentum around coverage and not only CLL and what we're seeing in DLBCL as well, I think we're setting our foundation up fairly strong to go into 2026 to have meaningful growth in ASP. And that's where we think we are. And again, I reiterate that $1,700 to $1,800 long-range target, and we'll continue to grow for next year. Subbu Nambi: Perfect. And another one for me. Our mature EMR integrations remaining strong, what do those run rates look like? And if still accelerating for the more mature accounts, how long before some of them actually steady off? Susan Bobulsky: Sure. I can answer that question, Subu. Thanks for asking. As you've seen, our EMR integrations have continued to progress well and to drive growth across really accounts of all sizes, both academic and community. And I'll just take a moment to mention that we don't just see the benefit of growth acceleration, but also we're protecting existing business from competition, and we're increasingly finding ways to utilize tools built within the EMR to help us increase the consistency and the frequency of testing, which will have long-term value for our growth in those accounts over time. We do see that the more mature integrated accounts do continue to grow more quickly than non-integrated accounts. That can vary to some extent based on the size of the account. As you can imagine, more well-penetrated accounts can't sustain those significant accelerations that we see post integration long term, but we see a variety of benefits in those large accounts even if they go back to sort of more stable growth rates after some time. We see that the integration helps democratize ordering. So more HCPs can place orders that reduces the impact of staff turnover. We see reduced HCP workload, which sort of eases the effort we have to put in to maintain that business, and we see -- we're strengthening our competitive moats. So even in those largest accounts, this has long-term benefits. in general, to give you some statistics, when we look at our integrated account commercial volumes this quarter -- in Q3 versus Q2, we saw 9% quarter-over-quarter growth across the entirety of the group, whether they were mature or newer and non-integrated accounts grew 6%. So a 50% increase in the growth rate just looking across the entire group. That group is getting bigger and the number of mature accounts is getting bigger over time, but it's still relatively small. Most of our integrations are less than a year old. So we'll have more to say as this continues, but we are confident that this is a real trend and that it's something that we can continue to build on with some of those tools I mentioned that the EMR offers us to optimize testing. Subbu Nambi: Fantastic. And given we recently initiated in most of our checks, we felt the competition was nonexistent almost or there was no close competitor, maybe a distant second. So when you refer to competitive moat, could you shed light on what kind of tests truly compete with clonoSEQ? Susan Bobulsky: Sure, of course. So in many of our indications, what we're really competing against is sort of lack of testing or use of traditional methods for disease burden assessments that aren't really MRD. And in those cases, we're focused primarily on educating clinicians on the clinical data, the utility, the use cases and now increasingly the guidelines, which are strongly supportive of MRD adoption. There are technologies like you're aware of, like traditional and next-generation flow that are utilized in academic institutions in-house that we have to compete against in those settings. And our data strongly supports the advantage of clonoSEQ over both traditional and next-gen flow, and you'll see some data at ASH actually that will look at that on top of many existing data sets that will continue to be favorable to clonoSEQ. The one indication where we are seeing emerging competition is, of course, in [ diffuse large B-cell lymphoma. And competitors have entered the market. We anticipate we will continue to enter the market in the coming year. But the great news is that we're very confident in our position. We've established strong credibility. We have robust clinical experience. We've run more than 7,000 DLBCL tests in the past 12 months and had more than 900 HCPs order the test. So we're way ahead from a clinical -- from an established clinical base, and we have a number of other established advantages, commercial footprint, relationships our Medicare coverage and now our expanding commercial payer coverage, which we've just started to see really secure a foothold and the fact that we can offer universal testing for all lymphoid cancers. So even in a space where we may have more emerging competition, we do still believe we are well positioned to maintain our market-leading position. Operator: Our next question comes from Andrew Brackmann at William Blair. Andrew Brackmann: Chad, I think you called out recent guideline wins this year and even in Q3. Obviously, we saw those throughout the year. But have you seen those sorts of changes to the guidelines start to impact utilization already? Or is that still something on the come? And then I guess bigger picture here, just on the commercial front, how are those updates perhaps maybe changing the conversation that your team is having with these docs? Chad Robins: Yes. Maybe I'll start and just kind of -- because we have had an impressive list of guideline wins this year, maybe I'll cover them and then I'll turn it over to Susan to talk about kind of the impact that we're seeing from a clinical standpoint. So first, I mean, there's been several meaningful guideline updates in multi myeloma, the recommendation to obtain a clonality ID assessment was really strengthened this year. And this is key for clonoSEQ to help them to reduce the barriers to the initial ID testing. It's also relevant to our education and penetration of the community, which is obviously a key driver of our growth. Also in DLBCL MRD assessment was included in the NCCN and lymphoma guidelines for the very first time. We mentioned CLL in the prepared remarks, the first time that the guidelines include a recommendation for serial MRD assessment and specified a frequency of 3 to 6 months. And also provides additional reinforcement about NGS being an alternative to flow, which Susan just mentioned. So this is really just a great opportunity for us to educate on the data that emphasizes that clonoSEQ can detect disease that's missed by flow below a threshold of 10 to the 4. This is definitely starting. I just want to be clear, these guidelines came out this year. That's certainly a helpful call point to go in with a strong data presentation, but I'll turn it over to Susan to talk about how it's impacting the clinical uptake. Susan Bobulsky: Sure. Maybe I can just give you a couple of examples. So first of all, in multiple myeloma, we've been talking a lot about the [ MIDS ] data, which allows MRD-negative patients to potentially avoid a transplant. And in that setting, we can now, with the support of the guidelines, underscore the value of the ID test at diagnosis to make sure that no patient misses that opportunity. And that opportunity is particularly valued in the community setting where patients have to leave their local doctor to go get a transplant, neither the doctor nor the patient likes that. And so there's a lot of motivation and with the support of the guidelines to say that ID test is now -- there is a stronger recommendation around doing that, it ensures that more patients are accessible to this MIDS message that we're delivering. In CLL, where the guidelines were very recently updated. We're really just getting started, but we are exposing community doctors to some of the potential benefits of limited duration therapy, which many of them haven't experimented as much with yet, but we'll do more and more with the -- we expect upcoming approval of some of the combination regimens that are being referenced in the guidelines now. And so we can talk now about testing frequency in the context of a limited duration therapy in a much more specific way, which is what the community doctors really want. They want us to tell them when to test, who to test and the support of the guidelines just tremendously strengthens our ability to deliver that message. Andrew Brackmann: Susan, maybe a follow-up there. I think in an earlier question, you referenced tools in the EMR to increase the frequency of testing and getting that scheduled maybe. Just sort of practically, what are you referencing there? And I guess, how does that drive the increased utilization here? Susan Bobulsky: Sure. Yes. A couple of things that I'm referencing are things like treatment plans and order sets. So there are ways within Epic, let's say, that a clinician or a department can set up specific sets of actions that they want to take for a given type of patient at a given point in time. And we are now talking to clinicians in our integrated accounts increasingly about how clonoSEQ might be incorporated into order sets, how do guidelines, existing data, well vetted clinical trial designs support specific time points, where are there places where you might want to make decisions? Would you want to have the clonality ID incorporated into the diagnostic workup. All of those things can be facilitated by tools that are built into Epic. Additionally, there are tools that allow you to do essentially analytics and reporting on your patient population. And so for example, very easily and Epic you can pull up a list of all the patients who are within, let's say, 1 month of the end of a frontline induction regimen in DLBCL. And you can make sure that your staff has those patients on their radar to place a clonoSEQ order when they come in. So that kind of thing is incredibly powerful. And it's really where we're -- you're going to hear us talking a lot more in 2026 about those types of things because we're shifting from just get as many accounts integrated as possible. We'll continue to do that, but now we can also look at our integrated accounts and what are all the opportunities to use those tools. Operator: Our next question comes from Sebastian Sandler at JPMorgan. Sebastian Sandler: Congrats on the quarter. My first question is on community. I think that had another solid quarter. It seems to be continuing to accelerate. Can you just help us level set where we stand in penetration into the community, which is where most of the heme cancer patients are treated? And then do you have any color on whether the sequential increase in HCPs from these practices are coming from new accounts versus existing accounts? And I think you've kept your sales force headcount relatively stable. So I'm wondering if you have any plans to expand as you penetrate further into the community setting? And I have a follow-up. Susan Bobulsky: Sure. Thanks, Sebastian. Let me see if I can touch on all of those. So first of all, our community penetration, while we've made substantial headway and now have about 30% of our volume coming from community settings, we still are underpenetrated certainly relative to academic settings and have a very high ceiling in that space. We are taking, as you know, specific steps to drive growth in that setting, one of which is the recent integration with OncoEMR via Flatiron Health. And we've been really pleased with the results we've seen in the Flatiron accounts. I'll just briefly mention that we saw 17% quarter-over-quarter growth in Q3 in our Flatiron accounts. and we're only 1 quarter into our experience, but quite a lot of interest and opt into our serial testing offering in that interface, which we'll learn more about how we can pull those tests through in the coming months. But a lot of potential that I think we can build on with the option of serial test ordering in community settings. In terms of the HCPs, where are they coming from, we have a lot of white space in the community still. And so we are -- while it takes time to break into new accounts, we continue to see new HCPs in both new and existing accounts. In the existing accounts, integration is a big driver of bringing new HCPs on board because, again, it democratizes the ability to order. And the new accounts will continue to penetrate. There are Flatiron accounts that don't yet use clonoSEQ, and so that's a big area of focus, but outside of that segment as well. In terms of the sales force, we've looked at this carefully, and we are comfortable with the 65 reps that we have, of which about half are focused on the community setting. What I'd say is that this is the right number of reps based on what we can see in terms of potential in each territory, the number of accounts and HCPs each rep is calling on, the amount of windshield time that the reps have. We do look carefully at our alignment, and we will occasionally add a territory or collapse the territory when we see some specific opportunity. And over time, we will consider potentially new deployment strategies that could justify additional hiring, but we're not anticipating any significant expansion in the near term. Sebastian Sandler: Got it. Very helpful. And then my second question is on sequencing gross margins. So those had a nice step up. Can you give us a little more granularity on the individual drivers of that improvement? I think more of the uplift from the X transition was expected to fall more in 4Q, but I'm wondering if that benefit was accelerated and had an outsized impact in 3Q? And then any color on how we should think about sequencing gross margins exiting the year would be helpful. Kyle Piskel: Thanks, Sebastian. Yes, I appreciate the comment. Sequencing gross margin was 66%, and that was up from 64% in Q2. I'd say if you drill in a little deeper on the MRD business alone, it was up 3 percentage points and NovaSeq X contributed 2 percentage points of that. So certainly taking out the [ Lion's ] share of the improvement. We were only integrated starting at the end of July, so really 2 months of benefit. So expect it to continue. And in terms of guidance as it relates to exiting the year, we said 5 to 8 percentage points post launch, still reaffirming that. And I think we'll see a continued step-up, especially as the volume continues to grow exiting the year. Operator: Our next question comes from William Bonello at Craig-Hallum. William Bonello: I just want to circle back to the question that Andrew was asking about the EMR tools. Did I hear you right earlier in the call that you said with -- and I need to be clarified whether it was Epic or OncoEMR, but that a physician now has the ability to essentially put in an order that would cover multiple testing time periods upfront. And then if I did hear that right, maybe you can talk a little bit more about how that works, if that's available for all indications, can a practice customize? Are they -- you mentioned some time points, but I don't know if those are fixed order points or a doctor has flexibility around that? And then maybe what kind of lift do you think you might be able to get from that capability in terms of test per patient? Susan Bobulsky: Sure. I'd be happy to talk more about that, William. So the serial testing option is available to our Flatiron integrated accounts. So OncoEMR offers this as an option in their interface that we've taken advantage of. And what essentially happens is when you're placing an order, you have to select from a drop-down whether you'd like a single order or a serial cadence, which can vary from 1, 3, 6 or 12 months. And so it's as simple as selecting from the dropdown. And that is universal for all OncoEMR accounts that utilize their molecular precision NPI tool, which is what we use to provide integrated test ordering. It's across all indications. It isn't customizable in the sense that it looks the same for every practice, but it is up to the HCP what cadence they select. And so we do see variability depending on whether an HCP is going to do blood or bone marrow, depending on whether they're testing in DLBCL or CLL, et cetera. We haven't quantified the specific lift associated with this yet because, as I mentioned, we're only 3 months in, and most clinicians are selecting a 3 or 6 month cadence. And so we are just now getting to the point where we'll be able to start measuring, do we pull those orders through or do the physicians elect to delay or not send the sample. So -- but we are confident based on the early results that we will get incremental test growth from that offering, and we are looking at whether there are ways to extend it to other parts of our business beyond Flatiron. William Bonello: And so if a physician, for instance, selects a 3 month cadence, does that mean that for a period of time, every 3 months, another test is being ordered? I just want to make sure I understand that. Susan Bobulsky: Correct. I mean it's essentially that way, but what happens is it's like a placeholder order. So the order is scheduled into the patient's calendar within the EMR system. And then when that due date comes up, it will sort of pop up for the staff in the clinic and say this patient is due for another blood draw for a clonoSEQ test. The staff still have to take the action to make that blood draw happen before it comes to us and officially count as an order. So none of these orders are appearing in our order numbers. But if we pull them through, which we are actively working to do by putting in place reminders and field-based tactics to ensure that our clinicians are aware that these orders are coming due, we'll be able to -- we expect, pull some number of those through and be able to provide more consistent testing to patients over time. William Bonello: Okay. That's really helpful. And then just a completely different question for you guys. Where are we at in terms of blood today and uptick with blood as sort of a percent of what you're seeing? And what are your thoughts on that looking forward? Susan Bobulsky: Sure. So overall, we have now reached 45% of all MRD tests being performed in blood. And that was actually our goal for the year. So we're pleased to have achieved that a quarter early was to exit the year at 45% was our expectation. We are seeing increases in blood-based testing in both myeloma and ALL, which are sort of traditionally marrow-based tests. We now are at 37% of ALL tests in blood and 24% of multiple myeloma tests in blood. That's each up about 3 to 4 absolute percentage points from a year ago. And we also have increased contribution from our primarily blood-based indications, which include DLBCL, MCL and CLL. DLBCL, in particular, is driving some of the growth in blood-based testing because it's simply becoming a larger portion of our total test base. William Bonello: Sure. Okay. And then if I can, just one last question. You mentioned the national contract wins and just the way the bullet points were on the slide, I wasn't totally sure if you were saying those were related, if there were 2 distinct points, are the rate increases related to just DLBCL and CLL? Or are those across all modalities? And then secondly, did we see any benefit from that this quarter? Or is that all ahead of us? Chad Robins: Yes, I'll start and then, Kyle, feel free to jump on. First, there's a difference between kind of coverage and potentially rate increases, although those can sometimes be combined. What I mentioned in the prepared remarks is that we were -- we obtained coverage, our first commercial payer coverage in DLBCL and that for 2 CLL coverage policies, we obtained kind of further coverage. So those will hit -- those hit now and -- but then you'll see the impact come over time, not -- those wouldn't be reflected in this quarter. Kyle Piskel: Yes, that's right. And the contracting initiatives or wins we flagged were in effect in Q3. So some of that pull through in Q3. We still think there's some room to go just from an implementation perspective with some of those payers that we're still working some of the kinks through, but we'll get there on that front. Chad Robins: Just to give you a good example. Remember, we discussed a major payer win in terms of contracting kind of for Anthem last quarter and the implementation of -- actually probably 2 quarters ago and the implementation happened this quarter. So you do start seeing a lift in terms of your ASP from that. So there's a lag often between contracting and implementation and kind of the rate increase and/or the rate increase. William Bonello: Okay. That makes sense. And when I go back and look at it, I see it's sort of 2 distinct points, right? [ You get ] coverage policy from the 2 plus I am reading that right, though, that there were 3 national payer price increases, like you're saying those -- Kyle, you're saying [indiscernible] Chad Robins: Correct. Kyle Piskel: That was in effect in Q3. Operator: Our next question comes from David Westenberg at Piper Sandler. David Westenberg: So I want to maybe start with the contribution margin of MRD at this point. I mean I know you're maybe not going to give the exact number, but I'm just kind of thinking about how -- as we see growth in that, we see this move to cash flow breakeven and kind of our ability to kind of pace that. And then also, just given the fact that you do have a pretty solid competitive lead in MRD in blood at this point. How are you thinking about balancing investments in sales and marketing, et cetera, to really like push on that competitive advantage, maybe clinical studies or anything else there? Kyle Piskel: Yes. Thanks, David. On the contribution margin comment, certainly, we have control to be able to manage and pace the growth as long as we continue to see and expect to see the growth. Again, this quarter was a great accomplishment to see the cash flow positivity, which gives us some confidence going forward that the business will remain cash flow positive. That being said, we may choose to make some additional investments to press the gas and grow faster, either in volumes and/or in the reimbursement environment. So I think all of those things get combined give us a little bit of control. And as the volume continues to increase, we can decide whether or not we want to reinvest in the business and what areas we want to go after. Chad Robins: Maybe I'll add on to that and then Susan can as well. First, I think it's worth pointing out, even though we've had great growth, there's still a long way to go in penetration in order to fully capture this kind of large and expanding total addressable market opportunity. But particularly in terms of investments, we are continuing to invest in kind of blood-based testing, both in terms of assay improvements and in terms of clinical studies, in an addition to kind of blood-based testing, I think that's a key initiative for us overall is investing in clinical studies to continue to demonstrate the clinical utility of the assay as where a doctor can use our test to kind of improve patient care across the continuum, and we'll continue to make those investments. David Westenberg: Got it. Just real one quick one on the guide, and apologies, I've been jumping between 3 calls here. But is there any seasonality in the Q4 MRD number? I mean I think you've had sequential growth of, I think it was 10%, 10%, 7%. I realize you can't maintain that forever. But I think the guide would kind of imply that maybe the volumes or the ASPs might be a little bit lower than what you've gotten in the quarter-over-quarter. Just wanted to see if you can remind us on the seasonality there. And yes, I'll just stop there. Kyle Piskel: Yes. Yes. As it relates to guide, certainly something we are contemplating with respect to our guidance. Obviously, the volume growth has been phenomenal, and we expect it to continue to be phenomenal. But Q4 is one of the tougher periods with the amount of holidays and ordering. So I think that factored into some of our guide. But again, longer term and into '26, we think there's strong growth ahead of us. So there's a little bit of seasonality in that growth. It doesn't mean we can't beat it, but that is factored into our guide. David Westenberg: Got it. Maybe I'll just squeeze in one quick one. I might be at the end of the queue anyway. So just in terms of your thoughts on outside of multiple myeloma potential to see this as a primary -- or clonoSEQ as a primary endpoint, specifically written in is clonoSEQ or NGS clonality, et cetera? And how far away are we from that? I mean I'm guessing we're seeing a lot of speeding up of clinical trials and really seeing more promising drugs coming through the pipeline because of this. When can we see that advancement to other sorts of areas like CLL, ALL non-Hodgkin lymphoma, et cetera? Susan Bobulsky: Sure. As I think Chad mentioned earlier, we have -- there are active efforts ongoing for both CLL and DLBCL to establish a similar designation as the ODAC provided for myeloma for MRD as an accelerated endpoint for approval. The CLL effort is being led by a number -- a couple of KOLs and in partnership with a broad coalition of pharma partners. We are actually getting engaged in that effort as well directly. And what the leaders of that initiative have said to us is that it took 10 years for multiple myeloma. It will not take 10 years for CLL. That's because we now have a blueprint for what the FDA is looking for. Now that said, the FDA has evolved since the time of the ODAC vote, and so there are uncertainties around that. But the data collection is advancing rapidly. And I think all the participants are confident that current administration notwithstanding, we'll see those things come to fruition much faster than they did in multiple myeloma. And I think that other indications beyond CLL and DLBCL may have reason to explore this in the future as well. Chad Robins: And just one point in terms of quantifying this in terms of kind of bookings, our 2025 CLL bookings are more than twice what they were last year in the MRD pharma space. Operator: Our last question comes from Dan Brennan at TD. Daniel Brennan: Maybe just on DLBCL, I mean, the mix ticked up pretty nicely in the quarter. I know you may have addressed it a little bit, but just speak to a little bit what you're seeing there and how we might think about the opportunity there as we go into '26 in terms of the pace of progress. Susan Bobulsky: Sure. Thanks for the question, Dan. Yes, we are continuing to see a nice solid uptick in the contribution of DLBCL, rising from 6% a year ago -- 3 quarters ago to 9% this quarter. It's kind of poised to overtake CLL actually as the third largest indication probably in the next quarter or 2, although we'll certainly expect the CLL business to be buoyed by the recent guidelines update. In DLBCL, I think a couple of things contributing. Certainly, one is the noise around MRD in the space, which is not just coming from us. There is a large amount of data generation ongoing. There is a lot of interest from pharma companies and how they can utilize MRD-guided treatment to optimize outcomes in this disease state, which is curable for a subset of patients and hopefully for a growing number of patients, proportion of patients over time. So there are several companies that are currently advancing or considering trials that will include MRD-guided elements to them in the coming years. And that will -- in addition to the interest in the clinic as it is, that will contribute, I believe, to greater use cases for MRD in the clinic. Daniel Brennan: Great. And maybe just a follow-up. I know there's a few questions on margins. But just wondering as an early read, if we think about into '26 and the investments you're making, but yet the OpEx leverage path you're on, just can you remind us how we might think about the early look on OpEx leverage as we go into '26 and what are the key puts and takes? Kyle Piskel: Yes. I mean I think we will continue to see growth in investment areas like EMR. But at this point, we're not planning any major investments. That being said, we might change our mind. But at this point, I think we're going to continue to see meaningful leverage across the business and look at opportunities to take advantage of the position we're in, in the MRD business. Chad Robins: The other area that I mentioned earlier, Dan, continuing to invest in kind of data generation for clinical utility studies. But overall, we're looking to continue to get leverage out of the business. Daniel Brennan: Have you guys even -- like I forget, have you commented publicly at all about OpEx leverage for '26 in terms of where consensus is or no, not yet? Kyle Piskel: Not yet. Not yet. Operator: This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Dear ladies and gentlemen, welcome to the Uniper Analyst and Investor Conference Call for the first 9 months of fiscal year 2025. At our request, this conference will be recorded. [Operator Instructions]. I now hand you over to the Executive Vice President, Group Finance, and Investor Relations, Sebastian Veit, who will start the meeting today. Please go ahead. Sebastian Veit: Thank you, operator, and good morning, everyone. Welcome to the Uniper Interim Results Call for the first 9 months of fiscal year 2025. Next to me on today's call are Michael Lewis, our Chief Executive Officer; and Christian Barr, our new Chief Financial Officer. I'm glad that both are with us today, and a special warm welcome to Christian joining us for his first results presentation as Uniper's new Chief Financial Officer. Today, Michael will start with a summary of the company highlights, and Christian will guide you through the financial performance for the first 9 months 2025. And as usual, there will be a Q&A session after the presentation. Now let me hand you over to Michael Lewis, please. Michael Lewis: Thank you, Sebastian, and a very good morning to everyone, and thank you for tuning in to Uniper's 9 months results call for 2025. And we're very pleased to report a solid set of results in a challenging market environment, and we can confirm our outlook for the full year. But before we get into the numbers, I'd like to give you an update on our leadership team. And with me today for the very first time is Christian Barr, who I cordially welcome here as our new Chief Financial Officer, and this is, in fact, his fourth working day. And Christian joined as CFO on November 1. I've known Christian for quite some time as we were former colleagues at E.ON and we successfully worked together at E.ON U.K., where Christian served as the CFO when I was the CEO, and we successfully managed the U.K. transformation on the acquisition of npower. And Christian has a distinguished track record in financial management within the energy sector. And this experience, coupled with his transformation expertise, make him an invaluable addition to our management team. So, again, I repeat, a very warm welcome, Christian. And alongside Christian's appointment, we've also reorganized our management Board to focus more effectively on our strategic transformation, and effective from November 1, a new division has been established combining the roles of Chief People and Transformation Officer. This new area is led by a long-standing, highly experienced colleague, Fabienne Twelemann. Fabienne has held key roles over the past years in the CEO area of Uniper in leading our communications and government relations function during the energy crisis as well as heading successfully our Human Resources function over the past year. And she's widely recognized across Uniper for her leadership skills and her ability to drive change, and I'm delighted that she's now part of Uniper's Management Board. In addition, Uniper has extended the contracts of Holger Kreetz, our Chief Operating Officer; and Carsten Poppinga, our Chief Commercial Officer, for a further 5 years through to February 2031, and both Carsten and Holger are playing pivotal roles in Uniper's strategic transformation. And Carsten is, among other things, focused on building a diverse and risk-balanced gas and LNG portfolio following our successful litigation against Gazprom and our cancellation of those contracts. And Holger is delivering the transformation of our power plant portfolio. And their continued presence on the Management Board will provide the continuity and stability needed to successfully execute our strategic transformation. And in this context, I'd also like to express my sincere thanks to Jutta Donges as former Chief Financial Officer for her extraordinary commitment and outstanding contribution over the past years. Her performance was absolutely decisive for Uniper's stabilization and the successful repositioning of the group. And on behalf of the entire Management Board and all employees, I would like to wish Jutta every success in her new role and in her personal future. And with this, let's now turn to our 9 months highlights on Slide 4. As you can see, our operating business performed solidly in the first 9 months of this year. The positive earnings momentum from the second quarter continued into the third quarter. Group adjusted EBITDA amounted to EUR 641 million, and group adjusted net income reached EUR 268 million. As anticipated, these figures are below the exceptionally strong results of the prior year period, but they are in line with expectations. Also, our financial position remains in very good shape even after the full payment of the EUR 2.6 billion of contractual recovery claims of the Federal Republic of Germany in March 2025, and the group's net cash position reached EUR 3.3 billion at the end of September. Looking ahead, we're on track to deliver our full year earnings outlook. We expect adjusted EBITDA to range between EUR 1 billion and EUR 1.3 billion, and adjusted net income is expected to come in between EUR 350 million and EUR 550 million. And Christian will provide a more detailed explanation of the financial drivers in a moment. So our transformation journey continues. On the financing side, we've extended our toolkit. Only recently, we published our Green Finance framework, which will form the basis for green bond issuance in the future. A decision for issuance is not planned at the moment, but this Green Finance framework and our debt issuance program together form a strong debt financing tool set, securing a range of options for future funding. In addition, we've also been able to further reduce the KfW credit line from EUR 5 billion to EUR 1 billion as of October 1. Coming to our strategic transformation. So far, we've invested EUR 610 million this year, with the majority of this investment going into our Flexible Generation and Green Generation segments, and we continue to focus on the execution of our strategy. For instance, a number of financial decisions in the renewables business are still expected this year. Furthermore, we fulfilled almost all the necessary remedy measures and obligations agreed between the German government and the EU Commission as part of the state aid approval. And we've announced the sale of the 1.1 gigawatt German coal-fired power plant, Datteln 4, and this transaction is still subject to the usual regulatory approvals. And also since the last call, we've announced the sale of the district heating business in Germany, which successfully closed a few days ago. So we've made great progress in that area. But let's now take a closer look at the 9 months results. And Christian, over to you. Christian Barr: Yes. Thanks, Mike, for your kind introduction, and a warm welcome to all of you. It's a privilege to join Uniper as the Chief Financial Officer, and my special thanks go to my predecessor, Jutta Donges, whose exceptional dedication and excellent work has laid a strong foundation for Uniper's next step. In a professional and smooth handover process, Jutta was handing over to me a critical sphere of responsibility for Uniper's success, which is supported by a highly qualified and superbly coordinated team. I look forward to working with our talented teams to drive Uniper's transformation and create long-term value. I bring with me sector expertise and experience from various senior financial leadership roles within the E.ON Group. And over the years, I gained extensive expertise in the commodity business and a deep understanding of all parts of the energy value chain from the supply energy down to its consumption. And as he said, I worked closely and successfully together with Mike Lewis as CFO of E.ON U.K. until 2023. While I followed Uniper's developments with interest over the past years, it was also great to meet again many colleagues I still know from our joint E.ON times. So the start during the first days was very positive in any respect. With Uniper's strong asset base and a clear decarbonization strategy, I am convinced that we are well positioned to play an essential part in Europe's energy transition. And my key priorities are twofold: First, continue safeguarding Uniper's strong financial position; and second, support the strategy execution while maintaining rigorous investment discipline. I'm grateful for the trust placed in me by the Supervisory Board and Mike Lewis. I look forward to working closely with my fellow Board members and the wider Uniper team to deliver sustainable value. And now I'm pleased to present the Uniper numbers of the first 9 months of 2025 in more detail. Headline. Results for the 9 months of the 2025 financial year have been published in an ad hoc release on 24th of October, as we did in previous quarters of this year. The outlook of the whole year 2025 has been confirmed. In the period under review, Uniper generated an adjusted EBITDA of EUR 640 million. The group's adjusted net income came in at EUR 268 million. We achieved these results against the backdrop of a decline in Uniper's gas sales and lower electricity generation volume. The latter was also driven by portfolio changes, decommissioning of plants and outages. Margins from forward hedging transactions have normalized in this market environment. Further figures are detailed on subsequent slides. Coming from an elevated level, greener commodities recorded a sizable drop in adjusted EBITDA contribution to Uniper's group results. After 9 months of the 2025 financial year, the segmental adjusted EBITDA was still negative at minus EUR 196 million. However, since Q2, a turnaround is clearly visible with profit contribution of around EUR 300 million in the summer season. Overall, the reduction in earnings is primarily linked to the concession of favorable margins from prior years. Key influences on earnings include challenges resulting from previous portfolio optimization measures and the end of gains associated with alternative Russian gas supply hedging. One bright spot was the significant increase in earnings contributions from the U.S. LNG business, which benefited from earlier favorable forward sales. Flexible Generation. Earnings declined by more than 50% to EUR 459 million in the 9 months of the 2025 financial year, reflecting the current market environment and a reduced fossil fuel portfolio. But the result remains satisfactory. A decrease in margins after the end of elevated clean dark and spark spreads observed until mid-2024 was smoothened by some offsetting effects, including additional earnings resulting from the settlement of contractual disputes. Green Generation achieved an adjusted EBITDA of EUR 540 million in the 9 months, which marks double-digit earnings decline compared to last year. Segment earnings were particularly affected by the extended downtime of the Oskarshamn 3 nuclear power plant. This power plant has been back online since November 2. The Nordic power market were well supplied due to high precipitation and above-average hydro reserve levels. In our hedge slide in the appendix of today's investor and analyst presentation, one can track that hedge prices show a decline of EUR 5 per megawatt hour for 2025 versus 2024. Lower realized prices and lower nuclear output were partly mitigated by higher hydro power sales volumes. The German hydro business saw slightly lower earnings. Pump storage power plants delivered lower earnings contributions. However, this was largely offset by strong forward sales for merchant volumes from our run-of-river plants who locked prices more than doubled. Looking to the forward years, including 2027, hedge prices for our Nordic and German business remained steady for the future years. Hedge prices for our Nordic and German fleet stayed steady from last quarter at about high EUR 80s to low EUR 90s per megawatt hour in Germany and about EUR 38 per megawatt hour in the Nordic. The next slide shows adjusted EBITDA reconciled to adjusted net income. Uniper's adjusted net income has been supported this year by lower depreciation and amortization and a continued significant positive economic interest result. Depreciation and amortization declined by about 10%, reflecting asset disposals and plant shutdowns as well as impairment charges on property, plant and equipment recognized, which resulted in a lower asset base. Economic interest remained in a clear positive territory, supported by the group's high net cash position ending up at EUR 3.3 billion as of end of September 2025. The operating tax rate was 26.2%. Turning to Slide 9, the focus is on the operating cash flow. Uniper recorded a negative operating cash flow of EUR 281 million in the first 9 months of the 2025 financial year. As you can see on this slide, Uniper's operating cash flow is strongly influenced by payment obligations to the Federal Republic of Germany settled in March 2025. Excluding this, Uniper's operating cash flow would have been a positive EUR 2.3 billion, supported by reduced inventory levels and strong cash in from receivables. Gas storage facilities were 80% -- 84% full at the end of September 2025 due to Uniper's own and customer bookings. This is around 10 terawatt hours below the previous year's level, which saw a record fill rate of 95%. Now over to Slide 10 and Uniper's financial position. At the end of September 2025, economic net cash stood at EUR 3.3 billion, which was virtually unchanged from the middle year level and only slightly below the balances at the end of the 2024 financial year. This very strong cash position was achieved despite of Uniper's fulfillment of the payment obligation to the German government, which was settled in full in March 2025, and an increase of CapEx. Cash investments reached EUR 610 million, up 60% year-on-year, reflecting progress in initiating growth projects and higher maintenance spending. These numbers bring us closer to the total investment of about EUR 1 billion budgeted for the full year 2025. Capital expenditure on maintenance focused on higher expenditure for flexible generation in the U.K. and Germany. Primary investments to accelerate our transition efforts were directed towards renewables, such as the development of a wind farm in Scotland and for restoring the 160-megawatt pump storage facility in Happurg in Bavaria. Divestment proceeds of EUR 345 million in total resulted mostly from the sale of the Hungarian CCGT power plant, Gönyu. Other items included changes in pensions and asset retirement obligations as well as consolidation effects. In the current financial year 2025, Uniper further developed its financial base on the debt side for short-term financing requirements and for the medium- to long-term financing of future projects. This includes the extension of Uniper's EUR 3 billion revolving credit facility to 2028, which provides Uniper with additional liquidity for varying needs in a day-to-day business. At the same time, the existing KfW credit line, which runs until 2026 and has not been drawn down, was reduced ahead of schedule from EUR 5 billion to EUR 1 billion from October 2025. The existing debt issuance program with a volume of EUR 2 billion was extended on a revolving basis for another year. Uniper just came up with its first Green Finance framework. This framework has been reviewed by Standard & Poor's Global confirming that we follow market standards. Uniper can issue green bonds for EU taxonomy aligned green projects on this basis in the future. And this brings me to the final slide with Uniper's outlook for the full year 2025. In summary, the normalization in power markets amid less favorable commodity prices has continued. Uniper is on track with its outlook, which shows that our business model is solid and, for the most part, delivers predictable results. The outlook for the full year 2025 is confirmed both for the group's adjusted EBITDA and adjusted net income. With a strong asset base and a clear decarbonization strategy, we are convinced that we are well positioned to play a decisive role in Europe's energy transition. This concludes our presentation for today, and I will hand it over back to you, Sebastian, to kick off the Q&A session. Sebastian Veit: Thank you, Mike and Christian, and we can now start the Q&A session. Operator, I'm handing it over to you, please. Operator: [Operator Instructions] Our first question comes from the line of Anna Webb. Anna Webb: Anna Webb from UBS. Firstly, can I ask a question on the renewables pipeline. if you could give any more detail on what is under construction, how much you have kind of ready to build and how the kind of pipeline is progressing there? And also more generally, any comments you can give on the kind of market conditions for renewables, where you see as most attractive geographies and also technologies, that would be great. And then secondly, if you can give any commentary around the German government stake in Uniper. I mean, I know it's difficult for you to comment, but any kind of public statements from the German government on timing, on what might be the route to reduce their stake and the latest discussions there. Any detail would be really helpful. Michael Lewis: Thanks, Anna, for the questions, I should say. Maybe I'll pick up the second question first. The position hasn't changed since the federal government announced the 2-track approach last year. That's to say potential re-IPO and potential M&A sale. That is still the position. There's been no update. What is also still the position is that the EU requirements to sell down to 25% plus 1 share by the end of 2028 are still valid. So there's no real update beyond that, that I can give you. Let's come on to the renewable situation. At the moment, we have 280 megawatts of projects which have been approved for build, i.e., they've been through our final investment decision. That's 7 projects in the U.K., Germany and Hungary. Six of those are solar projects and one of those is a wind project. And we have another 400 megawatts which are preparing for financial investment decision across those markets. Now I don't want to comment specifically on the commercial details of any of those projects. We are finding that our pipeline is developing in a satisfactory way. We are in a position to invest significant amounts, and we are building up the portfolio, as I've just announced, and we will continue to do so. I think the key challenge is always how potential incentive systems might change in the different countries. And of course, beyond the fixed price period, how wholesale prices are developing, and we keep a very close look on that at all times to ensure that all of our projects meet our hurdle rate. Operator: [Operator Instructions] As there are no further questions, I will return the conference back to the management. Sebastian Veit: Thank you. Dear analysts and investors, thanks for listening in for today's call. We're looking very much forward to our next call for the full year results on 2025 in next March. Have a good remaining of the day, and see you soon and hear you soon. Thank you very much. Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded.
Matias Jarnefelt: Hello, everyone, and welcome to Harvia's Third Quarter '25 Earnings Webcast. My name is Matias Jarnefelt. I am the CEO of the company. And with me, I have Ari Vesterinen, our Chief Financial Officer. Ari Vesterinen: Hello. Matias Jarnefelt: I will first start by taking you through the highlights of quarter 3 in terms of business and financial performance, and I will also talk a bit about our strategy implementation. After that, Ari will continue and will shed more detail on our financial performance and numbers, after which we are very happy to get your questions. So let's start and summarize quarter 3. This time, it actually is very easy. We can summarize even with just one number, 19. So 19% top line growth at 19% adjusted EBIT margin. So essentially, when we talk about the top line, we delivered EUR 46 million, and that's, I said, 19% growth versus the comparison period. In terms of comparable exchange rates, that's 22% growth from last year. Organic growth was solid double-digit at 16%. We're very pleased that the growth was broad-based. Essentially, we had double-digit growth across all of our 4 geographical sales regions. And this despite the fact that, of course, this year has been rather volatile in terms of the macro environment. We had modest quarter 2 in North America. Now returning to a solid double-digit growth. That's, of course, something we are very pleased with. APAC and MEA continued very strong double-digit growth. And we're also very happy that Europe that has been a bit on the slower momentum for now the past couple of years, returned to double-digit growth as well. Our adjusted operating profit was EUR 8.8 million, and that represents 19% of our revenue. And that's an improvement from quarter 2 when we had 17% margin, while it's still slightly below our long-term target. The operating profit margin was impacted by the gross margin and in particular, higher cost of goods sold due to tariffs and currency exchange rates. This specifically refers to our heating equipment business, where we make the products mainly in Europe. And then when we sell them in the United States, they are sold in USDs. And of course, the increased tariffs also apply. Also, we've been increasing our operating expenses as we continue to build the foundation for long-term success in areas such as product development, brand building, channel expansion and operational efficiency. If you think about the year-to-date performance, it could be summarized at 17/20. So 17% top line growth at 20% operating profit margin. And looking ahead, we remain focused on executing our strategy and building the foundation for long-term success. And at the same time, we are focused on also delivering strong results in the short-term. In the near-term, our key focus areas include commercial excellence that includes topics like driving growth and driving pricing in this volatile environment, also sourcing and operational excellence to manage the materials cost and also prudent OpEx management. But it is very clear. This is extremely attractive market that's supported by strong long-term growth drivers, and Harvia is extremely well positioned to continue to lead this market and deliver significant growth. Here are the key figures for quarter 3. So revenue at EUR 46 million, and that's 19% growth, organic 16% and at comparable exchange rates, that's 22%. Adjusted operating profit margin at EUR 8.8 million, and that's 19% of our revenue. Operating free cash flow in this quarter was minus EUR 600,000. And there's 2 reasons to this. One is that historically, quarter 3 is our lowest cash-generating quarter. And the reason for that is that during the quarter 3, we are building products to sell during the high winter selling season. Also, we do believe in the long-term growth and success of Harvia. And that's why we're also investing in the platform to grow. So we've been making quite significant investments compared to our investment history in improving our operational efficiency and also building capacity to grow. So last year, we grew -- last year, we bought land around our West Virginia factory in the United States, and we have started to develop the site. And that's just one example of what is going on in our business. In terms of the first 9 months of the year, revenue at EUR 145 million, and that's 16% growth versus last year and organic growth at solid double-digit 11%. Growth at comparable exchange rate at 18%. Adjusted operating profit very close to that 20% mark at 19.7% and operating free cash flow for the first 9 months, positive EUR 13 million. As I opened, I mentioned that we are really pleased that we delivered strong broad-based growth during this quarter. So all of the regions grew double-digit. The highest growth rates continue to be outside Europe and also in terms of absolute contribution, North America and APAC contributed the most. But as I said, we are very pleased that now we also saw Europe playing strong and delivering double-digit growth in both of the European sales regions. When we look at Northern Europe, the region grew by 15%, and that's a significant momentum change after tough 3 years. And during quarter 3, North Europe represented 24% of our total revenue. Where did this momentum come from? We had strong performance in Sweden, in particular. And there, that momentum has been built through channel expansion and development. And also, I personally believe that, here there is some impact from the excitement that KAJ and Eurovision created around sauna in Scandinavia during first half of the year, and now we see that realizing in our numbers. Also Baltic countries delivered strong growth. I'm also very pleased that Finland that has been also struggling already it's quite some time, actually turned back to growth. And here, our focus is to continue on a positive path and really build foundations for sustainable, steady growth for the years to come. Continental Europe grew by 10%, and that's on top of 8% growth a year ago in the comparison period. And I think that tells a story about continued solid progress in the market. So essentially not just a temporary swing, but there is now already a longer trend where we see Continental Europe strengthening. If we look at Continental European markets, submarkets, we have many very strong performance countries there. For example, United Kingdom, Spain, countries in Eastern Europe like Poland. North America returned to double-digit growth after the modest quarter 2. And essentially, our revenue grew by 24% and the region represents now 36% of our total revenue. If you look at the comparison period and exchange rates, the dollar is now around 6% weaker than a year ago. So give and take at constant currencies, North America would have grown around 30%. In terms of organic growth and organic growth in North America, I'd like to note that ThermaSol, a company we acquired in the summer of '24, has been fully consolidated in our numbers since August '24. So essentially, it contributes to inorganic growth for Harvia Group only for the month of July. So August and September this year are already part of our organic growth. And majority of our revenue growth in North America clearly came from organic development. I'd also like to highlight a piece of news that came after quarter 3 was closed, and that is that we have appointed new President of Harvia North America and Region Head, Nathan Hagemeyer. We had a thorough process to find the best possible person to take the lead of this crucially important region for us. And Nathan brings a wealth of experience in selling technical products to residential and commercial facilities in a multichannel sales environment that resembles largely the sales setup that we have in Harvia in U.S. And also, I think there's a strong culture fit, something that we also value a lot. And I'm extremely pleased that Nathan accepted our offer and has already started actually since Monday this week in his new role. APAC and Middle East and Africa is continuing on its strong growth path. And you can see here the comparison figures from '22 through '25. This region is really picking up momentum. And also in terms of just absolute size, representing now 12% of our total revenue, it is a significant part of our business. And what we're also very pleased with is that APAC, when it was smaller, it was more volatile and prone to, for example, individual product deliveries. But when we look at the numbers now, the growth is broad-based, and we feel that the growth is on a strong platform in APAC and Middle East. Now looking at the portfolio view, we continue strong performance in our core of technical equipment for sauna and spa. And you can see that the heating equipment represented 56% of our top line during the quarter 3. We also are having strong momentum in other areas, but heating equipment just grew so fast that the relative shares of some of the other parts of our portfolio didn't develop. Now if we look at the growth bridge for quarter 3 by product category, you can see that the biggest absolute contribution, nearly EUR 5 million came from heating equipment, and that's 23% growth, but also solid double-digit growth in many other parts of our portfolio, and this is also something we are very pleased about. Now then let's talk a little bit about our strategy. Harvia is playing in a very interesting market. We are world leader in a market that has strong growth drivers that we believe have sustainability over a long time. And we want to be a proactive leader and leader that shapes the market and excites the market. And our strategy is based on 4 focus pillars that respond to questions what, where to whom and how. So what delivering the full sauna experience about product leadership and portfolio leadership. Where it's about winning the right markets that matter the most, to whom it's having the leading channels and brands in this business and how it relates to our operational excellence and competencies and people. And I'd like to mention a few things how we've been executing our strategy during quarter 3. In terms of delivering the full sauna experience of product and portfolio leadership, I'm very pleased that we have a strong core, and strong core helps us to build also the future. So when you look at the heating equipment performance, you could see that it is really going from strength to strength. At the same time, we are clearly upping the game in terms of innovation and differentiation. And in the following slides, I will share some of the examples of new products that we brought to the market or launched. In terms of winning in the markets that matter the most, North America, of course, we are very pleased that it's back on strong growth trajectory. And looking at the first 9 months, North America is really performing very strong. Also, APAC is performing extremely strong, and we are continuing systematic activities to drive growth across key markets and making sure that we are not too dependent on any single market in that region. I'm also very pleased that in terms of Europe, the tenacious and systematic work that we've been putting in place over the last couple of years is really starting to bear fruit. So having both regions now in double-digit growth is something that does help us in our strategic and growth journey a lot. In terms of leading the key channels, we, at the same time, want to deepen and grow our partnerships with the existing and traditional customers, that's mass volume merchants and also dealer channel. We want to be the best partner. At the same time, we want to build an even stronger direct-to-consumer channel, and I would encourage you to go and visit our almostheaven.com site and thermasol.com site. So you'll see the level of excellence that we've been able to build during the past 12 months on our direct-to-consumer channels. In terms of best-in-class operations and great people, we are continuing to invest in the heart of our competitive advantage, which is operational excellence. So we've been investing, for example, in energy-efficient and new coating system for Dierdorf that provides cost benefits and also efficiencies. We are investing in our Lewisburg site in West Virginia, in particular in anticipation of driving a significant and ambitious growth strategy in that region. We are also investing in our group IT, so streamlining, bringing common platforms and bringing more simplified and modern platforms for us. And that's also a very important enabler for us to keep scaling this business up. And now a few highlights from our innovation pipeline. So we have now started the sales of Harvia Fenix, which is a new full touch control unit for volume segment. I think it's really the leading product in this category. Exiting 4.3-inch full touch screen product. It's very easy to use with, for example, ready-made presets like mild, cozy and hot. It's smart. So actually it learns about your sauna. So it knows how fast the sauna heats up. So instead of programming it your heater to start heating, for example, 30 minutes before you want to go to sauna. Actually, sauna knows how long it takes to heat up your sauna. So you can just easily put that I want to go to sauna at 3 p.m. and the sauna will be ready, making it very easy for you and also saving energy. What's really cool about it, it's Wi-Fi enabled, and it's over-the-air updatable, so we can keep updating the software and providing even more functionality over the life cycle of the product. And in addition to being able to sell it with new heaters, we can actually sell it to significant installed base of saunas already out there since it's backwards compatible with huge seller Harvia Xenio control panel. So a really exciting product that we are very happy about. Another example is our new MyHarvia smartphone app and definitely the most advanced sauna app there. It very nicely aligns the user experience with Harvia Fenix. It's modern, consistent. Again, a lot of features, functionality to help you get most out of your sauna, including over-the-air updates, and for commercial users, ability to control multiple saunas from the same app and interface. We've also been working on the Harvia cloud platform in the background. So really making us ready for the future. Now in the United States, we've been playing mostly when we talk about ready-made saunas in the more like entry level through Almost Heaven Saunas in price points from $5,000 to $10,000. And with ThermaSol brand, we are now attacking the high end much more aggressively in the past. So we've introduced a range of really exciting 3 new models for the premium sauna category in price points from $30,000 to $35,000. And the response to this introduction has been very, very strong. So very much looking forward to what we can do in terms of delivering results in the coming quarters and years with this strength and play in the high end. And one highlight is that we actually got a prestigious recognition as Time Magazine selected Harvia Group solar powered sauna as one of the best inventions in 2025. And this is quite unique product. So it's basically electric heater powered product but designed so that it actually can be very efficiently and conveniently run with solar power. So really providing full freedom from electrical grids and very sustainable solution. Again, a highlight of what Harvia can do. And then the final slide before handing over to Ari. This is just an example of how we also continue to build other group brands like EOS, our high-end brand for technical equipment. Aufguss World Championships were held end of the summer in Italy. And in the center of the picture, you can see an example of what kind of products we can deliver. So that's an EOS event heater. And that was really exciting to see us as the centerpiece of such an event. Maybe another event to mention, Osaka World Expo was running 6 months during this year with over 20 million visitors. And essentially, Harvia was part of sauna experience site there, which run for 6 months, and it was fully booked 7 days a week, full day for 6 months, really shows the power of sauna and what we can do to excite the market. So with that, I would hand over to Ari. Ari Vesterinen: Okay. Thank you. So when we now compare the quarters, actually, the quarter 3 was great. We had a very clear growth path and the profitability level in absolute money stayed basically on the same level as a year ago, but the percentage is lower. And one thing what is here important to note, almost all financial metrics in the profit and loss statement improved in Q3, except the use of materials and external services. And this measure is not always the same from quarter-to-quarter. It depends on the promotions and product mix and so forth. And frankly speaking, we had a very good year last year. We had that percentage only about 30%. And now we had 37% of the annual -- the quarterly revenues, but this 37% is actually very close to our average, which has been in the past about 35% of the total sales. So I'm personally not worried about this percentage at all. It just requires certain price management with which we have been working. And as said, the quarters are not always alike. Here, we see the most important financials, the key figures for the review period. Okay, we have already seen the profitability and growth rates, but probably some highlights to note. The earnings per share increased about 12% now. The operating free cash flow, okay, it is now lower than a year ago, and it's because of the growth investments we have also in net working capital and in CapEx. And that's visible on the line investments in tangible and intangible assets. This year is an exceptionally high investment year. We are investing for the growth. Net debt stayed more or less on the same level as a year ago and leverage also net working capital has been growing. Also, our number of employees has grown, but only about 8% when we have grown 19% in the sales. So the effectiveness of the staff and the organization has improved. Here, we see the operating free cash flow and cash conversion over the quarters. And what is very typical for Harvia is the seasonality. We have the lowest cash flow usually in Q3 and then the highest usually in Q4. So that has been at least the pattern in the past. And the reason is simply that we have been making products to our stock during Q3 and the biggest sales seasons in North America, in Central Europe and many other areas. The biggest sales seasons are actually in Q4 and Q1. So we are well prepared for the Q4 sales season, and that's demanding some investments in advance. The leverage has been staying on a rather low level, 1.4 at the end of Q2. And in our long-term financial targets, we would like to stay under the level of 2.5. But in the case of acquisition also, we could temporarily also exceed it. But as you see, we have a very healthy balance sheet situation in terms of debt. The net financial items, no big changes now there. We had quite steady environment now during Q3 with U.S. dollar and also the interest and interest rate swaps, they helped also to keep the interest rates quite steady. So actually, the effective interest rates of interest costs -- financial costs to be paid out followed very much the accrued balance sheet-related costs. Here, we see how the investment levels have increased during Q3. And I'm personally not expecting as high level for Q4 anymore, but this year at '25 is somewhat over the historical average level of investments. And the investments, they are really, really required, and they have a quite short payback time, and they improve our operational efficiency also in the near-term. Okay. The Harvia's long-term financial targets, just to repeat, they haven't changed anywhere. They have been quite a while on the same level since last Capital Markets Day 2 years ago, 1.5 years. The average annual growth rate over 10% profitability, adjusted operating profit margin over 20% and leverage, as mentioned already earlier, under 2.5%. Harvia pays twice a year dividend, and now the second dividend installment was paid out October 28 this fall. So now there is time for questions, please. Ari Vesterinen: I have actually got a few questions here in the tablet and most of them are business related, also some finance questions. So I start to make -- ask 2 questions from Matias first. Is there an effect of prebuying ahead of announced price increases in your strong U.S. sales growth in Q3? Matias Jarnefelt: Maybe I would take you back to 3 months ago when we talked about our quarter 2. And I understand the quarter 2 results were a bit of a disappointment to the market, in particular, what comes to the modest performance of North America during that quarter. But at that time, what I told you, I said that look at quarter 1 and quarter 2 in combination because there were clear kind of shifts between quarter 1 and quarter 2, in particular in the comparison period from '24. And when we look at the performance in North America now quarter 3, it's actually a logical continuation of the first half. Another thing that I did mentioned during that earnings call was that we saw quarter 2 in North America modest in the earlier part of the quarter, but we saw signs of improvement as the quarter progressed. So essentially, I would say that this is a logical continuation of the performance already from a longer period of time. Maybe, however, I'd like to make a one brief comment, which is related to quarter 4 last year. And that's, of course, relevant for the baseline now in the quarter that we are now living in quarter 4 this year. And that, of course, is that we had a very strong top line growth last year, overall 28% growth in quarter 4 last year and 63% growth coming from North America, which had a significant portion of rather low-margin campaign sales. So maybe that's something to take into account as you assess Harvia's near-term outlook. But all in all, we see strong performance, continued performance in North America despite all the noise in the market. And despite that the consumer confidence generally on a macro level, we've seen, of course, taking a hit. But what comes to interest in our category, we seem to be in a good place. Ari Vesterinen: There is actually quite closer question to that. What is your strategy ahead of campaign heavy Q4 in terms of inventory levels and pricing? Matias Jarnefelt: Well, first of all, the plan is to participate in campaigns. Campaigns are a significant part of many of our partners' business model. So when we think about, in particular, large volume retailers, typically, they want to have something exciting to offer to their customers during the high selling season, for example, Black Friday, Cyber Monday. And we have a choice, either we participate, or we don't participate. And for us, it is clear we want to keep developing these partnerships. We want them to be a win-win for both. We feel that there's great opportunities for us. But of course, we've also reflected the outcome of quarter 4 last year and always try to learn from the past experiences. In terms of building the inventory, that's also visible in the cash flow. It is very clear that we have been building inventory to be able to deliver and sell during quarter 4 and quarter 1. And I think it's also a sign of confidence that we in the management have for the business. Ari Vesterinen: Then one question actually, you shortly mentioned it, but I ask this anyhow. Can you please tell more what is the heater behind the premium range launched under ThermaSol brand? Matias Jarnefelt: The ThermaSol saunas that we launched will be equipped with EOS heaters. So if you think about our premium brands, we practically have 2 of them. We have the German-based EOS that we have had in our portfolio since 2020 and ThermaSol, high-end brand for the steam and kind of home spas in North America that we acquired last year. In U.S., ThermaSol is clearly more well-known brand versus EOS. So while ThermaSol has great channel access to high-end spas and high-end commercial facilities, we feel it's a great opportunity for us to piggyback with EOS on that. So essentially, the idea is that what comes to steam products and then the kind of full sauna solutions in North America, they are branded ThermaSol. But what comes to the heating equipment, it's powered by EOS. So ThermaSol powered by EOS. Ari Vesterinen: Can you specify the investments in the efficiency you made in Q3? What segments and regions? Matias Jarnefelt: Well, the investments are rather broad-based. So one of the example we pointed out was the EOS factory that's located in Driedorf close to Frankfurt. We made quite significant investments there. Another example I did mention as part of my presentation, we bought land around our West Virginia factory in anticipation of building options to grow. And now we are taking action. So there is already works, the groundworks ongoing on the site, and we are expanding the facility as we continue to see significant growth opportunities for us for years to come in that region. Ari Vesterinen: Then more finance-related question. What was the ForEx impact on sales level in North America? I am after the euro-USD exchange rate you used in Q3 '25. The exchange rates we used for our P&L, they are the average rates from Bank of Finland. And for this quarter, we used exact average. It was $1.168 per euro. And a year ago, it was about $1.10. So actually, dollar was about 6% weaker than a year ago during this quarter. And as we saw from the pictures already in the presentation, we were way over 20% of the growth in Northern America. And in terms of U.S. dollar, it was about 30%. Is EMEA growth more one-off or new projects already coming after current project deliveries? Matias Jarnefelt: EMEA, so is that Europe? Ari Vesterinen: Yes. It is the -- well, let's consider the whole area, APAC, EMEA. Matias Jarnefelt: Okay. APAC and Middle East and Africa. Okay, sure. It used to be much more volatile. And of course, when the scale of the APAC, Middle East and Africa business was smaller, it was quite easily swung either direction by single large orders, for example, significant project deliveries. But over the past few years, our key goal has been to develop the region in a sense that it really provides not only growth opportunities, but also on a stable ground, so diversify the kind of outreach that we have in the region. And when we look at the quarter 3 in terms of the markets and countries that delivered to that regional performance, it is wide spread, and that's very good thing for Harvia. So we saw significant growth in countries like Japan, China, Oceania, Australia and also strong performance in EMEA. So it's not like something really stood out and kind of made the whole thing happen. It really is broad-based growth. And there wasn't -- there's always some project deliveries in Middle East, in particular. That is more a project-based business. But I would consider almost something that is very part of the business we do in that part of the world. And there wasn't any particular outliers in terms of, for example, project business impacting our quarter 3. So all in all, I would assess it as a solid broad-based performance. Ari Vesterinen: Yes. There is really a great interest for sauna, a growing interest in wealthier Arabic countries and certainly some business to come also in future. So it was really not a one-off even in those areas. The new Fenix control and app, is that an opportunity for installed base? Does it give modernization demand? Matias Jarnefelt: This is exactly the thinking we have. So I think in the sweet spot of innovation, we have something that excites the market and we can sell with the new products, but at the same time, provides us an opportunity to tap into the existing Harvia installed base. And if you think about the kind of strategic rationale of how we see Harvia in the long term, it is very important for us now to be a winner as the market goes through a significant growth phase. So have more Harvia products and saunas out there in the world. And the way we think about it is, that we want to make it easy for customers to get into the Harvia world. And once they are in the Harvia world, they want to stay. And one of the example is that if you have already Harvia sauna where you have that Xenio kind of mid-range control panel, it works perfectly with the new Fenix. There's no need to renew, for example, the wirings. That's an exciting opportunity for us to reach out to Xenio owners and basically send a message that there's an exciting innovation. Do you want to upgrade your sauna experience and modernize it with now this full touch smart console that Harvia Fenix is. So the idea is that as we basically sell products and new products, we also want to build the foundation for recurring revenue and loyalty for the long run. Ari Vesterinen: Okay. Now there is a series of 3 U.S. related -- more or less U.S.-related questions. So let's start. What is your best estimate on your performance relative to competition in the U.S.? Is part of the gross margin pressure attributable to increased price competition or merely by the impact of tariffs? Matias Jarnefelt: So around 30% growth after 9 months in the U.S. I think it's a solid performance. The market continues to grow. I believe that we have taken share. So that's one perspective to it. On the kind of pricing competition side, I think it's more related to inertia in having price increases effective that then truly reflect the changes in the cost of doing business due to tariffs and for example, exchange rate changes that happened actually pretty rapidly. If you think about the dollar depreciation, it really started to happen actually towards the end of quarter 1, then quarter 2 was significant rapid deterioration and then more stabilizing during the quarter 3. And then, of course, the tariff increases. We used to have tariffs of around 4% for our heaters that we make in Europe and sell in North America. And essentially, with that 15% general tariffs plus extra tariff on the steel part of the product, we talk about a little bit above 20%. So it's also quite significant impact in terms of that hardware business from Europe. We have implemented already pricing change, but it's also a little bit of a balancing act that what's the right strategy and right pace because at the same time, we want to keep growing, we want to keep our customer relationships strong. But of course, we also need the appropriate compensation for the great products that we make. So ultimately, the sort of margin dynamics, I think it's more related to just the macro factors, the exchange rate and tariffs rather than there would have been significant intensification of competitive landscape. Ari Vesterinen: Do you expect that the price increases implemented to counteract tariffs will be fully visible in Q4, thus supporting margins? Matias Jarnefelt: Well, long story short is that, I think, of course, price increase are always supportive. There's maybe kind of one area of uncertainty, which is basically kind of financing rules. So basically, to a degree, we've still been selling some products that were imported to the market before the tariffs took effect. And basically, it's first in, first out principle. So of course, we have been modeling also the kind of what's the full impact of the tariffs as we will transition in a situation where practically 100% of the products will be having a tariff attached to them. But all in all, I'm confident in the work that we have been doing. Significant effort has been put in pricing analytics and assessing the situation and agreeing and implementing the right course of action. Ari Vesterinen: How do you aim to improve your margin performance in Q4 in the U.S. versus last year when aggressive campaigns heavily diluted your margins? Matias Jarnefelt: Less aggressive campaigns. Now that's maybe a little bit of a kind of a cheek -- tongue in the cheek, but there is some truth to it. That's, of course, for sure. There is many things. So generally -- general price increases that we have been implementing and they have been also coming in force step by step. So we basically built a more like a transition path. It's not yet in full effect, but it's already partially in effect. It's about also being smart in terms of what kind of campaigns and campaign pricing, not only with kind of key accounts we have, but also what do we have available in our direct-to-consumer, which is the fastest channel where our pricing decisions can basically be affecting the price the next minute. And most likely, you would see a little bit less aggressive campaigns, but still good campaigns because at the same time, we want to continue to drive top line growth, and we want to continue to take share in this growing market to place us very strongly in terms of how do we have products out there, building the installed base and building the brand leadership for years to come. Ari Vesterinen: If there is a retrofit demand, perhaps you talk about ASP for such an upgrade, average sales price. Matias Jarnefelt: Yes, I think that's a great comment and something that we are increasingly focused on. So while we are driving growth and volume growth and as I said, building the installed base, it is very clear that in our minds, there's also the long-term future where hopefully, there will be essentially millions of products and saunas where we can sell more continuously. In terms of kind of metrics that we would be reporting like ASPs and ASPs by product category, that's something that we haven't done so far, but the idea, of course, behind that question is a very good one. Ari Vesterinen: Yes. Just to remind, in the more traditional sauna areas, 70% to 80% of our total revenues is actually replacement revenue. People are buying new saunas to their old or -- old place or replacing the heaters. And actually, our sweet spot of heater sales is the second heater for the same sauna. When the construction company has selected the cheapest heater, Harvia heater usually for the new sauna. And after a couple of years or probably 5, 6 years, the user of the sauna wants to have a better one. And that's the most interesting heater for us with more equipment and features and also with higher margins. Matias Jarnefelt: And maybe I could also continue on your very good answer. And just examples of the sort of building recurring business on the installed base. One example is, of course, now Fenix, where we can actually, through OTA, over-the-air updates, actually sell new features during the life cycle of the product. And then, of course, we are looking at -- basically these control panels are becoming fully connected interfaces in the wellness oasis that sauna is, what kind of, for example, digital services in the coming years we can offer that could also provide direct service revenue that would be high margin and scalable. Ari Vesterinen: You discussed already earlier about that we make probably not so strong campaigns, but we make campaigns during Q4. Now the follow-up question to that, shall we expect negative organic growth for North America for Q4? Matias Jarnefelt: I will leave that to your Excel exercise. We, of course, always want to see positive figures, and we have, I would say, high ambition level. And then as you know, we don't give short-term guidance. So that's something that you will need to assess. Ari Vesterinen: Okay. Your CapEx has been now somewhat elevated both in '24 and '25. Is this higher CapEx expected to continue in '26? Or should it decline? Our estimate is currently that it will decline a little compared to this '25, but we don't give more exact figures for that. Okay. When are you able to offset the tariff impact with price increases? That was more or less already discussed a little. By the way, the tariff impact for completely sauna cabin set in U.S. for us is actually not so heavy. So -- because the saunas are produced there in Northern America and from local wood with local work power. So only the hero, which is coming from Finland, it has max up to 20% impact tariff for the landed cost, but it makes -- from the total price of the package only about 10%, 10% to 15%. So the impact of the tariffs for the complete sauna cabin, which we are mostly selling there is only about 2% and with our pricing power, we should really be able to increase that 2% or somehow otherwise compensate. So the biggest impact of the tariffs are for importers who are importing only the heaters for their saunas and for the distribution. And we have that kind of customers also in U.S. who are actually paying the import tariffs by themselves. Matias Jarnefelt: And maybe to also build on what Ari said, we, of course, are in close discussions with our key customers. And some of them have also big companies, public listed companies making statements also in terms of the development on kind of the pricing of the merchandise that they buy from suppliers from the Far East. And I think it is clear that there is kind of this dynamics that the inventory that many companies have in the U.S. to a degree has been imported before the tariffs took in place. And now more and more companies are really the kind of, I would say, the back against the wall implementing the price increases. So essentially, I would say, as my personal assessment that we have not fully yet seen the pricing increase impact of the tariffs that are currently in force and finding that new equilibrium in the market will take probably another 6 months. Ari Vesterinen: From some of my personal channel checks in Europe, it seems that the winter selling season has started earlier than normal. Several distributors told me that Harvia sales have been accelerated notably throughout the summer and since October. Would you like to comment that? Matias Jarnefelt: Well, I can comment. Actually, I'll take you again back to 3 months ago when we were talking about quarter 2. And actually, usually, I don't talk about weather as an excuse. But actually, 3 months ago, I did mention that. And I did mentioned it in particular in relation to our Northern European performance. So in Northern Europe, we had basically vacation house sauna season, so-called cottage season is very important for us. But in North Europe, we had a very poor beginning of the, I would say, spring and beginning of the summer. And the weather was significantly better in July. And that's what I also mentioned. So I would say the quarter 3 that you now see, it's actually a little bit the dynamics from the season. Actually, the spring season started a bit later just due to the weather. Ari Vesterinen: The same is true for U.S. when looking at recent momentum on Costco and Wafer. Most importantly, customers are increasingly mentioning that Harvia has been the best value for money. Thank you. Not working for us, this [ ask. ] Somehow, this feels like COVID-19 2.0 light as consumers are staying more at home. Meanwhile, we are coming out of a period of subdued home improvement, which has started to pick up again, also benefiting Harvia in mature regions. Does this match to your view? Matias Jarnefelt: Well, I think there's a little bit different dynamics between how much are we in wellness business and how much are we in home improvement business depending on the region. So for example, in Finland, it's very clear that sauna has close connection to the property market and new build construction just for the simple reason that saunas in such a big majority of houses, apartments and summer cartridges. So there is such a correlation. Whereas in regions where the sauna density is much lower, clearly, the dynamics is much more about buying a wellness product. And sauna is like, I would say, miracle wellness oasis. Sauna has significant health and wellness benefits. And it's unique since you can get those health and wellness benefits in such a pleasant way. And this combination, it does great for you and it feels great, story resonates extremely well, almost no matter what the economic times are. And personally, I'm a strong believer of this sauna as a perfect wellness oasis and the strength of the story for years to come. Ari Vesterinen: During the conference call in September, Costco's CEO said they would radically reshuffle their holidays offering. For the first time, they will also bring in saunas in store for which they didn't have enough space previously. Does this impact Harvia given that Costco members are now limited to shopping almost 7 saunas product online? Does it imply that Costco will carry saunas in its own inventory and thus impact Q4 and future performance? Matias Jarnefelt: Well, I wouldn't comment too much on the CEO of another company. But of course, we have taken a note, and we have a long-standing relationship with Costco. And the growth ambition of Harvia is to grow each of our accounts, so we want to keep developing Costco, and we see significant growth opportunities. We also want to have more of the big box retailers as part of our partnership network. We want to grow in the dealer channel where we can sell more premium products like ThermaSol saunas, which require, for example, installation support for the end user. And we see significant opportunity also in our D2C with a portfolio that's tailored for D2C so that all channels can grow without cannibalizing each other. And of course, as I said, we know about the comment made. And it's an example of actually in a sense, in the sort of big macro picture, the tariffs most likely are bit of a negative thing, but they do also change the supply chains and competitive landscapes. And one example is that, of course, Harvia makes majority of our products inside the United States. So we are not fully insulated from tariffs as discussed, but we are better insulated than most of our direct competitors. But there's also this competition between categories in big channels. And essentially, we know that many companies like the one mentioned and others have seen significant price increases, in particular products that have been imported from the Far East and making reassessment of their commercial potential in their channels and also, for example, for the kind of sales season campaigns. And this is something we have now seen that actually a category like sauna that seems to be resisting very well kind of the macro environment because the story of the category is so strong and partner like Harvia that can produce good value and much of it -- much of that value created in the United States are in great position. Ari Vesterinen: Looking at the strong growth in heating equipment. Harvia has got more than 20% market share. No matter how you look at it, it can't be coming solely from new build or replacement at your existing customers. You must be converting non-Harvia customers into Harvia customers, coupled with upselling, the price difference between a digital control versus a basic heater. Can you comment on the drivers behind the strong growth in heating equipment? Matias Jarnefelt: Well, on one hand, the whole -- like sauna category is growing. And many saunas in the world are powered by Harvia. And if we think about just putting things in scale with Harvia, we talk about Harvia making -- we make clearly more than 200,000 heaters per year and give and take maybe 20,000 sauna cabins. And practically, that means that we have 10x more volumes in the heaters. And that, of course, tells the story that many saunas, which have been provided may be custom-made on site or maybe provided by some other sauna cabin providers actually use Harvia. And the reason is very clear. We have excellent products, and we provide great value for money, but we also are very good at designing the products so that the market wants them, and we have efficiencies in production. So that, of course, leaves good margins for us. But ultimately, this is the dynamics. We want to keep growing in the equipment business. We see significant opportunities. And in terms of volume, in order of magnitude, it's significantly larger than the cabin business at the moment. But at the same time, we want to sell these full solutions because it does help us tap into much bigger spend potential in the key markets. So these sauna and heating equipment do complement each other, and I think we are well placed in both of them. Ari Vesterinen: Looking at your LinkedIn pages, recruitment has ticked up quite a bit at ThermaSol and Almost Heaven Saunas over the past 2, 4 weeks. This matches the early indicators that sauna demand is already a lot higher versus previous year. Notably, it comes at the time of the shutdown. Here is the [ current ] shutdown meant. Are you impacted by the current shutdown? Matias Jarnefelt: I would say mostly no. That would be the answer. Maybe on the sort of recruitment, of course, if you think about a region that's growing 30% year-to-date and has a history of growth of 40% over a period of 6 years on average, of course, that puts us in a situation where we have opportunity and need to strengthen the organization. And I would take it also as a sign of confidence from the management side to the future of Harvia. Ari Vesterinen: In the Q2 results information for Sweden, it was mentioned that consumer trade is expected to improve towards the end of the year as a new partner is being sought or started to replace Kesko. What is the situation with this? And if the partnership has already started, has it had an impact on the Q3 results yet? Matias Jarnefelt: Yes, I did touch upon it when I talked about North Europe as part of the presentation. The answer is yes. So for Harvia, when Kesko made the strategy alignment or like realignment kind of choosing to leave D2C technical trade in Sweden that left a big gap in our channel landscape in Sweden. And we have been able to bridge that gap, and we have started to work with the new partner, and that's going very well. Ari Vesterinen: And Kesko is still selling our products also in Sweden with a slightly different concept. In APAC/MEA, given that the multiple markets seem now to demonstrate sustainable growth, but you are partly dependent on relatively long logical routes from Europe. Are there opportunities for M&A? Or have you considered adding capacity into the region? The same note, are you delivering whole sauna kit solutions increasingly to the region? Can you give a little bit color on your outlook in that -- in this regard? Matias Jarnefelt: Yes. We do have actually a factory in Asia. So -- since 2005, so this is actually 20th anniversary of our factory in Guangzhou. We have, I would say, mini version of Muurame. So Muurame is an equipment factory that is also a volume factory. We have another volume factory, which is the China factory. On top of that, for the heaters, we have the value factory close to Frankfurt in the EOS home space. So we actually do have supply source in that region. And the majority of the products we sell in APAC are the technical equipment. So if you look at the sort of the cabin full solutions business, it is very clear that the star of the region is North America. We do have ambition to also increase the full solutions business in Asia. We are already doing it mostly through partnerships. Some of the products, cabins are also shipped from Europe. And at the same time, we are assessing what potentially could be the right time for us to have sauna cabin factory in that region when the volumes would justify it. Ari Vesterinen: Okay. Ladies and gentlemen, we have now spent exactly 1 hour with Harvia. I don't have any more questions on the list. Thank you very much for following, and let's sauna. Matias Jarnefelt: Thank you very much. Let's sauna.
Operator: Ladies and gentlemen, welcome to the Zalando publication of the Q3 Results 2025 Conference Call. I'm Vicky, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Patrick Kofler, Director of IR. Please go ahead, sir. Patrick Kofler: Good morning, and welcome to our Q3 2025 earnings call. Today, I'm joined by our co-CEO and Interim CFO, David Schroder. David will kick it off with a business update before he walks you through the financial development of the quarter. Finally, David will discuss our outlook and will be available for questions afterwards. As usual, this call is being recorded. The live webcast as well as the replay of the call will be available on our Investor Relations web page later today. I will now hand it over to David. The floor is yours. David Schröder: Thanks, Patrick. Good morning, everyone, and thank you for joining today's call. We continue to execute on our ecosystem strategy at full force, and the third quarter demonstrates its effectiveness in capturing profitable growth across both of our B2C and B2B segments. Our strong Q3 results incorporate, for the first time, the fully consolidated financial results of ABOUT YOU effective July 11, the closing date of the transaction. Final step of the squeeze-out will -- which implies the delisting of ABOUT YOU will happen very soon. With our continued strong performance in the third quarter, we are well on track to achieve this year's combined guidance and to make further progress towards our midterm targets for 2028. Let me now walk you through the 5 key highlights of the third quarter on Page 2. Number one, we are pleased to report strong financial performance in Q3 2025, demonstrating our resilience in what still is a dynamic geopolitical and macroeconomic landscape. We achieved 6.7% year-on-year pro forma GMV growth, with an even stronger pro forma revenue growth of 7.5%, on top of a strong prior year baseline. Our profitability also remained solid with adjusted EBIT reaching EUR 96 million, slightly surpassing last year's figures despite negative impact from the inclusion of ABOUT YOU. Number two, in B2C, we continue to expand into lifestyle with a key focus on sports this year. Today, we announced an exciting new partnership with the German Football Federation, DFB. I'll come back to these very exciting developments in a moment. Number three, our B2B segment continued its double-digit growth trajectory. We are pleased to highlight several successful large-scale client go-lives and extensions, along with enterprise merchant wins for both ZEOS and SCAYLE. Further details on this will follow shortly. Number four, as already announced, we are equally excited to welcome Anna Dimitrova as new CFO to Zalando. She will officially start on January 1, 2026. Throughout her career, she's been responsible for all aspects of finance, including Capital Markets and Investor Relations. Her experience in fast-moving capital-intensive technology-driven sectors positions her perfectly to support Zalando's ecosystem strategy, and work with our teams to seize the exciting opportunities ahead. And number five, on the back of our strong year-to-date performance, we are confirming our combined guidance for full year 2025, including ABOUT YOU from the 11 July 2025 closing date onwards. Let me now elaborate on the progress of our B2C strategy as detailed on Slide 3. To briefly recap, with our ecosystem strategy, we are extending Zalando's reach and relevance beyond fashion into broader lifestyle areas, playing an even more important role in our customers' lives. This involves creating a distinct and engaging experience that positions us as the go-to destination for sports enthusiasts. Our strategy continues to yield positive results, demonstrated by sustained customer growth and double-digit GMV increases in our sports proposition last year and this year. Furthermore, we are strengthening our commitment to authentically integrate Zalando into sports culture through strategic partnerships. I'm just very excited to announce a significant stride in these efforts today, an extensive partnership with the German Football Federation. Until 2030, Zalando will be a main partner for the men's, women's and youth national teams. The new sponsorship agreement presents an unparalleled opportunity to significantly elevate Zalando standing as a leading football destination. Following the same playbook, we also made significant strides to boost Zalando's awareness and consideration as a running destination. We've entered partnerships with the Rotterdam Marathon, the Copenhagen Half Marathon, and Berlin Marathon, all with the aim of inspiring runners across Europe. Let's now turn to the latest developments in our B2B business. With our B2B business, ZEOS, we are building the operating system for fashion and lifestyle e-commerce in Europe, unlocking and accelerating digital business opportunities for brands and retailers. Building on our unique infrastructure and technology capabilities, we are now scaling and enhancing our offering with a particular focus on logistics and software. Regarding logistics, we already announced our large-scale strategic partnership with British retailer, NEXT, last November. This collaboration has successfully launched in September this year in 21 markets on next.com and additional European marketplace businesses. We are pleased to announce that British retailer, Marks & Spencer, has expanded its collaboration with ZEOS as well. Having already utilized ZEOS for its marketplace business, the partnership now covers fulfillment for the brand's entire Continental European e-commerce business to take full advantage of one single stock pool. With the acquisition of ABOUT YOU, we also complemented our software offering with SCAYLE, a leading enterprise digital commerce platform. This shop system allows us to better support the most important channel of our merchants with their own e-comm. After the initial go-live of the partnership, we are very thrilled to see the go-live of DEICHMANN on SCAYLE shop system in its key market, Germany. DEICHMANN is the market leader in European shoe retailing. We are equally happy to celebrate another key merchant win, namely Netto Marken-Discount, the German discount grocer. This partnership is a great example that SCAYLE is the perfect shop system for implementing modern retail concepts in different verticals, efficiently and at scale. This concludes our key business updates. Let's now take a look at our Q3 financials. In doing so, let me first focus on our group level figures on Page 5. All presented financial figures are as reported figures, including ABOUT YOU's results from the 11 July 2025, closing date onwards. Additionally, GMV and revenue growth are presented on a pro forma basis. For the corresponding prior year period, historical pro forma figures include ABOUT YOU's results from the 11th of July 2024 onward. In Q3, we sustained our profitable growth trajectory. GMV saw a reported growth of 21.6%, while reported revenue grew by 26.5%. This increase was primarily due to the inclusion of ABOUT YOU. Pro forma GMV grew by 6.7% and pro forma revenue increased even more by 7.5%, supported by strong performance of Zalando Marketing Services, ZEOS Fulfillment and SCAYLE, all of which contribute revenues but are not included in our GMV figures. Our focus on driving profitable growth is also reflected in our adjusted EBIT performance. On a reported basis, combined adjusted EBIT including ABOUT YOU, reached EUR 96 million, slightly surpassing last year's figure of EUR 93 million. On profitability, the inclusion of ABOUT YOU acted as a headwind and resulted in an adjusted EBIT margin of 3.2%, 0.7 percentage points below last year's level. Our combined Q3 results once again underscore our consistent progress in achieving profitable top line growth, while simultaneously facilitating investments that cultivate long-term value. Now let's examine the performance of our B2C segment in more detail on Page 6. In Q3, revenue grew by 27.9%, exceeding the GMV growth rate. The strong reported growth was predominantly driven by the inclusion of ABOUT YOU commerce business. Additionally, growth in Zalando B2C was supported by strategic growth investments, such as the Zalando launch in Portugal and the rollout of our upgraded Zalando Plus program. Plus now serves more than 13 million customers. Furthermore, we saw a successful start to the autumn/winter season and particularly strong growth in our lounge, sports and beauty categories. Continued strong growth in Zalando Marketing Services also contributed to B2C revenue growth. Adjusted EBIT declined to EUR 77 million, with the adjusted EBIT margin decreasing to 2.8% due to the inclusion of ABOUT YOU's Commerce business. Before we move on to our customer metrics, I want to briefly highlight something I'm incredibly excited about, the unmatched scale of our total combined customer base following the ABOUT YOU transaction. As you can see on Slide 7, teaming up with ABOUT YOU is a clear testament to our strong position as one of the leading multi-brand fashion and lifestyle groups across Europe. Together, we now serve a combined active customer base of more than 60 million customers. This supreme scale does not only showcase our strong standing in Europe, but further broadens our market reach and provides us with the opportunity to actively influence and shape the European fashion and lifestyle industry hand-in-hand with our more than 7,000 partnering brands. More than 5 million customers already take advantage of both the Zalando and ABOUT YOU platform. They exhibit a significantly higher spending compared to customers that only shop on either Zalando or ABOUT YOU. At the same time, the share of -- the high share of unique customers on both platforms is a clear testament to the appeal of our dual brand strategy, which we are going to leverage going forward to drive growth and to cover an even larger share of the EUR 450 billion European fashion and lifestyle market. Let's now move on to Page 8 and look at the remaining customer metrics of the combined group. With the inclusion, spending per customer held steady at around EUR 300. This was due to the increased spending from customers using both platforms, which compensated for the lower average spend of customers who use the ABOUT YOU platform less frequently. Let's now turn to Page 9 and take a closer look at our B2B segment performance. In Q3 2025, our B2B segment achieved combined revenues of EUR 277 million, marking a 15.6% increase year-over-year. The growth in our B2B segment was primarily fueled by ZEOS Fulfillment, which includes both Zalando Fulfillment Solutions and multichannel fulfillment. Additionally, the inclusion of SCAYLE supported revenue growth. Adjusted EBIT for the B2B segment reached EUR 20 million. The adjusted EBIT margin saw a strong increase of 4.3 percentage points, reaching 7.1%. This improvement was driven by efficiency gains in ZEOS Fulfillment and the inclusion of SCAYLE. Let's now move on to the group P&L on Page 10 and focus on the Q3 performance on the right-hand side of the table. With the change in reporting scope to include ABOUT YOU, all cost lines and the adjusted EBIT margin have been impacted. Group gross margin decreased year-over-year by 1.1 percentage point to 39.6%. More details to follow on the next slide in a moment. Fulfillment costs increased by 0.6 percentage points to 24.3% of revenue, and marketing costs rose to 9.3% of revenues, both primarily due to the consolidation of ABOUT YOU. Meanwhile, the consolidation positively affected admin costs, which improved by 0.6 percentage points. Overall, we delivered a lower adjusted EBIT margin of 3.2%. Now let's examine the gross profit development in more detail on Page 11. Our Q3 group gross profit was impacted by 3 main factors: factor number one, Zalando B2C negatively impacted the group gross margin by 0.7 percentage points. We saw negative impacts from active customer participation in commercial events, strong growth in our lounge business coming with a structurally lower gross margin and the planned revenue deferrals from our updated loyalty scheme. At the same time, we benefited from positive contributions of our partner business, including Zalando Marketing Services. Factor number two, the revenue contribution from ABOUT YOU's commerce business, which currently operates with lower gross margins and a lower partner business share, negatively impacted the group gross margin by 0.6 percentage points. And factor number three, B2B revenues positively impacted group gross margin by 0.2 percentage points. This was due to efficiency gains in ZEOS Fulfillment and the inclusion of SCAYLE as a high gross margin software business, both of which positively affected B2B gross margins. Looking ahead, we remain fully committed to our midterm group level gross margin target of around 40% by 2028. Turning now to Slide 12 for net working capital. Our net working capital continues to be negative in Q3 at minus EUR 141 million. Compared to last year, we see an increase of more than EUR 100 million. Inventories were higher, predominantly reflecting the inclusion of ABOUT YOU. Let's now take a look at Slide 13. As of the close of the first 9 months of 2025, our cash and cash equivalents stood strong at EUR 1.3 billion. This figure represents a decrease of EUR 1.3 billion from the EUR 2.6 billion recorded at the end of last year, primarily due to the paydown of convertible bonds and the consideration transferred for the ABOUT YOU acquisition. This concludes the financial performance review. Let's now move on to the outlook on Page 14. Today's strong Q3 results confirm that we are fully on track to achieve our combined guidance for the financial year 2025, as provided in August. Based on current trading and looking ahead at Cyber and Christmas peaks on the horizon, we anticipate a strong finish to the year, with mid-single-digit pro forma GMV growth in Q4. As a team, we are fully focused now on providing our customers with great experiences, and our partners with top-notch service during the upcoming peak season. For the upcoming year, our ambition remains clear. We will continue to deliver on our ecosystem strategy, accelerate growth and increase profit across both our B2C and B2B segments, fully in line with our midterm guidance. This will be supported by both accelerated growth of our platform business in B2C and further scaling of B2B, delivery of cost synergies enabled through the combination of Zalando and ABOUT YOU as well as continued cost efficiency measures. This concludes our presentation for today. Let's now open for Q&A. Operator: [Operator Instructions] First question from Adam Cochrane, Deutsche Bank. Adam Cochrane: The first question I got is on the basket size that you've reported, you've got the combined number. How has the sort of basket size progressed over the period? I know that as you're gaining new customers, they generally come in at a slightly lower average basket size. Is it possible to give us any sort of view on how the existing customer base basket size is evolving? And then obviously, you've got the new customers coming in. And then you've got the acquisition of ABOUT YOU as well. It's quite hard to get a picture of what's going on within the basket size. And then secondly, in terms of the B2B business, how is it evolving without the benefit of SCAYLE? And within SCAYLE, would you guys give any view on -- you've dropped in a few names there of clients. How much EBIT do these clients generate from the SCAYLE operation? Just so we get a flavor for talking about Netto as an example or DEICHMANN. I don't want them exactly, but how much EBIT do these clients generate for the group? David Schröder: Adam, thanks for your questions. I mean, looking at basket size development, I think the most important thing to understand, and as we've explained when we released our strategy, is that our key goal is really to increase GMV spend per customer, right? So our key focus is on the wallet of customers rather than the basket size of each individual purchase because ultimately, that's what we need to drive to drive customer lifetime value and to also obviously drive value of the business. That being said, obviously, we have taken measures over the past years, as you know, to improve our order economics also on individual orders, and that has led to an increase in average basket size actually both on Zalando and ABOUT YOU. And yes, that's also a trend that we actually expect to continue in the future. But as you know, what we are even more focused on at the moment, is to drive more frequency, frequency of engagement through our inspiration and entertainment efforts, but also frequency of shopping, especially through our loyalty program, Zalando Plus. And then on your second question regarding developments in B2B. I think I'm happy to confirm that even without including SCAYLE, our B2B business looks very strong, continues its double-digit growth trajectory that we've also talked about earlier this year, predominantly driven by ZEOS Fulfillment. And as we've also commented already in the presentation, the margin also without SCAYLE is up year-over-year in that business. And SCAYLE is contributing obviously even more revenue growth due to the first time inclusion on an as reported basis and then also obviously supports the margin due to the strong software gross margins, which then also leads me to the second point that you asked for. So if we look at SCAYLE specifically, obviously, it's a high gross margin software business, meaning that we -- if we add meaningful revenue which, in the case of large enterprise merchants can be right in the millions. There's also a strong drop-through of that revenue on to the bottom line. Operator: The next question is from William Woods, Bernstein. William Woods: The first one is just on, obviously, you're engaging in kind of more sponsorships with the German Football Association, et cetera. Do you think that this will become a larger portion of the business? And do you think the marketing spend might have to come up over the next couple of years? And the second one is similar to Adam's question, just on the active customer growth. Can you give some color on who you're acquiring either by gender, age category? And are you seeing similar retention rates? And then where do you think there's further room to go in terms of acquiring customers? David Schröder: Sure. Yes. So maybe taking a step back on sports in general, right? I mean, as you know, we -- as one pillar of our B2C strategy, we are definitely keen on expanding more into lifestyle areas beyond fashion. We see this as a key way to drive share of wallet and GMV per customer, as I also just explained on Adam's question. And especially the sports business is appealing there, right? Because sports, in a way, very nicely brings together style, culture and obviously, also performance. And we see that there's generally a high interest from our customers in that category, and that's why we also enjoyed significantly double-digit growth last year and also seeing strong growth this year. And for us, the sponsorships are now really an opportunity to, yes, further step up our game in sports and further raise awareness and consideration with customers to continue to grow that category very strongly. In terms of the implication that has on our marketing spend, I think what we rather see it as a reallocation of marketing spend within the marketing budget, so we don't intend to increase our marketing spend on a relative basis. I guess we've always said, over time, we rather aim to take it down in relative terms over time, and that is still very much true today. For us, it rather means, yes, we refocused some of our marketing spend on these big partnerships because we think they are an interesting new way to engage with customers, especially when it comes to these exciting new lifestyle propositions. And we've seen it work very well with the running sponsorships that we've done this year. So as we talked about in the presentation, several partnerships with key marathon events. And in the running category, we've seen even higher growth rates than in sports overall. So I think we have strong proof points that exactly this strategy is working, and we're now using the same playbook for football. Also ahead, obviously, of the large-scale events coming up next year with the World Cup in the U.S., Canada and Mexico. And then second question on active customer growth. I mean, we are very happy actually at both Zalando and ABOUT YOU to see this strong active customer growth continue. I think it shows us that we are far from reaching maturity levels anytime soon. I mean as we've talked about multiple times, the market is huge. Our market share, even combined, is still very small. And we continue to attract customers across all our markets, really, right? So even in more mature regions like DACH, still looking strong on new customer acquisition. It's also broad-based across age groups, across also the different propositions, which also provide us with a new angle obviously, to attract customers, right? So some customers now are also coming to us because of beauty, because of sports, because of kids, right? And I think that is very much explaining the strong traction that we are seeing on the active customer side. Operator: The next question from Georgina Johanan, JPMorgan. Georgina Johanan: I've got 2, please. The first one was just on the synergy guidance of EUR 100 million, I think. Just any updated thoughts on that from the early work that you've been able to do? And then secondly, I think just following on from, I think, Adam's question on SCAYLE, I think I'm right in saying that ABOUT YOU's guidance historically was for about EUR 25 million or so of EBITDA for their fiscal '25 from that business. It would just be really helpful even if it was on a one-off basis to understand the sort of level of depreciation that was going through SCAYLE, just so we could get a sense of that EBIT contribution, please? And then just sticking with SCAYLE, I know ABOUT YOU has talked about the potential for U.S. client wins. So just wanted to understand if that was something that you were still targeting under your ownership, please. David Schröder: Sure, Georgina. So on synergy guidance, I think nothing has changed since the last update. If anything, I guess, we are becoming more and more confident with every day that we are working together, that we'll be able to deliver on the synergies that we promised and might even find new ones along the way. I think one thing to still keep in mind, we already mentioned that several times in the past, is that the largest amount of synergies is obviously backloaded. So we'll mainly then hedge the outer years, 2028, 2029. But obviously, we are working hard to enable those synergies already with the actions that we are taking today and also next year. But yes, we'll be happy to provide further updates as we move along, most likely already then with our full year results in March next year. On SCAYLE, I think I'm afraid that I can't help you out on the specific details. You asked for what I can confirm, however, is that the strong gross margin and also EBIT contribution that SCAYLE has talked about in the past. It's also something that is obviously now driving our B2B business forward. As you can imagine, we've now reporting on a combined basis, we are also taking the same approach to capitalization that we are taking for Zalando overall. So no difference here in the treatment going forward. And with regards to the U.S. opportunity, indeed, this is potentially one of the biggest opportunities for additional SCAYLE momentum in the future. As you know and have seen, the momentum is very strong in Europe already. But obviously, the total addressable market could be significantly expanded if we gain a foothold in the U.S. And so it's a key priority for us as a group and for the SCAYLE team in particular. I'm definitely happy to report that there are several key discussions in, yes, what I would call close to final stages. So I would say, stay tuned for further updates to come in that regard. Operator: The next question from Sarah Roberts, Barclays. Sarah Roberts: Two from me, please. Firstly, digging into the B2C Zalando gross margin moving parts a little bit more. Could you walk us through the key moving parts of the B2C gross margin? We know there's some impact from partner program and ZMS, some headwinds from loyalty, but can you quantify these? And then how much of the pressure on gross margins reflect a more price-sensitive or promotional consumer? And then secondly, the M&S partnership for ZEOS looks like a strong win. Could you share a little bit more color on its potential contribution to B2B revenues? And give us a sense of when we might start to see those revenues coming through for B2B? David Schröder: Yes. So on B2C gross margin, I mean, the overall impact is something that you see very transparently, I guess, in the bridge that we provided. In terms of the quantitative impact of the different factors influencing, especially the Zalando B2C gross margin, I think I'm definitely happy to tell you how they rank, right, in terms of how much they influence the picture. The biggest impact definitely comes from the commercial activations that were very successful across our destinations in Q3, considering also that, that is seasonally a quarter very much driven by commercial activations with end of season sales, for example. Yes, second largest impact then came from the lounge business, showing very strong traction and I think also allowing us to have a strong offer for value-focused and value-conscious consumers in the current market environment. I think that's the key strength of the group that we can also cater to these needs, whereas our main destination, as you know, is more geared towards quality full price. And then the smallest impact, but that's one we already flagged to you same time last year, essentially came from the continued rollout -- successful rollout of the loyalty program, which saw a 30% increase in active memberships quarter-over-quarter. And then obviously, it's also reflected in our gross margin on the B2C level. These are the negative ones. I guess, on the positive side, obviously, we did -- as we commented, we did benefit from the higher gross margin of our partner business, especially also the continued double-digit growth of our Zalando Marketing Services. And yes, then coming to your question on the Marks & Spencer partnership, I mean, I'm personally super happy actually to see that after this landmark deal with NEXT, we are now seeing also strong interest from other brands and retailers to go for a similar setup, essentially trust us, not with just a part of their business, but go all in with the ZEOS solution, especially to leverage its full advantages across Continental Europe, where I would say our network is really one of a kind in fashion and lifestyle, and also is able to deliver superior performance in terms of customer service and cost efficiency at the same time. I think the deal here is further testament to that. And as you can imagine, we are also talking to some other clients for similar moves. And yes, we'll see that impact come through next year. As usual, there's a bit of integration and onboarding work that needs to happen, has also happened with NEXT, but as you can imagine, the more we do these kinds of rollouts, the better we get, the faster we get and the faster we can also scale our B2B business going forward. And so we expect it to also contribute to our growth acceleration next year. Operator: The next question from Frederick Wild, Jefferies. Frederick Wild: I'm afraid, I've got 3. So first of all, could you give us a bit more detail about current trading? Particularly, was it consistent across October and any trends there? Second, is the gross margin year-on-year move in Q3 a good guide for Q4? Because I was looking at the fact that ABOUT YOU seems to have structurally lower margins in Q3, so should we see some recovery in year-on-year gross margin in Q4? And then finally, I'd like to understand, please, what the partner program GMV mix was in the quarter, both for the combined group and for Zalando stand-alone? David Schröder: Sure. Yes. I mean on current trading, I think we see ourselves very much on track to hit our full year guidance. As we said, we expect, on a pro forma business -- basis, sorry, mid-single-digit growth in Q4. And that is very much supported by what we've seen so far. So we're not betting like on an acceleration in the -- what you could call second half of the quarter, but it's very much what we've also seen so far, and basically expecting that to continue throughout the remainder of the quarter. Now gross margin-wise, I think Q3 definitely can serve as a good indication for Q4 in the sense of the effects that we just talked about, right? The impact from the inclusion of ABOUT YOU, the impact from commercial activations, impact of a fast-growing launch, impact of loyalty program, accounting effects. I think all these are very much going to persist in Q4. And that's why I think that gives you a good indication for what to expect also next quarter. And then last but not least, I think looking at partner program performance in terms of GMV growth, we saw both retail and partner business grow almost equally strong in the third quarter. And so that also then implies that there's no bigger change in mix on the Zalando side. Keep in mind, obviously, that the partner share on the ABOUT YOU side is significantly smaller, but it's also accelerating as they are now driving the platform transition to a true marketplace model on the ABOUT YOU side. Operator: The next question is from Yashraj Rajani, UBS. Yashraj Rajani: I've got 2, please. So the first one is, how does your role as an aggregator change with the advent of Agentic AI, please? Like what are you doing to ensure that you are a beneficiary of AI traffic rather than being adversely impacted by agents directing customers to brand websites rather than your website? So that's the first one. The second one is -- you made a comment that you are far from maturity and still growing. Appreciate it's still quite early to comment on next year, but does that comment mean that you can potentially accelerate GMV growth next year? Or do you think that at this point, it's better to be conservative and potentially a mid-single-digit GMV growth for next year is a reasonable place to be, which is where consensus is? David Schröder: Sure, yes. Thanks for your questions. I mean, on agentic -- and I think that's very much in line with how you've seen Zalando act in the past, right? So when we see shifts in the industry, be it early on the shift from web to mobile, then later, obviously, also seeing other shifts in the industry towards more inspirational formats and so on, I think we've always had the ambition to lead that change and to also leverage these shifts as an opportunity to strengthen our business, to accelerate our growth and to, yes, obviously, also grow our share. And we think the same way about agentic, and that's also why we decided to really act early. You've seen that happen for example, through our targeted efforts to develop our very own Zalando system, which is an agentic interface on our own premises. We've, yes, I think learned a lot. We've also managed to roll it out and scale it over time. And we're obviously, looking at other use cases as well, I think especially important to consider that, yes, the opportunity in the end is also huge on the B2B side of the business as many brands and retailers are asking themselves these questions, how to grow their business and continue to engage with customers in an agentic environment, and I think SCAYLE can also obviously play a key role in enabling them for that future. And that's why, yes, we continue to embrace that opportunity and make sure that once again, similar to the shifts in the past, we come out strong and use it as a way to further strengthen our position in the industry without being naive, of course, right? So we also know there are potentially areas of this development that we need to have a careful eye on. But yes, I think the key focus is really on the opportunity that it creates for us. Regarding next year, and as also stressed during my outlook presentation, I think, yes, indeed, we are aiming to accelerate growth further next year. And so I think that's something you should expect from us. We definitely expect it from us, going forward, in line with really the midterm guidance that we have provided to you a while ago. Operator: The next question from Richard Chamberlain, RBC. Richard Chamberlain: Two also for me, please. I just had, first of all, a question about inventory. How are you feeling about the composition of your inventory at the moment? How fresh is the inventory overall? And then the second one is on the midterm gross margin target of 40%. Can you just remind me what the key drivers you think are for improvement to get to that level? Will that come from more buying and procurement? Or will that come more from improved full-price sales? David Schröder: Sure. So on inventory, I think we feel very good about our inventory position. I think it has enabled us to also have the right offer for customers. It has enabled a strong season start already in September and now continued good trading in the months thereafter. I think it's really important to realize, I made that comment earlier that the quantitative impact you see us report is mainly due to the inclusion of ABOUT YOU, right? And so if you -- yes, if you would essentially consider that impact and the remaining increase on the Zalando side is comparatively small and hence, very much in line also with the growth rates that we are driving at the moment. Now on the gross margin outlook. We are very much focused on gross margin, as you know, and we also are very committed to achieving the around 40% that we guided towards for 2028 as part of our midterm guidance. And the building blocks really remain the same, right? So on the B2C side, we see further opportunity to increase the retail margin, more full price sell-through. Also, obviously, thanks to economies of scale, better cost of goods and so on. I think the other key part, obviously, is that as we continue to increase the platform part of our business or the partner business and especially also Zalando Marketing Services, we add a lot of high gross margin revenue, which will also contribute to an increasing B2C gross profit margin over time. And then what obviously also contributes to the 40% outlook is the B2B business, which is growing strongly, but which comes with a structurally lower gross margin, though that obviously does not mean that it comes with a structurally lower adjusted EBIT margin, right? So on adjusted EBIT, as we've seen this quarter, actually B2B can be a very strong contributor and will definitely also be going forward. But yes, gross margin, especially on the logistics revenues, is obviously lower than on the retail side. Operator: The next question from Clement Genelot, Stifel. Clement Genelot: Only one from my side. So just as a follow-up on the agentic, as we have -- well I recently seen the multiplication of partnerships in the U.S. between OpenAI and online platforms. On your side, would you be open to the idea of striking similar partnership with OpenAI or other AI chatbots in Europe? David Schröder: Yes, definitely. I mean, I think we've been successful in the past when driving innovation with a combination of in-house efforts and then also partnerships. I think our -- the very initial development, for example, of our Zalando Assistant, also came about by leveraging OpenAI technology. But I think important for us as part of our strategy, and that's also what I meant earlier with we don't want to be naive, right, is that while we like these partnerships, we don't put all our eggs in one basket. So the approach we are generally taking is to be model agnostic. It's hard to say who will win in the end, right, and what model will be best for which use case. And therefore, we continue to experiment with different models, and we also build our tech stacks in a way that we can easily exchange models depending on who performs best at a given point in time. But I think, yes, this general approach of co-innovation with strong partners is one we will continue to leverage going forward. Operator: Next question from Mia Strauss, BNP Paribas. Mia Strauss: And maybe just -- I think you've talked about the commercial environment a bit. But how would you characterize the promotional environment at the moment before even heading into the key trading events? And then just secondly, can you just remind us of what is your marketing strategy on social media? So I think the point was touched on about redirecting to brands websites, but how do you bridge the gap to be redirected to Zalando's platform? David Schröder: Sure Mia. So in terms of the promotional environment, I think we've basically seen a continuation of what we already saw in the past quarters. No surprise, right, given the continued rather muted macro environment also in some of the key countries in Europe, for example, Germany consumers, in general, I would say, remain a bit more price conscious and value seeking. That's why we see strong responses to our commercial activations. That's also why, especially our lounge business is performing particularly well. And yes, obviously, we are taking that into account when we optimize our go-to-market strategies for the current environment. But for me, that's more tactics, right, where, obviously, we need to make sure that we always stay relevant for consumers and fulfill their needs in pursuit of long-term customer value accumulation. What it does mean is that we change on our general strategic direction, right? So we continue to see our role in the industry as a role that supports brands that also drives quality and is not overly focused on price. Now coming to your second question on engaging customers on social media. Obviously, we are very active on social channels, and it's also an important part of our content strategy, not just in terms of customer acquisition, but also -- yes, sometimes the first steps of an inspiration journey, obviously, start on social media. We do a lot on our own, but we also do joint campaigns with key partners through ZMS. However, I think it's important to understand that our primary goal is really to engage customers on our own premises. And that's why we typically construct these campaigns in a way where, yes, you might see your first hook on a social media app, but then we aim to move customers into a funnel where they then continue their inspiration journey on Zalando. And I think that's especially where new innovations like our Zalando feed experience, which we talked about in our half year report, in which we've now rolled out to a number of countries successfully, where these innovations can also help us further drive user engagement because they allow a much more immersive, much more content-rich experience than what we were able to offer before. And I think it also really blurs the lines a bit between the inspiration you can get on social media and what you see on Zalando. And yes, the first reactions from customers in terms of how much engagement they show in each visit, but also in terms of frequency of visits are very promising. And that's why we will continue on that path. So essentially considering ourselves our own best marketing platform, while obviously working also with social media outlets going forward. Operator: The next question is from Anne Critchlow, Berenberg. Anne Critchlow: I've got 2 questions, please. The first one is in terms of the seasonal promotions and commercial activations. Just wondering if there's been any shift from Q4 into Q3 this year in terms of the weighting? And also whether you think there's been a shift to the start of the autumn/winter season, particularly in the DACH region from Q3 into Q4, maybe from a weather perspective? And then the second one, please. Just in terms of the virtual fitting room, whether you're getting any different results, any developments there? Any other initiatives on size and fit? And also, if you could talk a little bit about the differences between the return rate between that Zalando and ABOUT YOU. David Schröder: Sure. I mean in terms of seasonal development, I think everything that we've seen so far points to a very normal seasonal pattern. Had a good start to the season, but also then the usual, I would say, timing and also performance of mid-season sale. And that's also why we expect similar trends to continue throughout the upcoming peaks. So nothing unusual, I would say, very much in line with what we've seen in the past. And then in terms of size and fit, it remains a key strategic topic for us, predominantly also because we think it differentiates us from other platforms to provide our customers with superior size and fit advice. We've seen very good responses in the past. And that's why we're doubling down on these investments. Virtual fitting room, I think, is working well. I think the key task here for us is to scale it to more products over time because it's really, yes, much harder to scale in a way than the pure data-driven size advice that we already offer for the bulk of our products. You need much more information about each single product than you need if you just try to match a size with a customer, but we are confident that, that will unlock the next level of size advice to improve the customer experience and to also further reduce size-related returns. When we look at return rates overall, and I think that's also to be expected given that we sell largely similar items on ABOUT YOU and Zalando. After all, if you look at same geo and similar items, I think the return rate is really not so different between the 2 platforms. Operator: The last question comes from Vandita Sood, Citi. Vandita Sood Chowdhary: I just have 2 quick ones. Firstly, could you give us an update on how the integration with ABOUT YOU is evolving and if you are expecting any sort of changes to the synergies that you guided to before, basically not being too significant this year? And also if there's any seasonality between the third quarter and the fourth quarter in that? And then secondly, I saw that you're now buying back some shares just for the employee program. Just wondered how you think about the timing of when you do these and how we should model it? David Schröder: Sure, Vandita. Thanks for your questions. I mean, on ABOUT YOU, as I said earlier, I think everything is working super well so far. Both teams are excited to team up. I think we've seen very good traction on now also executing against our ambitious plans to drive value strategically and financially, and so we are very confident to achieve the synergies we outlined to you in our half year call also with the ramp-up over the next few years. Obviously, much more impact to come in later years due to the nature of the synergies. And yes, as I also said earlier, I definitely see an opportunity to also identify additional sources of value creation over time, be it in the stand-alone business ABOUT YOU or also through synergies between our activities in B2C and B2B. So no changes. I think just more certainty and confidence that we'll deliver on what we shared. And then on the share buyback, I think that is really to be seen in light of what we also did in the past, right? So very regular procedure, a very similar amount as well, up to EUR 100 million to fund our existing share-based compensation programs. We expect these shares to be bought over the course of the fourth quarter. And as usual, you will also see the reporting of the share buyback on our website. Operator: This was the last question. I would like to turn the conference back over to you, gentlemen, for any closing remarks. David Schröder: Sure. Thank you very much. So yes, great questions, great discussion. Thanks for your interest, as always. Let me take this opportunity to wrap up with the key takeaways of today. As you can see, our ecosystem strategy and the integration of ABOUT YOU are progressing very well. In the first 9 months of 2025, we delivered strong growth and increased profitability, and we are fully on track to deliver on our combined guidance for 2025 and also on our midterm guidance beyond. So thanks, everyone, for joining today's call. Have a nice day. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Hua Hong Semiconductor's Third Quarter 2025 Earnings Conference Call. Today's call is hosted by Dr. Peng Bai, Chairman and President; and Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. [Operator Instructions] The earnings press release and third quarter 2025 summary slides are available to download at our company's website, www.huahonggrace.com. Without further ado, I would like to introduce you to Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Thank you. Please go ahead. Yu-Cheng Wang: Good afternoon, everyone. Thank you for joining our Q3 2025 earnings call. Today, we will first have Dr. Peng Bai, our Chairman and President, share some remarks on our third quarter performance. I'll then take you through our financial results in detail and offer guidance for the upcoming quarter. We'll then open the floor for a Q&A session. With that, I turn the call over to Dr. Bai. Bai Peng: All right. Thank you, Daniel. Good afternoon, everyone. Thank you for joining our earnings call. Third quarter 2025 sales revenue for Hua Hong Semiconductor reached a record high of USD 635.2 million, in line with guidance, while gross margin stood at 13.5%, above guidance. Driven by the recovery in global semiconductor demand and the company's lean management practices, our capacity utilization remained high. Both sales revenue and gross margin showed year-on-year and quarter-on-quarter growth. The enhancements in our core competencies, including process technology, R&D, market development and operation, along with the results of our cost reduction and efficiency improvement initiatives are gradually becoming evident. Our overall profitability is improving, laying a solid foundation for long-term sustainable development. Hua Hong Semiconductor possesses extensive expertise and exceptional management experience in specialty technologies, facing the rapidly evolving global semiconductor landscape. The company must continuously advance across multiple core dimensions such as technology capability and capacity expansion. The acquisition, which is currently progressing smoothly, will further increase our production capacity and diversify our process platform portfolio while creating synergies with our 12-inch production line in Wuxi to strengthen our profitability. Furthermore, the company is actively engaged in strategic capacity planning, focusing on technological breakthrough and ecosystem development to continuously enhance our core competitiveness amidst the global industry transformation. Now I would like to hand the call back to our CFO, Mr. Daniel Wang, for his comments. Daniel? Yu-Cheng Wang: Thank you, Dr. Bai, for your exciting remarks. Now let me walk you through a summary of our financial performance for the third quarter, followed by our revenue and margin outlook for Q4 2025 before opening the floor for the Q&A session. First, let's review our financial results for the second -- for the third quarter. Revenue reached an all-time high of $635.2 million, 20.7%, over Q3 2024 and 12.2% over Q2 2025, primarily driven by increased wafer shipments and improved average selling price. Gross margin was 13.5%, 1.3 percentage points over Q3 2024, primarily driven by improved capacity utilization and average selling price, partially offset by increased depreciation costs and 2.6 percentage points above Q2 2025, primarily driven by improved average selling price. Operating expenses were $100.4 million, 23.3%, over Q3 2024, primarily due to increased engineered wafer costs and depreciation expenses and 2.6%, over Q2 2025. Other income net was $70.8 million, 65.7% lower than Q3 2024, primarily due to decreased foreign exchange gains and interest income, partially offset by decreased finance costs and 67.4%, over Q2 2024, primarily driven by foreign exchange gains versus foreign exchange losses in Q2 2025. Income tax expense was $10.4 million, 9.6% lower than Q3 2024, primarily due to decreased taxable income. Net loss for the period was $7.2 million compared to a profit of $22.9 million in Q3 2024 and a loss of $32.8 million in Q2 2025. Net profit attributable to shareholders of the parent company was $25.7 million, 42.6% lower than Q3 2024 and 223.5%, above Q2 2025. Basic earnings per share was $0.015, 42.3% lower than Q3 2024, and 200%, over Q2 2025. Annualized ROE was 1.6%, 1.2 percentage points lower than Q3 2024, and 1.2 percentage points above Q2 2025. Now let's take a closer look at our Q3 2025 revenue performance. From a geographical perspective, revenue from China was $522.6 million, contributing 82.3% of total revenue and an increase of 20.3% compared to Q3 2024, mainly driven by increased demand for flash, other power management IC and MCU products. Revenue from North America was $63.8 million, an increase of 36.7% compared to Q3 2024, mainly driven by increased demand for other power management IC and MCU products. Revenue from other Asia was $30.3 million, an increase of 5.6% compared to Q3 2024. Revenue from Europe was $18.4 million, an increase of 12.6% compared to Q3 2024, mainly driven by increased demand for IGBT and smart card ICs. With respect to technology platforms, revenue from embedded non-volatile memory was $159.7 million, an increase of 20.4% compared to Q3 2024, mainly driven by increased demand for MCU products. Revenue from stand-alone non-volatile memory was $60.6 million, an increase of 106.6% compared to Q3 2024, mainly driven by increased demand for flash products. Revenue from power discrete was $169 million, an increase of 3.5% compared to Q3 2024, mainly driven by increased demand for super junction products. Revenue from logic and RF was $81.1 million, an increase of 5.3% over Q3 2024, mainly driven by increased demand for logic products. Revenue from analog and power management IC was $164.8 million, an increase of 32.8% over Q3 2024, mainly driven by increased demand for other power management IC products. Now turning to our cash flow statement. Net cash flows generated from operating activities was $184.2 million compared to net cash flow used in operating activities of $26.8 million, primarily due to increased receipts from customers. Capital expenditures were $261.9 million in Q3 2025, including $230.7 million for Hua Hong Semiconductor Manufacturing, $19.3 million for Hua Hong 8-inch business, and $11.9 million for Hua Hong Wuxi. Other cash flow generated from investing activities was $8.6 million in Q3 2025, mainly including $15.6 million interest income and $7 million receipts of government grants of equipment, partially offset by $14 million investment in equity instrument. Net cash flows used in financing activities was $104.2 million, including $99.9 million proceeds from bank borrowings and $14.4 million proceeds from share option exercises, partially offset by $5 million interest payments, $3.2 million of bank principal repayments and $1.9 million lease payments. Now let's have a look at the balance sheet. Cash and cash equivalents were $3.9 billion on September 30, 2025, compared to $3.85 billion on June 30, 2025. Other current assets increased from $688.5 million on June 30, 2025, to $739.7 million on September 30, 2025, mainly due to increased value-add tax credit. Property, plant and equipment was $6.2 billion on September 30, 2025, compared to $6.1 billion on June 30, 2025. Equity instruments designated at fair value through other comprehensive income increased from $290.5 million on June 30, 2025, to $381.3 million on September 30, 2025, mainly due to an increased fair value of the equity instruments. Total bank borrowings increased from $2.3 billion on June 30, 2025, to $2.4 billion on September 30, 2025, mainly due to withdrawal of bank loans. Total assets increased from $12.2 billion on June 30, 2025, to $12.5 billion on September 30, 2025. Total liabilities increased to $3.5 billion on September 30, 2025, from $3.4 billion on June 30, 2025. Debt ratio increased to 28% on September 30, 2025, from 27.5% on June 30, 2025. Finally, let's discuss our outlook for the fourth quarter of 2025. We expect revenue to be in the range of $650 million to $660 million with a projected gross margin of 12% to 14%. This concludes my financial remarks. We now begin our Q&A session. Operator, please assist. Thank you. Operator: [Operator Instructions] The first question is from the line of Leping Huang of Huatai. Leping Huang: I have two questions to Daniel and one question to Dr. Bai. So the first question, I noticed there's a very strong beat on the gross margin this quarter. Also, I think ASP up 5.2% Q-on-Q this quarter. So Daniel, can you explain -- break down the reason of this strong margin and ASP beat between the product mix improvement and the price adjustment of the existing products? Also, you gave the guidance for next quarter. So what's the -- your outlook for your ASP in the fourth quarter? Yu-Cheng Wang: Thank you, Leping. First of all, we had extremely high utilization rate, okay? So the three 8-inch fabs were consistently above 110% utilization rate. And the first -- our first 12-inch fab with 95,000 wafer capacity, the loading was consistently above 100,000 wafers, okay? And then the other -- the fab that is currently ramping, it has about 40-plus thousand wafer capacity, but the loading is above 35,000. And pretty soon it's going to get to about 40,000 wafers in loading, okay? And in terms of that itself helps the margin. And also, I think the most critical thing is the ASP improvement. We start to raise ASP in the second quarter and start to take effect in the third quarter. So you said, absolutely, is correct, overall, gross margin is about -- the price ASP is quarter-to-quarter or even compared to last year, it was about 5.2%. Basically, the ASP improvement was coming from all technology platforms -- all technology platforms, including embedded non-volatile memory, okay, power discrete and logic and RF, analog and power management IC, okay? So it basically came from all technology platforms. I would say, if you want to really look at between product mix and ASP improvement, I would say 80% came from ASP improvement. And the other 20% is largely due to product mix. As far as going forward, I think we will continue to improve ASP. I mean we're looking at every order that comes in. We make sure that we -- if there is any opportunity, we can adjust price, okay? So I'm extremely positive about our Q4 in terms of ASP and the gross margin as well. Leping Huang: Okay. The second one is also for Daniel. So you also mentioned the utilization rate of your fab is very high. It's already 109%. So it seems to be -- do you think that -- so first, what are the actions you take to improve your factory utilization rate? And also, what you expect the utilization rate looking forward? It seems to be you are adding more wafer into your Wuxi fab. So do we -- should we expect the utilization rate will further improve in the coming quarters? Yu-Cheng Wang: You know what? Excellent question. I'll let Dr. Bai answer the question. Bai Peng: Okay. Let me try. There's a few factors playing together. It's kind of -- there's some interplay of a few factors. First of all, utilization number, as you know, is based on standard IE calculation, meaning you're supposed to set up certain capacities and based on that number, if you do better, your utilization can be a little bit above 100%. But clearly, you can be significantly above 100%, otherwise, the number would be incorrect. In our case, Fab 9A capacity is -- continues to come online. So we can -- there's two benefits. One is Fab 9A itself started to contribute to revenue. It actually adds more pressure to gross margin because all the depreciation also starts to come online. But it does provide some avenue to make our existing capacity a little bit more flexible in the sense that now you have a bigger scale when the product mix shifts that you can kind of use each other's capacity in each factory. That's how we can get the capacity utilization a little bit better above 100% or 105%. It's -- let me also add a comment to the gross margin. Gross margin also compressed because I always said there's always a balance between how much more depreciation coming online, which is inevitable as the new capacity start to contribute to revenue on one hand. On the other hand, you have -- whether you can manage to increase prices. Daniel already talked about, we did manage to increase our prices by, you already calculated, around 5%-ish in Q3. Another factor was our general cost reduction effort to make our cost structure a little bit better. That effectively balanced out some of the pressure we get from increased depreciation coming online. In the end, the Q3 story was a very good one. It was -- it also exceeded our expectation. But I do see that momentum in cost reduction as well as the price stabilization, if not increase, also start to take a hold. So that's a good trend for us. One more add to this is that when the demand is a little bit higher than our supply, which relates to why our utilization is so high, it also gives us a little bit of leeway, a little bit of flexibility in optimizing our product mix, namely, we can choose to focus or give priority -- or give it capacity priority, a little bit more for the product that has a higher margin than the ones that have a lower margin. That also help our price increases. If I -- I know I said a lot of things, but all those factors are there, and it's really the end result, and net is an interplay of all those factors that gives us the overall Q3 results. Thank you. Leping Huang: Okay. So the final question I want to ask is that I noticed that in Daniel's statement that the flash business is one major driver for your -- especially your China business. And in the investor community, we are talking about the memory super cycle. So Dr. Bai, so what's your view on how Hua Hong can benefit from the coming memory cycle and why the -- is it initial sign we see this quarter that your memory business or your flash business is going very strong? Is it initial sign of this memory super cycle? Bai Peng: Okay. Thank you for the question. First, I want to clarify the memory business that Hua Hong is engaged in is in the NOR Flash, which is one segment of overall flash business. And that NOR Flash business, there's two parts to it. One is the stand-alone, just the stand-alone NOR Flash product. Another one is MCU that's basically integrated with the logic circuit. We are participating in both, MCU as well as flash memory. You are correct. We see a strong business in Q3 in both, MCU as well as stand-alone flash. I would say overall NOR Flash market has a steady growth. It's probably a little bit different than the overall memory business. The other memory business, like the correlation with the other memory business is not that strong. For example, the NAND might be doing -- has its own dynamics. DRAM, MCM, HBM, DRAM-based HBM, all those related to AI applications, those has its own dynamics. Our part of the business, we do see steady growth in the NOR Flash business, in both MCU and stand-alone. Our, if you will, Q3 growth rate clearly is faster than the overall market growth. That probably has more to do with our own situation where our 55-nanometer NOR Flash started coming into the mass production phase in the last couple of quarters, that started to pick up volume. And also our 55-nanometer MCU business also is going into the mass production. And in the next year or 2, we're going to have 40-nanometer. In next year, 40-nanometer NOR flash business stand-alone as well as the MCU will come online. That will give us another push. So in general, we do see that our flash business will have a strong growth over the next few quarters, even next couple of years, mainly based on our new technology -- new technology transitions. I would say the other memory business, their dynamics might be a little bit different. Some of them are also growing strongly. It's probably not correlated with our situation. Operator: Our next question comes from Ziyuan Wang from Citic Securities. Ziyuan Wang: [Technical Difficulty]. Yu-Cheng Wang: Operator... Bai Peng: Can you help? Yu-Cheng Wang: We couldn't hear the question clearly. So can you please ask him to repeat? Operator: Ziyuan, would you be able to dial again or change to another better connection to repeat your question, please? Ziyuan Wang: Sorry, can you hear me now? Yu-Cheng Wang: I'm afraid the line is bad. Would you like to dial back, and we will take your question. Operator: [Operator Instructions] The next question is from Jian Hu from Guosen Securities. Jian Hu: [Foreign Language] So I have -- first, I have a quick follow-up. Just now, Daniel also mentioned the growth drivers for the next few quarters, some factors like capacity expansion and also the price increases. So how about the product structure adjustment for the future growth? So could you give us more details? And this is the first question. Bai Peng: Sure. All right. In terms of capacity expansion, we basically -- you will see a continued increase from our Fab 9A because we are still in the capacity expansion phase. Earlier, Daniel mentioned that the Fab 9A reached about 3,000 to 4,000 wafer -- 30,000 to 40,000 wafer per month right now. It's been climbing over the last 3, 4 quarters. That expansion will continue all the way towards till middle of next year. That will reach the peak of, I would say, 60,000 to 65,000. So you -- and those capacity will come online, will continue to give us -- contribute to the revenue growth. So that's on the capacity expansion front. In terms of the product mix, optimizing the product mix, that's really come down to the technology evolution, how our technology platform will evolve over the next few years. The key technology that we see that it will become better and more competitive. One, starting with the flash related, I talked about earlier, flash is a factor -- a growth sector for us. I think we -- with our 55-nanometer products online and next year, 40-nanometer products online, that will give even stronger position in this sector. So hopefully, that will bring the added value of the prices up with it. Another significant technology platform is the BCD platform for power management. Now we see a strong growth, and we see -- we are also purposely expanding capacity for BCD and basically skewing our product mix -- capacity mix towards supporting more BCD and BCD technology. BCD platform happens to be one that has a better margin among the technology platforms that we offer. So that will also give us a better product mix in essence. So then we continue to add -- continue to strengthen our overall technology development. This is one of the areas that is definitely a focus for the company. When I talk about how can we further improve our core competence, it's really talking about our technology capability and associated marketing capability. So all the key specialty technology platform, we basically will continue to invest heavily. And some of the platforms, we're already the best. We're already #1 in China, also very competitive worldwide. Some of them, we still have a little bit of distance to travel to become world-class, to become the best. In general, we're best in China in most of the technologies we participate in that we were -- then in some of the areas, we still need to improve a little bit to become really truly world-class. Here, I can also mention that some of the partnerships we have with our mainly European companies to -- in the context of China, their China for China strategy is also a way for us to increase our competitiveness. So I think I will stop right here in terms of answering your question. I don't know if that clarifies for you. Jian Hu: Very clear. My next question is a relatively big one. So driven by the boost from AI, we can see the global semiconductor sales have grown for like 8 quarters. So compared to the previous cycle, it's a relative long growth period. So how do you see the growth momentum in following quarters? Bai Peng: It is a very big question, a broad question. I think the -- I'll give you my personal take on this. AI is still at its infancy. I think the AI will continue to grow. How it manifests the growth -- how does the growth manifest in the different segment of semiconductor, that's a little bit complex. The direct benefit, obviously, is for the advanced technology, advanced node, which Hua Hong Semiconductor is not directly participating. But there's a lot of supporting technology associated with the Al products. We are a big part of those segments, like power management, because when you have -- you make AI systems, you need a lot of power management, either for training or now the industry seems to switch towards more deduction type of applications from training. So I think we all -- we definitely benefit from overall AI growth through their increased demand for power management, for MCU, for all kinds of -- power discrete products, they all need those. They need those in order to make the AI system work. So we are definitely part of that ecosystem. So we were -- in fact, some of the power management demand increase -- strong demand increase over the last year and continue -- that seems to continue into next year or 2 is primarily related to AI and plus, some of the new application on the horizon like cars and robots, those type of things. AI definitely is a big factor. So that's how I see it. I think AI will continue to grow. You might -- the product mix there might go through its own evolution. But overall, I think that bring along the whole -- all the chips that's needed in AI system, that's where we get the direct benefit, is all those associated chips in AI system that we do directly participate. Jian Hu: Yes. So I have a follow-up. So how about the power semiconductors. So compared to last few years, power semiconductors have shown some recovery, but still besides the AI demand, the rest of the part, the demand is relatively flat. So how we increase the pricing following quarters? So how do you see the pricing in this part? Bai Peng: All right. You are a very astute observer. I agree with you, the power discrete platform amongst our technology platform that we participate in probably has the biggest pressure in terms of growth. I think there are a couple of factors. One is, there are increased competition and increased capacity in the power discrete. Because the power discrete area, the barrier to entry is relatively small. So there are -- there has been over the last few years, large capacity coming online. So that's one factor that put some pressure on us. The second factor is some -- second factor is technological because right now, the compound Semiconductor like silicon carbide, mostly silicon carbide, but gallium nitride also start to become a significant factor. Those compound semiconductor-based devices become a significant factor in the overall power devices market that inevitably take away some of the silicon-based devices, especially, for example, the super junction, that used to be a Hua Hong -- still is a Hua Hong strength. But that is directly -- there is a direct competition for super junction-based product, silicon super junction based product from silicon carbide. And silicon carbide looks like over there, people are willing to cut price very, very drastically. So they start to have some competition with our super junction. And so this is one of the topic we've been -- inside the company, when we talk about our technology road map and also talk about our market perspective, is one of the focus area that we will come out with some strategy. We already started gallium nitride development. So we will definitely -- we have been a big player in the power discrete, we definitely will not give up this market segment. We will continue to be bigger and stronger by adding all the -- whatever the customer needs. So there's a few new initiatives in the power area that we will try to meet the challenge. The challenge is mostly a little bit long term. Short term, I don't see a huge problem, but longer term, over the next 3 or 5 years, that, we do need to do something there to make sure that we continue to keep our very strong position historically in this area. Thank you. Jian Hu: Thank you, Dr. Bai. I also agree with you, and we also think gallium nitride on silicon is a good direction for the new power semiconductors. So that's all my questions and looking forward to a better performance in next quarters. Operator: Once again, we will take the question from Ziyuan Wang from Citic Securities. Ziyuan Wang: Sorry for the connection previously. My first question is about the international customer adoption. We can see that this quarter, the proportion of customers in U.S. and Europe increased. And we also know that STMicro previously announced that they plan to produce 40-nanometer MCU in Hua Hong by the end of 2025. So how is it going? And are there any other new developments or new customers that you can share? Bai Peng: You're correct that we have a partnership with ST on MCU, 40-nanometer MCU. That project has been going very smoothly. In fact, it's a little bit ahead of schedule. We already started with production in this quarter. So that's a little bit ahead of schedule. That will continue -- it will start to contribute to our revenue in the next quarter. In terms of ramp rate, it will take a while to get up to a fairly high volume, but it's definitely a steady and very robust addition to our product mix. So that one is going well. Actually, this is one of the first collaboration projects we have with ST as well as other European companies for their China for China strategy. I think since now that we have worked together for quite a while and with this track record, everybody's confidence level has increased significantly. That's probably going to play a very positive role in terms of expanding our collaboration in the number of the products and also the area of the -- where we can collaborate with each other. So I would say that definitely is a hugely positive start, and that will start -- next year, you will see a multiply of those collaboration projects come to fruition in the next year. In terms of the international portion of our business, we always like to increase our international business because this is one of our strategy. Ever since I started here, we set a strategy to see how can we increase our international business, in terms of the percentage of international business. We are right now probably 15% to 20% range. I haven't looked at the number exactly, but that's the range we are in. I think Europe and North America, both regions, I still do see strong growth going forward. Asia is a little bit more challenging, but our two biggest international region, North America and Asia, will continue to grow strongly over the next few quarters. Ziyuan Wang: Okay. And these kind of customers also benefit from the AI, especially the AI power, right? Bai Peng: Correct. If you look at our business from North America, a big part of it -- part of it is the power management chips. Indeed, those are the ones that got used in the AI systems. Ziyuan Wang: Okay. Very clear. And my second question is about the CapEx. Is there any outlook for CapEx for next year as we are continuing to expand our capacity in Fab 9? Will there be any increase compared to this year? Or will it be stable? Yu-Cheng Wang: Thank you, Ziyuan. Let me just give you an update on that. Basically, for the -- for 2025, the three 8-inch fabs, roughly, it's about $120 million overall on a cash flow basis. That is the CapEx spending for the three 8-inch fabs. And then we -- the expected CapEx for Fab 9A is about $2 billion for this year. So we spent about $3-plus billion up to the end of last year. So we're going to be spending about $2 billion this year. So that gets us to about $5-plus billion. The overall project -- the total investment for the project is $6.7 billion. So it will be about $1.3 billion to $1.5 billion for next year for Fab 9, okay? So that is it for basically the CapEx for this year. So it would be $120 million for the [ 8-inch ], plus $2 billion. Next year, it would be just around $1.3 billion to $1.5 billion for the remaining of the CapEx spending that we have to spend for this Fab 9. And of course, in the future, if we do have -- we want to continue to grow, we want to continue to expand. We have plan to basically build another fab, but that will be a different story, okay? So when that happens, we'll let you know what would be the total capital spending for that new project. Operator: Our next question comes from the line of Tony Shen of SPDBI. Tony Shen: [Foreign Language] Dear management, this is Tony from SPDB International. I've also got two questions here. The first one, can we have some color into the semi cycle, especially for Hua Hong into next year, 2026. In our current stage, it's very good. The cycle is trading up. We have a little bit of tight supply with high demand, and the gross margin is also trading up into third quarter and also into the fourth quarter. Do we still see the tight supply will continue into the next year? And can we continue to raise prices for most of our products into next year? This is my first question. Bai Peng: From the market standpoint, we do see the momentum will go into next year. We think next year should be better than 2025. There's uncertainties and but just from the pure market unless something big happened like some of the geopolitical or otherwise, we do see that the growth will continue into next year. That will give us some opportunity to raise prices or at least keep the prices stable. I think we -- I want to be a little bit cautious in terms of raising too high expectation of how much prices we can raise because we are still in a very competitive industry. And there's many, many factors involved. But I do see overall, if the demand -- if demand goes up, if nothing else, you give us -- will give us a way to optimize our product mix, I can choose to make more higher-margin products than lower ones. So basically, I have at least that possibility -- that flexibility. And also with our improved technology offerings, we basically add value to our customers' products. We tend to be able to -- in that scenario, we should be able to also share the benefits that come out from those improvements with our customers, have some kind of win-win situation. So in general, I'm cautiously optimistic to use the cliche that 2026 will be better than 2025. Tony Shen: Okay. Perfect. That is very clear. And my second question is still related to AI servers. Can I have a basic sense of how much revenue may come from directly or either indirectly from AI servers? And how do we see the growth potential, especially into next year? Yes. This is my second question. Bai Peng: For AI server, there's -- power management is the obvious product that goes into that. If you look at our power management business, I think it's about 10% to 15% there. And not all of them are going to the AI server, but the growth -- the bigger growth part is related to power server. So look at the numbers here that -- so I would say the power management, we put it into analog and power management category, is about 25% of overall revenue. Probably right now, more than half -- about half of it -- about half of it is related to AI servers. So it's about 10% to 12%. That portion, we believe will continue to grow strongly. Thank you. Operator: [Operator Instructions] Our next question comes from the line of [ Scarlett Ker ] from BNP Paribas. Unknown Analyst: [Foreign Language] First of all, congratulations on the strong performance. My question is on the -- one of the numbers. So the operating cost is around USD 100 million. Could you share a bit of a breakdown of the wafer engineering cost and the depreciation? And could you also elaborate a bit on what drives the increase of the wafer engineering cost? And going forward, what you expect the trend to be for both, engineering cost and the depreciation? Yu-Cheng Wang: So out of that $100 million, the depreciation costs related to the R&D. It is about $18 million for this quarter, Q3, okay? And we continue to invest in the R&D. We have a lot of new products, tape-outs. So this number, we expect in the future will continue to be stable and will probably continue to grow as well, okay? So basically, you have to realize the more we invest, that number will go a little bit higher. Compared to a year ago, that number is much higher now. So that is basically the breakdown. But the other, I would say, $80 million is all related to mostly labor, IT and some other stuff. Operator: Our next question comes from Qingyuan Lin from Bernstein Research. Qingyuan Lin: Congrats on the good results. My first question is around the -- one segment around the industrial and auto. How much is auto versus industrial? And do we see stronger growth on the auto segment because we are indeed seeing the auto demand in China are still quite strong? Yu-Cheng Wang: So the industrial and auto, that part is about -- overall for that segment was about -- it's going to be nearly about -- for Q3, it was about 22%, okay? But going forward, I expect that segment will continue to grow. We have -- we expect this segment will grow -- have a pretty big growth percentage for Q4 quarter-over-quarter, okay? So out of that 22%, about 26% is related to industrial, about 6% is related to automotive. In fact, industrial has been recovering throughout this year compared to a year ago. Bai Peng: Just to add a little bit to Daniel's answer is that the category you call industrial auto, it actually cut across all our product lines. Some of them are in power discrete, some of them are in MCU, some of them are in power management because those end product -- end user products like auto, industrial, they use all kinds of products. And so it's not just about, say, power management or MCU or power discrete. So it's basically a different -- but the number that Daniel gave you is the correct number. Qingyuan Lin: Got it. Got it. It's very clear. And the second question is around the power discrete actually. It looks like the percent of revenue from power discrete coming down a little bit. Is it capacity constraint? Or we're actually pushing out a bit of a demand because we don't see sort of enough demand there? Bai Peng: We talked about this in one of the earlier questions, too, that power management -- the power discrete as a percentage of our revenue is going down a little bit because the other -- it has not grown as fast as the other segments. So that's how the number play out. But in absolute numbers, the power discrete business is still grow a little bit, but as a percentage, because it hasn't grown as fast with others. So relatively speaking, it will have a smaller percentage of our overall business -- our overall revenue. So that's number one. The second point is that the reason we discussed earlier that this is one segment that we do see more competitive pressure, mostly on pricing. We still have fully loading, and demand is still strong, but the pricing is -- we won't be able to -- we haven't been able to raise price on this area too much. And going forward, it's probably going to be continued, a bit of pressure, just because of the entry barrier to this market segment is relatively low. And plus, we talk about early silicon carbide and start to have a bigger -- to a larger extent and gallium nitride to a smaller extent, start to have added pressure for this market segment. Qingyuan Lin: Very clear. Maybe last question quickly on any updates on Fab 5 consolidation, time line impact, synergy, et cetera? Yu-Cheng Wang: Well, it has been moving along according to schedule, okay? So we had our first announcement. We basically already announced the price for the deal. We're negotiating almost close to the completion. Pretty soon, we're going to have our second announcement, second Board meeting. And we expect that will happen very, very quickly. So we expect -- we -- literally, we're going to start to take over the operation start beginning of next year, expect the transaction will be closed by August next year, okay? And all of that will happen -- even the shareholder meeting will probably happen in December. So we're moving according to the schedule. We're working with the shareholders, the other side, very closely to make sure in the end, we're going to have a very fair deal, a fair deal, a fair transaction. And whatever we're going to pay for the value is going to be -- from a company's perspective, we're looking out to the interest of all the independent shareholders, okay? So we want to protect the interest of all shareholders. Bai Peng: Just to add a comment there that the acquisition deal, obviously, is moving along at a pace that's commensurate with the regulatory requirements. We are following all the requirements of both exchanges because we're listed in both Hong Kong and in Shanghai. So we definitely follow all the regulatory requirements and taking all the steps. Our goal is to have a good deal for all the shareholders. as well as the seller as well as the buyer side of the shareholders. So this obviously require a lot of work to negotiate to kind of get the assessment right. Daniel and Daniel's team has done a great work so far. We're getting close to the second milestone of announcing something very quickly that will set the deal price, I think then we will follow the regulatory requirement of having all the appropriate approvals that we still need to get -- go through. We hope that in this process, all the people who support our company, support Hua Hong Semiconductor, please do your part to make this thing go through smoothly. Acquisitions are always not an easy thing to do, especially when listed in both places. But we are pretty confident that we will have a very good outcome for everybody, for all the stakeholders as well as all the people who have been cheering for Hua Hong. Thank you. Yu-Cheng Wang: Right. I mean just one last thing. It's going to be a good acquisition. It's going to basically give us, as I mentioned before, to many investors, $600 million, $700 million revenue addition. The company is profitable. Most of depreciation is behind us. So it's going to be good for Hua Hong Semiconductor. And then long term, consolidation is the way. Bai Peng: Yes. I think Daniel makes a very important point that this acquisition, strategically, is definitely a very, very good deal for the company because it has a lot of synergy. It can -- our growth model is both organic, which we have been doing very aggressively over the last few years as well as inorganic through acquisition. If we think -- you ask if the total 1 plus 1 is going to be larger than 2, we will do that. And this is a good example of having a target -- having an asset that can significantly add to our growth as well as increase our synergy that we're -- it should help our long-term growth and the profitability picture. Thank you. Yu-Cheng Wang: And also with the additional -- the specialty technology platform under Dr. Bai's leadership, I think it's going to be more profitable. Operator: Thank you. Ladies and gentlemen, that's all the time we have for questions. I'll now hand back to Mr. Daniel Wang for closing remarks. Bai Peng: So this concludes our today's call. Once again, thank you all for joining us today. It's been very exciting. Thank you for all your thoughtful questions. We appreciate your continued support and look forward to speaking and seeing you again soon, next quarter, okay? Thank you. Operator: Ladies and gentlemen, thank you for your attendance. You may all now disconnect.
Operator: Hello and thank you for standing by. My name is Bella and I will be your conference operator today. At this time, I would like to welcome everyone to ZipRecruiter Inc. Q3 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Emilio Sartori, Head of Investor Relations. You may begin. Emilio Sartori: Thank you, operator, and good afternoon. Thank you for joining us for our earnings conference call during which we will discuss ZipRecruiter's performance for the quarter ended September 30, 2025 and our guidance for the fourth quarter 2025. Joining me on the call today are Ian Siegel, Co-Founder and CEO; David Travers, President; and Tim Yarbrough, CFO. Before we begin, please be reminded that forward-looking statements made today are subject to risks and uncertainties relating to future events and/or the future financial performance of ZipRecruiter. Actual results could differ materially from those anticipated in these forward-looking statements. A discussion of some of the risk factors that could cause actual results to differ materially from any forward-looking statements can be found in ZipRecruiter's quarterly report on Form 10-Q for the quarter ended September 30, 2025, which is available on our investor website and the SEC's website. The forward-looking statements in this conference call are based on current expectations as of today and ZipRecruiter assumes no obligation to update or revise them, whether as a result of new developments or otherwise. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from GAAP results. Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in ZipRecruiter's shareholder letter and in our Form 10-Q. And now I will turn the call over to Ian. Ian Siegel: Thank you and good afternoon to everyone joining us today. Despite a persistently soft labor market, ZipRecruiter's momentum continued in Q3, which we believe is clear evidence that our strategy is working. From Q1 '25 to Q3 '25, we delivered consistent sequential revenue and quarterly paid employer growth and our Q4 '25 revenue guidance at the midpoint indicates our first year-over-year increase since Q3 of '22. This performance comes despite both hires and the quits rate in the U.S. remaining near their lowest levels since 2015. ZipRecruiter is showing strength with enterprise employers in particular. Performance-based revenue grew 12% quarter-over-quarter, the most growth we've seen in the past 3 years. Multiple long-term product investments are now bearing fruit. We've made it easier for enterprises to start spending with ZipRecruiter thanks to our over 180 ATS integrations. We've improved the return on that spend through our programmatic campaign optimization tools. And we've greatly improved the job seeker application experience to enterprise jobs through the development and growing adoption of ZipApply. On the job seeker side of our marketplace, we are focused on reaching people wherever they are no matter how they choose to find work. After consistently gaining market share with job seekers, we now see generative AI as a new and rapidly growing channel of job seeker traffic. In response to this emerging market reality, in Q3 we further optimized for AI-driven discovery driving a 140% sequential increase in visits from generative AI models. We credit our 2025 performance to the multiyear investments we have been making into tomorrow's hiring solutions. ZipRecruiter's strategic strengths continue to endure despite the macro. \We remain the #1 rated job search mobile app in both app stores and the #1 rated recruiting site for employers. We maintain over 80% aided brand awareness among both the job seeker and employer sides of our marketplace. And we continue to use the billions of interactions in our marketplace to train our AI-powered matching algorithms, driving better outcomes for job seekers and employers. We believe ZipRecruiter is in a strong position to shape the future of work and lead the shift from offline to online recruiting enabling us to capture outsized market share when the market recovers. I'll now hand the call over to Dave to share some business highlights. Dave? David Travers: Thanks, Ian, and good afternoon. We continue to focus our product and technology investments on driving better matching and engagement across our marketplace. Our strong results in Q3 demonstrate the value these investments are creating for both employers and job seekers. I'm excited to share a few highlights with you. Quarterly paid employers hit 67,000, increasing 1% sequentially and 3% year-over-year. This is our first time seeing year-over-year growth in quarterly paid employers since Q1 of 2022 demonstrating the value of our brand and product offerings despite the subdued hiring market. Our enterprise strategy is delivering strong results. Enterprise customers who run sophisticated hiring campaigns rely on us to optimize their campaign performance by delivering high quality candidates. In Q3, we improved our automated campaign performance optimization solution to increase the efficiency of employer spend. As a result, enterprise customer adoption of this solution increased 19% quarter-over-quarter and drove stronger campaign performance, contributing to the 12% sequential increase in performance-based revenue in Q3. This marks the largest sequential growth in performance-based revenue in over 3 years and signals that our enterprise partners are finding increasing value in our products and services. ZipIntro, an AI-powered solution that speeds up hiring by rapidly connecting employers and job seekers for face-to-face conversations, continues to build momentum. Enterprise customers are rapidly adopting the tool. In Q3, interviews and scheduled sessions for enterprise customers increased by 80% sequentially building on the sequential growth of 90% we delivered in Q2. In Q3, we released upgrades to our next-generation resume database, including productivity tools designed to help recruiters review candidates faster, collaborate seamlessly and fill roles sooner. As a result of these enhancements, SMB employer resume unlocks increased 11% sequentially building on the 12% sequential growth in Q2. We believe that this consistent increase in employer adoption demonstrates the increasing value SMBs are finding in our resume database. Job seekers are increasingly using generative AI to search for job opportunities. And in Q3, we optimized our marketplace to help these next-generation tools easily discover and surface employer jobs. This improvement drove a 140% sequential increase in site visits from generative AI. We believe that reaching job seekers no matter how they find work will allow us to capture market share over time. In 2024, we acquired Breakroom, a workplace rating platform purpose-built for workers in frontline industries. In August of 2025, we launched Breakroom in the U.S. and it is quickly gaining traction with employers and job seekers alike. As of September, Breakroom has published over 10,000 employer profiles, up from 8,000 in the prior quarter. This is powered by over 1 million ratings from workers in the U.S. These ratings provide job seekers with crucial data on working conditions to make more informed and more confident decisions about their next great opportunity. I'll now turn the call over to Tim to review our financial results and guidance. Tim? Timothy Yarbrough: Thank you, Dave, and good afternoon, everyone. Revenue in Q3 '25 was $115 million representing a 2% decline year-over-year and a 2% increase sequentially, exceeding the midpoint of our guidance. This sequential increase was primarily driven by the 12% quarter-over-quarter increase in performance-based revenue from our enterprise employers. Quarterly paid employers were 67,000 in Q3 '25. This is an increase of 3% year-over-year and 1% sequentially. This marks the third consecutive quarter of sequential quarterly paid employer growth and importantly, our first year-over-year increase in quarterly paid employers since Q1 2022. Our continuing momentum with employers of all sizes is a strong indicator of our brand's resilience despite the macroeconomic volatility. Revenue per paid employer for Q3 '25 was $1,717, down 4% year-over-year, but up 1% sequentially driven mainly by the growth in performance-based revenue from enterprise employers. Performance-based revenue made up 24% of our total revenue in Q3 '25, up from 22% in the prior quarter. Our net loss in Q3 '25 was $9.8 million. Adjusted EBITDA in Q3 '25 was $9.2 million resulting in an adjusted EBITDA margin of 8%. This is flat compared to the 8% margin in Q2 2025 with higher revenue offset by higher expenses. As of September 30, 2025, our cash, cash equivalents and marketable securities totaled $411 million. During Q3 '25, we repurchased 2.2 million shares for a total of $10 million. Looking ahead to our guidance for Q4 '25, we anticipate revenue to be between $109 million and $115 million. The midpoint of $112 million represents a 1% increase year-over-year, a return to year-over-year revenue growth for the first time since Q3 2022. The 3% sequential decline in revenue follows typical seasonality despite a subdued macroeconomic environment. Our guidance assumes a continuation of the same stable, but subdued hiring environment observed in Q3 along with normal seasonal slowness during the holiday periods. Our adjusted EBITDA guidance midpoint of $14 million implies a full year 2025 adjusted EBITDA margin of 9%. This exceeds the mid-single-digit scenario we outlined earlier in the year. We continue to believe in disciplined capital deployment and sustained investment in high ROI product and marketing opportunities. Despite the ongoing macroeconomic challenges, we've maintained adjusted EBITDA profitability while investing in our product and technology, which we believe sets us up to achieve our long-term goal of 30% adjusted EBITDA margins. We are successfully navigating this period, stabilizing revenue this year in a subdued macro environment while leaning into strategic long-term investments that we believe will drive future growth. With that, we can now open the line up for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Justin Patterson with KeyBanc. Sergio Segura: This is Sergio Segura on for Justin. Just the market reception for products like automated campaign optimization and ZipIntro seem to be strong. So just wondering how should we think about product innovation influencing growth against a still weak macro? Ian Siegel: This is Ian. Thank you for your question. I think what you can see is there is clear evidence that our product strategy is working and that in spite of the macro, we have been able to grow both revenue and utilization of our product by both sides of the marketplace. And I think the only explanation for why that strategy is working is because we are taking market share. We are growing because our solutions are being embraced by the market. We have picked the right lanes in which to focus. And in particular, as it relates to enterprise, we've been having tremendous success, which has been a labor of many years to put all the pieces in place as we discussed in the initial comments at the beginning of this call where it took a lot of work to get the 180 ATS integrations done, but that means that large buyers can more easily activate and start buying from ZipRecruiter. It took a lot of work to both deploy and optimize an automated campaign optimization tool and yet that's becoming a fundamental part of the value that these enterprise customers get from us because they get substantially better results when they use that tool, which is why you saw adoption of it grow by 19% in the past quarter. I think when you look at our marketplace as a whole, for a long time we've talked about the split between SMB revenue and enterprise revenue, and what you're starting to see is the balance that we have predicted for a long time start to play out. As the innovations and optimizations to our product have been deployed, we're seeing the market respond positively to that. And even in this time of what we'll call like a subdued labor market, we are finding momentum. Operator: Your next question comes from the line of Josh Chan with UBS. Joshua Chan: I was wondering if you could share a little bit about sort of your macro view. It doesn't sound like that from your perspective much has changed from a macro perspective, but curious what you saw kind of cadence through the quarter and how that informs kind of the guidance for Q4 from a macro perspective. Ian Siegel: Well, I think as we talked about coming into 2025, post election there seemed to be a really significant spike in optimism from businesses of all sizes in regards to their hiring plans. And then as we've gotten into 2025 for a variety of reasons, I think the overall picture is one of more of a continued modest decline in hiring is what we have observed. There have been brief periods of stability, but the overall bend has still been one of modest decline. The projections that we gave you are based on an expectation of a continuation of the market that we are in. We will continue to observe what is happening in the labor market as we give you future projections. But as far as our Q4 goes, our assumptions are fundamentally that the market continues on its current relative trend. Joshua Chan: Great. And I guess from a margin perspective, what's enabling the Q4 margin strength versus sort of the mid-single-digit characterization from earlier in the year? And then obviously as we kind of return to growth, will there need to be another investment phase or are we kind of off to these relatively higher margin levels compared to the recent past? Timothy Yarbrough: Yes. This is Tim. Thanks for the question, Josh. So as far as margins go, what you see in Q4 is reflective of I think more of a typical seasonal pattern in our marketing investment. When we make these investments, we're doing so opportunistically based on the returns that we're seeing. And so over the course of Q4, typically we see a slight downturn in terms of hiring overall especially surrounding the holidays and oftentimes our marketing investments reflect that. Overall though we're still leaning into opportunities for high ROI opportunities as we see them, but that's generally going to result in a higher adjusted EBITDA margin in periods like Q4. Operator: Your next question comes from the line of Trevor Young with Barclays. Trevor Young: Great. On the 12% sequential growth in the performance-based revs on the enterprise side, was there something that kind of changed this quarter that all of a sudden made it click? I know we've been talking for a lot of quarters and frankly, a number of years on the continual changes to the product, all the ATS system integrations, taking out the campaign optimization tools and so forth. But it just seems like that was really a strong pickup. Just wondering if there's any nuance there as to why this quarter it was particularly strong. David Travers: Trevor, this is Dave. It was really strong this quarter. I think it is the cumulative effect of a bunch of things we've been up to for a long time, but I would highlight 2. One, as we've talked about before, continuing to take market share and continuing to have the highest rated job seeker apps in the app stores of both Google and Apple. Fundamentally, enterprises want job seekers and increasingly, it's clear to them not only that job seekers are choosing ZipRecruiter, but why they're choosing ZipRecruiter. And so that is incredibly powerful for our enterprise customers and our continued momentum there. And then secondly, the campaign performance tool that we've mentioned a couple of times already. Fundamentally, it takes less work now to get better results with our latest generation tool where you, as a customer, say what your goals are and the magic of our technology empowered by AI and a bunch of other underlying tech makes it increasingly likely that you're going to have your goals not just met but exceeded. And so that is fundamentally the 2 underlying things. We've been executing well against that and enterprises don't move on a dime. It takes several quarters of great execution for that to come to fruition and we feel really good about where we're at. Trevor Young: That's really helpful. And to that point that enterprises are maybe slow to move, but maybe once there's that inertia there, should we then assume that that performance-based revenue should be stronger sooner than the recovery on the subscription side of things? Is that a fair way of thinking about it for 4Q and then beyond? David Travers: I definitely think in Q3 we were taking share rather than riding an overall market trend and we feel very good about the indicators we see in terms of what the long-term potential is there. So I'm feeling good about it. And I think when I talk to customers all the time, it increases my confidence that we're doing all the right things to serve the high end of the market. Operator: Your last question comes from the line of Kishan Patel with Raymond James. Kishan Patel: This is Kishan on for Josh Beck. What is driving quarterly paid employer trends, which returned to growth this quarter? And are growth trends different across new employers on Zip versus reactivations? Timothy Yarbrough: Kishan, thanks for the question. This is Tim. The trends have been consistent all year long so showing quarterly paid employer growth sequentially in Q1, Q2 and now in Q3. And I think all of this is reflective of our forward-looking stance on customer acquisition and engagement. The strength that we're seeing is coming from both of those categories that you mentioned. So we are seeing a return of new paid -- an increase in new paid employers and a return of former employers that were at our marketplace before that are looking to reengage in hiring. So those 2 vectors have been driving the paid employer growth number throughout the course of the year. Ian Siegel: And I would just add, this is Ian, that the level of engagement on our platform is achieving new heights and there's a combination of product improvements that have led to this. But on a year-over-year basis, 24% more of the SMBs that use our service for recruiting are getting 5-plus candidates within the first 24 hours and that is a direct testament to the algorithmic matching that we're doing, which is identifying messaging and inducing those candidates to apply. So I think just fundamentally, the service is getting better. Kishan Patel: Got it. If I can ask a follow-up. You mentioned site visits from GenAI search engines are up 140% year-over-year. Can you share any surprises on conversion quality or downstream revenue from that uptick versus traditional traffic? Ian Siegel: This is Ian again. Yes, I would say we're all watching generative AI very closely as a new source of job seeker traffic and a new pattern of job seeker behavior. It is still emergent. It is rapidly changing. The quality of traffic from that is on par with the quality of traffic we're seeing from other sources. I think it is definitely poised for continued growth and it's something we're putting a lot of attention on to. And we are quarter-by-quarter optimizing our site and the experience that we provide both to job seekers and to those engines to increase the probability that we are the answer that one of those engines get or that a job seeker that comes from one of those engines has a strong experience on ZipRecruiter. David Travers: This is Dave. The other thing I would add to that is that in addition to doing all the work to make ourselves visible, structure our data, et cetera so that generative AI becomes a powerful new growth channel for us with job seekers, that's the handoff to then create the great experience once they get there. So we talked about ZipIntro obviously earlier, but that's a pattern of job seeker behavior where they start out in generative AI having that conversation about where to look for a job and then end up on ZipRecruiter where they're quickly then talking to a real employer about a real job opportunity. And we see explosive growth in both the front end with generative AI and then in the subsequent conversation with a hiring manager and that's a powerful combination. Operator: That concludes our Q&A session. Ladies and gentlemen, thank you all for joining and you may now disconnect. Everyone, have a great day.
Operator: Ladies and gentlemen, welcome to the Zalando publication of the Q3 Results 2025 Conference Call. I'm Vicky, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Patrick Kofler, Director of IR. Please go ahead, sir. Patrick Kofler: Good morning, and welcome to our Q3 2025 earnings call. Today, I'm joined by our co-CEO and Interim CFO, David Schroder. David will kick it off with a business update before he walks you through the financial development of the quarter. Finally, David will discuss our outlook and will be available for questions afterwards. As usual, this call is being recorded. The live webcast as well as the replay of the call will be available on our Investor Relations web page later today. I will now hand it over to David. The floor is yours. David Schröder: Thanks, Patrick. Good morning, everyone, and thank you for joining today's call. We continue to execute on our ecosystem strategy at full force, and the third quarter demonstrates its effectiveness in capturing profitable growth across both of our B2C and B2B segments. Our strong Q3 results incorporate, for the first time, the fully consolidated financial results of ABOUT YOU effective July 11, the closing date of the transaction. Final step of the squeeze-out will -- which implies the delisting of ABOUT YOU will happen very soon. With our continued strong performance in the third quarter, we are well on track to achieve this year's combined guidance and to make further progress towards our midterm targets for 2028. Let me now walk you through the 5 key highlights of the third quarter on Page 2. Number one, we are pleased to report strong financial performance in Q3 2025, demonstrating our resilience in what still is a dynamic geopolitical and macroeconomic landscape. We achieved 6.7% year-on-year pro forma GMV growth, with an even stronger pro forma revenue growth of 7.5%, on top of a strong prior year baseline. Our profitability also remained solid with adjusted EBIT reaching EUR 96 million, slightly surpassing last year's figures despite negative impact from the inclusion of ABOUT YOU. Number two, in B2C, we continue to expand into lifestyle with a key focus on sports this year. Today, we announced an exciting new partnership with the German Football Federation, DFB. I'll come back to these very exciting developments in a moment. Number three, our B2B segment continued its double-digit growth trajectory. We are pleased to highlight several successful large-scale client go-lives and extensions, along with enterprise merchant wins for both ZEOS and SCAYLE. Further details on this will follow shortly. Number four, as already announced, we are equally excited to welcome Anna Dimitrova as new CFO to Zalando. She will officially start on January 1, 2026. Throughout her career, she's been responsible for all aspects of finance, including Capital Markets and Investor Relations. Her experience in fast-moving capital-intensive technology-driven sectors positions her perfectly to support Zalando's ecosystem strategy, and work with our teams to seize the exciting opportunities ahead. And number five, on the back of our strong year-to-date performance, we are confirming our combined guidance for full year 2025, including ABOUT YOU from the 11 July 2025 closing date onwards. Let me now elaborate on the progress of our B2C strategy as detailed on Slide 3. To briefly recap, with our ecosystem strategy, we are extending Zalando's reach and relevance beyond fashion into broader lifestyle areas, playing an even more important role in our customers' lives. This involves creating a distinct and engaging experience that positions us as the go-to destination for sports enthusiasts. Our strategy continues to yield positive results, demonstrated by sustained customer growth and double-digit GMV increases in our sports proposition last year and this year. Furthermore, we are strengthening our commitment to authentically integrate Zalando into sports culture through strategic partnerships. I'm just very excited to announce a significant stride in these efforts today, an extensive partnership with the German Football Federation. Until 2030, Zalando will be a main partner for the men's, women's and youth national teams. The new sponsorship agreement presents an unparalleled opportunity to significantly elevate Zalando standing as a leading football destination. Following the same playbook, we also made significant strides to boost Zalando's awareness and consideration as a running destination. We've entered partnerships with the Rotterdam Marathon, the Copenhagen Half Marathon, and Berlin Marathon, all with the aim of inspiring runners across Europe. Let's now turn to the latest developments in our B2B business. With our B2B business, ZEOS, we are building the operating system for fashion and lifestyle e-commerce in Europe, unlocking and accelerating digital business opportunities for brands and retailers. Building on our unique infrastructure and technology capabilities, we are now scaling and enhancing our offering with a particular focus on logistics and software. Regarding logistics, we already announced our large-scale strategic partnership with British retailer, NEXT, last November. This collaboration has successfully launched in September this year in 21 markets on next.com and additional European marketplace businesses. We are pleased to announce that British retailer, Marks & Spencer, has expanded its collaboration with ZEOS as well. Having already utilized ZEOS for its marketplace business, the partnership now covers fulfillment for the brand's entire Continental European e-commerce business to take full advantage of one single stock pool. With the acquisition of ABOUT YOU, we also complemented our software offering with SCAYLE, a leading enterprise digital commerce platform. This shop system allows us to better support the most important channel of our merchants with their own e-comm. After the initial go-live of the partnership, we are very thrilled to see the go-live of DEICHMANN on SCAYLE shop system in its key market, Germany. DEICHMANN is the market leader in European shoe retailing. We are equally happy to celebrate another key merchant win, namely Netto Marken-Discount, the German discount grocer. This partnership is a great example that SCAYLE is the perfect shop system for implementing modern retail concepts in different verticals, efficiently and at scale. This concludes our key business updates. Let's now take a look at our Q3 financials. In doing so, let me first focus on our group level figures on Page 5. All presented financial figures are as reported figures, including ABOUT YOU's results from the 11 July 2025, closing date onwards. Additionally, GMV and revenue growth are presented on a pro forma basis. For the corresponding prior year period, historical pro forma figures include ABOUT YOU's results from the 11th of July 2024 onward. In Q3, we sustained our profitable growth trajectory. GMV saw a reported growth of 21.6%, while reported revenue grew by 26.5%. This increase was primarily due to the inclusion of ABOUT YOU. Pro forma GMV grew by 6.7% and pro forma revenue increased even more by 7.5%, supported by strong performance of Zalando Marketing Services, ZEOS Fulfillment and SCAYLE, all of which contribute revenues but are not included in our GMV figures. Our focus on driving profitable growth is also reflected in our adjusted EBIT performance. On a reported basis, combined adjusted EBIT including ABOUT YOU, reached EUR 96 million, slightly surpassing last year's figure of EUR 93 million. On profitability, the inclusion of ABOUT YOU acted as a headwind and resulted in an adjusted EBIT margin of 3.2%, 0.7 percentage points below last year's level. Our combined Q3 results once again underscore our consistent progress in achieving profitable top line growth, while simultaneously facilitating investments that cultivate long-term value. Now let's examine the performance of our B2C segment in more detail on Page 6. In Q3, revenue grew by 27.9%, exceeding the GMV growth rate. The strong reported growth was predominantly driven by the inclusion of ABOUT YOU commerce business. Additionally, growth in Zalando B2C was supported by strategic growth investments, such as the Zalando launch in Portugal and the rollout of our upgraded Zalando Plus program. Plus now serves more than 13 million customers. Furthermore, we saw a successful start to the autumn/winter season and particularly strong growth in our lounge, sports and beauty categories. Continued strong growth in Zalando Marketing Services also contributed to B2C revenue growth. Adjusted EBIT declined to EUR 77 million, with the adjusted EBIT margin decreasing to 2.8% due to the inclusion of ABOUT YOU's Commerce business. Before we move on to our customer metrics, I want to briefly highlight something I'm incredibly excited about, the unmatched scale of our total combined customer base following the ABOUT YOU transaction. As you can see on Slide 7, teaming up with ABOUT YOU is a clear testament to our strong position as one of the leading multi-brand fashion and lifestyle groups across Europe. Together, we now serve a combined active customer base of more than 60 million customers. This supreme scale does not only showcase our strong standing in Europe, but further broadens our market reach and provides us with the opportunity to actively influence and shape the European fashion and lifestyle industry hand-in-hand with our more than 7,000 partnering brands. More than 5 million customers already take advantage of both the Zalando and ABOUT YOU platform. They exhibit a significantly higher spending compared to customers that only shop on either Zalando or ABOUT YOU. At the same time, the share of -- the high share of unique customers on both platforms is a clear testament to the appeal of our dual brand strategy, which we are going to leverage going forward to drive growth and to cover an even larger share of the EUR 450 billion European fashion and lifestyle market. Let's now move on to Page 8 and look at the remaining customer metrics of the combined group. With the inclusion, spending per customer held steady at around EUR 300. This was due to the increased spending from customers using both platforms, which compensated for the lower average spend of customers who use the ABOUT YOU platform less frequently. Let's now turn to Page 9 and take a closer look at our B2B segment performance. In Q3 2025, our B2B segment achieved combined revenues of EUR 277 million, marking a 15.6% increase year-over-year. The growth in our B2B segment was primarily fueled by ZEOS Fulfillment, which includes both Zalando Fulfillment Solutions and multichannel fulfillment. Additionally, the inclusion of SCAYLE supported revenue growth. Adjusted EBIT for the B2B segment reached EUR 20 million. The adjusted EBIT margin saw a strong increase of 4.3 percentage points, reaching 7.1%. This improvement was driven by efficiency gains in ZEOS Fulfillment and the inclusion of SCAYLE. Let's now move on to the group P&L on Page 10 and focus on the Q3 performance on the right-hand side of the table. With the change in reporting scope to include ABOUT YOU, all cost lines and the adjusted EBIT margin have been impacted. Group gross margin decreased year-over-year by 1.1 percentage point to 39.6%. More details to follow on the next slide in a moment. Fulfillment costs increased by 0.6 percentage points to 24.3% of revenue, and marketing costs rose to 9.3% of revenues, both primarily due to the consolidation of ABOUT YOU. Meanwhile, the consolidation positively affected admin costs, which improved by 0.6 percentage points. Overall, we delivered a lower adjusted EBIT margin of 3.2%. Now let's examine the gross profit development in more detail on Page 11. Our Q3 group gross profit was impacted by 3 main factors: factor number one, Zalando B2C negatively impacted the group gross margin by 0.7 percentage points. We saw negative impacts from active customer participation in commercial events, strong growth in our lounge business coming with a structurally lower gross margin and the planned revenue deferrals from our updated loyalty scheme. At the same time, we benefited from positive contributions of our partner business, including Zalando Marketing Services. Factor number two, the revenue contribution from ABOUT YOU's commerce business, which currently operates with lower gross margins and a lower partner business share, negatively impacted the group gross margin by 0.6 percentage points. And factor number three, B2B revenues positively impacted group gross margin by 0.2 percentage points. This was due to efficiency gains in ZEOS Fulfillment and the inclusion of SCAYLE as a high gross margin software business, both of which positively affected B2B gross margins. Looking ahead, we remain fully committed to our midterm group level gross margin target of around 40% by 2028. Turning now to Slide 12 for net working capital. Our net working capital continues to be negative in Q3 at minus EUR 141 million. Compared to last year, we see an increase of more than EUR 100 million. Inventories were higher, predominantly reflecting the inclusion of ABOUT YOU. Let's now take a look at Slide 13. As of the close of the first 9 months of 2025, our cash and cash equivalents stood strong at EUR 1.3 billion. This figure represents a decrease of EUR 1.3 billion from the EUR 2.6 billion recorded at the end of last year, primarily due to the paydown of convertible bonds and the consideration transferred for the ABOUT YOU acquisition. This concludes the financial performance review. Let's now move on to the outlook on Page 14. Today's strong Q3 results confirm that we are fully on track to achieve our combined guidance for the financial year 2025, as provided in August. Based on current trading and looking ahead at Cyber and Christmas peaks on the horizon, we anticipate a strong finish to the year, with mid-single-digit pro forma GMV growth in Q4. As a team, we are fully focused now on providing our customers with great experiences, and our partners with top-notch service during the upcoming peak season. For the upcoming year, our ambition remains clear. We will continue to deliver on our ecosystem strategy, accelerate growth and increase profit across both our B2C and B2B segments, fully in line with our midterm guidance. This will be supported by both accelerated growth of our platform business in B2C and further scaling of B2B, delivery of cost synergies enabled through the combination of Zalando and ABOUT YOU as well as continued cost efficiency measures. This concludes our presentation for today. Let's now open for Q&A. Operator: [Operator Instructions] First question from Adam Cochrane, Deutsche Bank. Adam Cochrane: The first question I got is on the basket size that you've reported, you've got the combined number. How has the sort of basket size progressed over the period? I know that as you're gaining new customers, they generally come in at a slightly lower average basket size. Is it possible to give us any sort of view on how the existing customer base basket size is evolving? And then obviously, you've got the new customers coming in. And then you've got the acquisition of ABOUT YOU as well. It's quite hard to get a picture of what's going on within the basket size. And then secondly, in terms of the B2B business, how is it evolving without the benefit of SCAYLE? And within SCAYLE, would you guys give any view on -- you've dropped in a few names there of clients. How much EBIT do these clients generate from the SCAYLE operation? Just so we get a flavor for talking about Netto as an example or DEICHMANN. I don't want them exactly, but how much EBIT do these clients generate for the group? David Schröder: Adam, thanks for your questions. I mean, looking at basket size development, I think the most important thing to understand, and as we've explained when we released our strategy, is that our key goal is really to increase GMV spend per customer, right? So our key focus is on the wallet of customers rather than the basket size of each individual purchase because ultimately, that's what we need to drive to drive customer lifetime value and to also obviously drive value of the business. That being said, obviously, we have taken measures over the past years, as you know, to improve our order economics also on individual orders, and that has led to an increase in average basket size actually both on Zalando and ABOUT YOU. And yes, that's also a trend that we actually expect to continue in the future. But as you know, what we are even more focused on at the moment, is to drive more frequency, frequency of engagement through our inspiration and entertainment efforts, but also frequency of shopping, especially through our loyalty program, Zalando Plus. And then on your second question regarding developments in B2B. I think I'm happy to confirm that even without including SCAYLE, our B2B business looks very strong, continues its double-digit growth trajectory that we've also talked about earlier this year, predominantly driven by ZEOS Fulfillment. And as we've also commented already in the presentation, the margin also without SCAYLE is up year-over-year in that business. And SCAYLE is contributing obviously even more revenue growth due to the first time inclusion on an as reported basis and then also obviously supports the margin due to the strong software gross margins, which then also leads me to the second point that you asked for. So if we look at SCAYLE specifically, obviously, it's a high gross margin software business, meaning that we -- if we add meaningful revenue which, in the case of large enterprise merchants can be right in the millions. There's also a strong drop-through of that revenue on to the bottom line. Operator: The next question is from William Woods, Bernstein. William Woods: The first one is just on, obviously, you're engaging in kind of more sponsorships with the German Football Association, et cetera. Do you think that this will become a larger portion of the business? And do you think the marketing spend might have to come up over the next couple of years? And the second one is similar to Adam's question, just on the active customer growth. Can you give some color on who you're acquiring either by gender, age category? And are you seeing similar retention rates? And then where do you think there's further room to go in terms of acquiring customers? David Schröder: Sure. Yes. So maybe taking a step back on sports in general, right? I mean, as you know, we -- as one pillar of our B2C strategy, we are definitely keen on expanding more into lifestyle areas beyond fashion. We see this as a key way to drive share of wallet and GMV per customer, as I also just explained on Adam's question. And especially the sports business is appealing there, right? Because sports, in a way, very nicely brings together style, culture and obviously, also performance. And we see that there's generally a high interest from our customers in that category, and that's why we also enjoyed significantly double-digit growth last year and also seeing strong growth this year. And for us, the sponsorships are now really an opportunity to, yes, further step up our game in sports and further raise awareness and consideration with customers to continue to grow that category very strongly. In terms of the implication that has on our marketing spend, I think what we rather see it as a reallocation of marketing spend within the marketing budget, so we don't intend to increase our marketing spend on a relative basis. I guess we've always said, over time, we rather aim to take it down in relative terms over time, and that is still very much true today. For us, it rather means, yes, we refocused some of our marketing spend on these big partnerships because we think they are an interesting new way to engage with customers, especially when it comes to these exciting new lifestyle propositions. And we've seen it work very well with the running sponsorships that we've done this year. So as we talked about in the presentation, several partnerships with key marathon events. And in the running category, we've seen even higher growth rates than in sports overall. So I think we have strong proof points that exactly this strategy is working, and we're now using the same playbook for football. Also ahead, obviously, of the large-scale events coming up next year with the World Cup in the U.S., Canada and Mexico. And then second question on active customer growth. I mean, we are very happy actually at both Zalando and ABOUT YOU to see this strong active customer growth continue. I think it shows us that we are far from reaching maturity levels anytime soon. I mean as we've talked about multiple times, the market is huge. Our market share, even combined, is still very small. And we continue to attract customers across all our markets, really, right? So even in more mature regions like DACH, still looking strong on new customer acquisition. It's also broad-based across age groups, across also the different propositions, which also provide us with a new angle obviously, to attract customers, right? So some customers now are also coming to us because of beauty, because of sports, because of kids, right? And I think that is very much explaining the strong traction that we are seeing on the active customer side. Operator: The next question from Georgina Johanan, JPMorgan. Georgina Johanan: I've got 2, please. The first one was just on the synergy guidance of EUR 100 million, I think. Just any updated thoughts on that from the early work that you've been able to do? And then secondly, I think just following on from, I think, Adam's question on SCAYLE, I think I'm right in saying that ABOUT YOU's guidance historically was for about EUR 25 million or so of EBITDA for their fiscal '25 from that business. It would just be really helpful even if it was on a one-off basis to understand the sort of level of depreciation that was going through SCAYLE, just so we could get a sense of that EBIT contribution, please? And then just sticking with SCAYLE, I know ABOUT YOU has talked about the potential for U.S. client wins. So just wanted to understand if that was something that you were still targeting under your ownership, please. David Schröder: Sure, Georgina. So on synergy guidance, I think nothing has changed since the last update. If anything, I guess, we are becoming more and more confident with every day that we are working together, that we'll be able to deliver on the synergies that we promised and might even find new ones along the way. I think one thing to still keep in mind, we already mentioned that several times in the past, is that the largest amount of synergies is obviously backloaded. So we'll mainly then hedge the outer years, 2028, 2029. But obviously, we are working hard to enable those synergies already with the actions that we are taking today and also next year. But yes, we'll be happy to provide further updates as we move along, most likely already then with our full year results in March next year. On SCAYLE, I think I'm afraid that I can't help you out on the specific details. You asked for what I can confirm, however, is that the strong gross margin and also EBIT contribution that SCAYLE has talked about in the past. It's also something that is obviously now driving our B2B business forward. As you can imagine, we've now reporting on a combined basis, we are also taking the same approach to capitalization that we are taking for Zalando overall. So no difference here in the treatment going forward. And with regards to the U.S. opportunity, indeed, this is potentially one of the biggest opportunities for additional SCAYLE momentum in the future. As you know and have seen, the momentum is very strong in Europe already. But obviously, the total addressable market could be significantly expanded if we gain a foothold in the U.S. And so it's a key priority for us as a group and for the SCAYLE team in particular. I'm definitely happy to report that there are several key discussions in, yes, what I would call close to final stages. So I would say, stay tuned for further updates to come in that regard. Operator: The next question from Sarah Roberts, Barclays. Sarah Roberts: Two from me, please. Firstly, digging into the B2C Zalando gross margin moving parts a little bit more. Could you walk us through the key moving parts of the B2C gross margin? We know there's some impact from partner program and ZMS, some headwinds from loyalty, but can you quantify these? And then how much of the pressure on gross margins reflect a more price-sensitive or promotional consumer? And then secondly, the M&S partnership for ZEOS looks like a strong win. Could you share a little bit more color on its potential contribution to B2B revenues? And give us a sense of when we might start to see those revenues coming through for B2B? David Schröder: Yes. So on B2C gross margin, I mean, the overall impact is something that you see very transparently, I guess, in the bridge that we provided. In terms of the quantitative impact of the different factors influencing, especially the Zalando B2C gross margin, I think I'm definitely happy to tell you how they rank, right, in terms of how much they influence the picture. The biggest impact definitely comes from the commercial activations that were very successful across our destinations in Q3, considering also that, that is seasonally a quarter very much driven by commercial activations with end of season sales, for example. Yes, second largest impact then came from the lounge business, showing very strong traction and I think also allowing us to have a strong offer for value-focused and value-conscious consumers in the current market environment. I think that's the key strength of the group that we can also cater to these needs, whereas our main destination, as you know, is more geared towards quality full price. And then the smallest impact, but that's one we already flagged to you same time last year, essentially came from the continued rollout -- successful rollout of the loyalty program, which saw a 30% increase in active memberships quarter-over-quarter. And then obviously, it's also reflected in our gross margin on the B2C level. These are the negative ones. I guess, on the positive side, obviously, we did -- as we commented, we did benefit from the higher gross margin of our partner business, especially also the continued double-digit growth of our Zalando Marketing Services. And yes, then coming to your question on the Marks & Spencer partnership, I mean, I'm personally super happy actually to see that after this landmark deal with NEXT, we are now seeing also strong interest from other brands and retailers to go for a similar setup, essentially trust us, not with just a part of their business, but go all in with the ZEOS solution, especially to leverage its full advantages across Continental Europe, where I would say our network is really one of a kind in fashion and lifestyle, and also is able to deliver superior performance in terms of customer service and cost efficiency at the same time. I think the deal here is further testament to that. And as you can imagine, we are also talking to some other clients for similar moves. And yes, we'll see that impact come through next year. As usual, there's a bit of integration and onboarding work that needs to happen, has also happened with NEXT, but as you can imagine, the more we do these kinds of rollouts, the better we get, the faster we get and the faster we can also scale our B2B business going forward. And so we expect it to also contribute to our growth acceleration next year. Operator: The next question from Frederick Wild, Jefferies. Frederick Wild: I'm afraid, I've got 3. So first of all, could you give us a bit more detail about current trading? Particularly, was it consistent across October and any trends there? Second, is the gross margin year-on-year move in Q3 a good guide for Q4? Because I was looking at the fact that ABOUT YOU seems to have structurally lower margins in Q3, so should we see some recovery in year-on-year gross margin in Q4? And then finally, I'd like to understand, please, what the partner program GMV mix was in the quarter, both for the combined group and for Zalando stand-alone? David Schröder: Sure. Yes. I mean on current trading, I think we see ourselves very much on track to hit our full year guidance. As we said, we expect, on a pro forma business -- basis, sorry, mid-single-digit growth in Q4. And that is very much supported by what we've seen so far. So we're not betting like on an acceleration in the -- what you could call second half of the quarter, but it's very much what we've also seen so far, and basically expecting that to continue throughout the remainder of the quarter. Now gross margin-wise, I think Q3 definitely can serve as a good indication for Q4 in the sense of the effects that we just talked about, right? The impact from the inclusion of ABOUT YOU, the impact from commercial activations, impact of a fast-growing launch, impact of loyalty program, accounting effects. I think all these are very much going to persist in Q4. And that's why I think that gives you a good indication for what to expect also next quarter. And then last but not least, I think looking at partner program performance in terms of GMV growth, we saw both retail and partner business grow almost equally strong in the third quarter. And so that also then implies that there's no bigger change in mix on the Zalando side. Keep in mind, obviously, that the partner share on the ABOUT YOU side is significantly smaller, but it's also accelerating as they are now driving the platform transition to a true marketplace model on the ABOUT YOU side. Operator: The next question is from Yashraj Rajani, UBS. Yashraj Rajani: I've got 2, please. So the first one is, how does your role as an aggregator change with the advent of Agentic AI, please? Like what are you doing to ensure that you are a beneficiary of AI traffic rather than being adversely impacted by agents directing customers to brand websites rather than your website? So that's the first one. The second one is -- you made a comment that you are far from maturity and still growing. Appreciate it's still quite early to comment on next year, but does that comment mean that you can potentially accelerate GMV growth next year? Or do you think that at this point, it's better to be conservative and potentially a mid-single-digit GMV growth for next year is a reasonable place to be, which is where consensus is? David Schröder: Sure, yes. Thanks for your questions. I mean, on agentic -- and I think that's very much in line with how you've seen Zalando act in the past, right? So when we see shifts in the industry, be it early on the shift from web to mobile, then later, obviously, also seeing other shifts in the industry towards more inspirational formats and so on, I think we've always had the ambition to lead that change and to also leverage these shifts as an opportunity to strengthen our business, to accelerate our growth and to, yes, obviously, also grow our share. And we think the same way about agentic, and that's also why we decided to really act early. You've seen that happen for example, through our targeted efforts to develop our very own Zalando system, which is an agentic interface on our own premises. We've, yes, I think learned a lot. We've also managed to roll it out and scale it over time. And we're obviously, looking at other use cases as well, I think especially important to consider that, yes, the opportunity in the end is also huge on the B2B side of the business as many brands and retailers are asking themselves these questions, how to grow their business and continue to engage with customers in an agentic environment, and I think SCAYLE can also obviously play a key role in enabling them for that future. And that's why, yes, we continue to embrace that opportunity and make sure that once again, similar to the shifts in the past, we come out strong and use it as a way to further strengthen our position in the industry without being naive, of course, right? So we also know there are potentially areas of this development that we need to have a careful eye on. But yes, I think the key focus is really on the opportunity that it creates for us. Regarding next year, and as also stressed during my outlook presentation, I think, yes, indeed, we are aiming to accelerate growth further next year. And so I think that's something you should expect from us. We definitely expect it from us, going forward, in line with really the midterm guidance that we have provided to you a while ago. Operator: The next question from Richard Chamberlain, RBC. Richard Chamberlain: Two also for me, please. I just had, first of all, a question about inventory. How are you feeling about the composition of your inventory at the moment? How fresh is the inventory overall? And then the second one is on the midterm gross margin target of 40%. Can you just remind me what the key drivers you think are for improvement to get to that level? Will that come from more buying and procurement? Or will that come more from improved full-price sales? David Schröder: Sure. So on inventory, I think we feel very good about our inventory position. I think it has enabled us to also have the right offer for customers. It has enabled a strong season start already in September and now continued good trading in the months thereafter. I think it's really important to realize, I made that comment earlier that the quantitative impact you see us report is mainly due to the inclusion of ABOUT YOU, right? And so if you -- yes, if you would essentially consider that impact and the remaining increase on the Zalando side is comparatively small and hence, very much in line also with the growth rates that we are driving at the moment. Now on the gross margin outlook. We are very much focused on gross margin, as you know, and we also are very committed to achieving the around 40% that we guided towards for 2028 as part of our midterm guidance. And the building blocks really remain the same, right? So on the B2C side, we see further opportunity to increase the retail margin, more full price sell-through. Also, obviously, thanks to economies of scale, better cost of goods and so on. I think the other key part, obviously, is that as we continue to increase the platform part of our business or the partner business and especially also Zalando Marketing Services, we add a lot of high gross margin revenue, which will also contribute to an increasing B2C gross profit margin over time. And then what obviously also contributes to the 40% outlook is the B2B business, which is growing strongly, but which comes with a structurally lower gross margin, though that obviously does not mean that it comes with a structurally lower adjusted EBIT margin, right? So on adjusted EBIT, as we've seen this quarter, actually B2B can be a very strong contributor and will definitely also be going forward. But yes, gross margin, especially on the logistics revenues, is obviously lower than on the retail side. Operator: The next question from Clement Genelot, Stifel. Clement Genelot: Only one from my side. So just as a follow-up on the agentic, as we have -- well I recently seen the multiplication of partnerships in the U.S. between OpenAI and online platforms. On your side, would you be open to the idea of striking similar partnership with OpenAI or other AI chatbots in Europe? David Schröder: Yes, definitely. I mean, I think we've been successful in the past when driving innovation with a combination of in-house efforts and then also partnerships. I think our -- the very initial development, for example, of our Zalando Assistant, also came about by leveraging OpenAI technology. But I think important for us as part of our strategy, and that's also what I meant earlier with we don't want to be naive, right, is that while we like these partnerships, we don't put all our eggs in one basket. So the approach we are generally taking is to be model agnostic. It's hard to say who will win in the end, right, and what model will be best for which use case. And therefore, we continue to experiment with different models, and we also build our tech stacks in a way that we can easily exchange models depending on who performs best at a given point in time. But I think, yes, this general approach of co-innovation with strong partners is one we will continue to leverage going forward. Operator: Next question from Mia Strauss, BNP Paribas. Mia Strauss: And maybe just -- I think you've talked about the commercial environment a bit. But how would you characterize the promotional environment at the moment before even heading into the key trading events? And then just secondly, can you just remind us of what is your marketing strategy on social media? So I think the point was touched on about redirecting to brands websites, but how do you bridge the gap to be redirected to Zalando's platform? David Schröder: Sure Mia. So in terms of the promotional environment, I think we've basically seen a continuation of what we already saw in the past quarters. No surprise, right, given the continued rather muted macro environment also in some of the key countries in Europe, for example, Germany consumers, in general, I would say, remain a bit more price conscious and value seeking. That's why we see strong responses to our commercial activations. That's also why, especially our lounge business is performing particularly well. And yes, obviously, we are taking that into account when we optimize our go-to-market strategies for the current environment. But for me, that's more tactics, right, where, obviously, we need to make sure that we always stay relevant for consumers and fulfill their needs in pursuit of long-term customer value accumulation. What it does mean is that we change on our general strategic direction, right? So we continue to see our role in the industry as a role that supports brands that also drives quality and is not overly focused on price. Now coming to your second question on engaging customers on social media. Obviously, we are very active on social channels, and it's also an important part of our content strategy, not just in terms of customer acquisition, but also -- yes, sometimes the first steps of an inspiration journey, obviously, start on social media. We do a lot on our own, but we also do joint campaigns with key partners through ZMS. However, I think it's important to understand that our primary goal is really to engage customers on our own premises. And that's why we typically construct these campaigns in a way where, yes, you might see your first hook on a social media app, but then we aim to move customers into a funnel where they then continue their inspiration journey on Zalando. And I think that's especially where new innovations like our Zalando feed experience, which we talked about in our half year report, in which we've now rolled out to a number of countries successfully, where these innovations can also help us further drive user engagement because they allow a much more immersive, much more content-rich experience than what we were able to offer before. And I think it also really blurs the lines a bit between the inspiration you can get on social media and what you see on Zalando. And yes, the first reactions from customers in terms of how much engagement they show in each visit, but also in terms of frequency of visits are very promising. And that's why we will continue on that path. So essentially considering ourselves our own best marketing platform, while obviously working also with social media outlets going forward. Operator: The next question is from Anne Critchlow, Berenberg. Anne Critchlow: I've got 2 questions, please. The first one is in terms of the seasonal promotions and commercial activations. Just wondering if there's been any shift from Q4 into Q3 this year in terms of the weighting? And also whether you think there's been a shift to the start of the autumn/winter season, particularly in the DACH region from Q3 into Q4, maybe from a weather perspective? And then the second one, please. Just in terms of the virtual fitting room, whether you're getting any different results, any developments there? Any other initiatives on size and fit? And also, if you could talk a little bit about the differences between the return rate between that Zalando and ABOUT YOU. David Schröder: Sure. I mean in terms of seasonal development, I think everything that we've seen so far points to a very normal seasonal pattern. Had a good start to the season, but also then the usual, I would say, timing and also performance of mid-season sale. And that's also why we expect similar trends to continue throughout the upcoming peaks. So nothing unusual, I would say, very much in line with what we've seen in the past. And then in terms of size and fit, it remains a key strategic topic for us, predominantly also because we think it differentiates us from other platforms to provide our customers with superior size and fit advice. We've seen very good responses in the past. And that's why we're doubling down on these investments. Virtual fitting room, I think, is working well. I think the key task here for us is to scale it to more products over time because it's really, yes, much harder to scale in a way than the pure data-driven size advice that we already offer for the bulk of our products. You need much more information about each single product than you need if you just try to match a size with a customer, but we are confident that, that will unlock the next level of size advice to improve the customer experience and to also further reduce size-related returns. When we look at return rates overall, and I think that's also to be expected given that we sell largely similar items on ABOUT YOU and Zalando. After all, if you look at same geo and similar items, I think the return rate is really not so different between the 2 platforms. Operator: The last question comes from Vandita Sood, Citi. Vandita Sood Chowdhary: I just have 2 quick ones. Firstly, could you give us an update on how the integration with ABOUT YOU is evolving and if you are expecting any sort of changes to the synergies that you guided to before, basically not being too significant this year? And also if there's any seasonality between the third quarter and the fourth quarter in that? And then secondly, I saw that you're now buying back some shares just for the employee program. Just wondered how you think about the timing of when you do these and how we should model it? David Schröder: Sure, Vandita. Thanks for your questions. I mean, on ABOUT YOU, as I said earlier, I think everything is working super well so far. Both teams are excited to team up. I think we've seen very good traction on now also executing against our ambitious plans to drive value strategically and financially, and so we are very confident to achieve the synergies we outlined to you in our half year call also with the ramp-up over the next few years. Obviously, much more impact to come in later years due to the nature of the synergies. And yes, as I also said earlier, I definitely see an opportunity to also identify additional sources of value creation over time, be it in the stand-alone business ABOUT YOU or also through synergies between our activities in B2C and B2B. So no changes. I think just more certainty and confidence that we'll deliver on what we shared. And then on the share buyback, I think that is really to be seen in light of what we also did in the past, right? So very regular procedure, a very similar amount as well, up to EUR 100 million to fund our existing share-based compensation programs. We expect these shares to be bought over the course of the fourth quarter. And as usual, you will also see the reporting of the share buyback on our website. Operator: This was the last question. I would like to turn the conference back over to you, gentlemen, for any closing remarks. David Schröder: Sure. Thank you very much. So yes, great questions, great discussion. Thanks for your interest, as always. Let me take this opportunity to wrap up with the key takeaways of today. As you can see, our ecosystem strategy and the integration of ABOUT YOU are progressing very well. In the first 9 months of 2025, we delivered strong growth and increased profitability, and we are fully on track to deliver on our combined guidance for 2025 and also on our midterm guidance beyond. So thanks, everyone, for joining today's call. Have a nice day. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, ladies and gentlemen, and welcome to today's Legrand 2025 9 Months Results Conference Call. For your information, this conference is being recorded. [Operator Instructions] At this time, I would like to hand the call over to CEO, Mr. Benoît Coquart and CFO, Mr. Franck Lemery. Please go ahead, sir. Benoît Coquart: Thank you very much. Good morning, everybody. Franck Lemery, Ronan Marc and myself are happy to welcome you to the Legrand 2025 9 Months Results Conference Call and Webcast. Please note that as usual, this call is recorded. We have published today our press release, financial statements and a slide show to which we will refer. I begin on Page 4 with the 3 key highlights of this release. First, Legrand delivered robust sales growth and very solid margins over 9 months. Second, we are sustaining a strong acquisition momentum and, third, our 2025 full year target rate in July are confirmed. So moving to Page 6. I will start with an overview of sales. Over 9 months, excluding FX, our sales grew by plus 14.5%. This includes an organic growth of plus 8.2%, driven by an outstanding performance in data centers of well above plus 30%. This also includes a positive scope effect of plus 5.8%. And based on acquisitions announced and their likely date of consolidation, the full year impact of scope changes should be around plus 5%. For exchange rates, the effect was a negative minus 2.2% in the first 9 months of 2025. And based on the rates of the month of October, it would be around minus 3% for the full year. On Page 7, you will find the key takeaways per geography on a like-for-like basis. In Europe, in a market that remains overall contrasted, sales were up plus 1.5% over the first 9 months of 2025. In North and Central America, sales were up a strong plus 18%, driven by an outstanding performance of data center offerings. Finally, in the Rest of the World, sales increased by plus 2.5% with growth in Asia Pacific and the Middle East, partially offset by a retreat in South America and Africa. Overall, at group level, as expected, most of the organic growth is coming from data centers that represent 25% of our sales at the end of September, while our sales in residential and other nonresidential buildings are flattish with residential slightly down. These were the main comments I wanted to share on sales. I will now hand over to Franck for more color on our financial performance. Franck Lemery: Thank you, Benoît , and good morning to all of you. I will start on Page 8 with adjusted operating margin. At September end, we recorded a solid adjusted operating margin of 20.7% after acquisition. This represents 20 bps of increase year-on-year, including 10 bps on organic improvement and 10 bps favorable impact coming from acquisitions. The group's profitability over the first 9 months demonstrates the strength of our strategic model and the solid capacity for execution and adaptation, notably, amid evolving global trade policies. Going now to Page 9. The net profit stood at EUR 892 million, representing 12.8% of our sales. The increase coming from operating profit is partially offset by the impact of financial results and a modest rise in corporate income tax. The free cash flow came to EUR 871 million, growing plus 16.3% over the same period of last year. This concludes our key financial topics I wanted to share with you this morning. And I'm now handing over back to Benoît . Benoît Coquart: Thank you, Franck. We are now moving to Page 11, detailing our recent acquisitions. Since Jan, we have announced 7 acquisitions, all in buoyant markets tied to the energy and digital transition for a total acquired annualized sales of approximately EUR 500 million. It includes Avtron, Page 12, a very promising leader in North America and a highly strategic acquisition. First, Avtron strengthens our presence in growing data centers, gray space and energy transition in North America. Second, financial metrics are robust, close to $350 million of sales with high profitability. Third, the transaction is fully compliant with our usual financial criteria of value accretive deals. By the way, I'm happy to confirm that we have just closed the deal a couple of days back. These transactions illustrate our ability and expertise in continuously strengthening our leadership in buoyant fields of activity. To conclude this section on Page 14, we confirm the 2025 full year targets we raised in July '25, building on the achievements we've just mentioned. And taking into account the first 9 months of 2025 results, we target for the full year sales growth organic and through acquisitions, excluding currency effects of between plus 10% and plus 12%. This includes expected organic growth of plus 5% to plus 7% and growth from acquisitions of approximately plus 5%. And adjusted operating margin after acquisitions of 20.5% to 21% of sales. And at least 100% CSR achievement rate for the first year of the 2025-2027 road map. Those were the key topics of this release. I suggest we now switch to Q&A. Operator: [Operator Instructions] We will now take the first question from the line of Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions, but they are quick. But the first one is in terms of looking at your guidance and given what you've done already in the first 9 months, the -- I guess, if you take the midpoint of the organic sales growth, you're expecting a flat Q4, which implies -- seems to imply sequentially even more deceleration than what a tough comp means. Can you talk through what would be the things that would get you to that level and why? The other 2 questions are quicker are just where was data center growth and what was your pricing and tariff headwinds? Benoît Coquart: Okay. Daniela, I will take the 3 questions. I will start actually by the data center growth because it explains a lot about our performance in 2025. So as I told you, over the first 9 months of the year, we grew well above 30% in data center. For the full year, we are somehow raising our guidance target for data center growth. We expect now that we should grow in data centers by about 30% in 2025 full year. As you remember that we started the year hinting that we would grow from 10% to 20%. Then we narrowed that and we increased it 3 months back by saying that we should grow 20% to 25%. And we now believe that given what orders in hand and so on and so forth, that we should grow 30%, which is a good performance because at the end, it would imply that over 2 years compounded, we would have grown 50% in data centers, 50%, 5-0. Plus 15, 1-5 in 2024, plus 30, 3-0 in 2025. So plus 50%, which, by the way, is pretty in line with what our listed peer has released because I trust is also at about plus 50% of what we are. So it's a very good performance, probably slightly above what the data center market growth is doing. And we believe that nice growth will continue into 2026. Now the fact is that we have a demanding basis for comparison. You remember that in 2024, we started the year very flattish in data center in Q1. And then we did plus 10%, plus 20%, plus 30%. In other words, in H2 2024, we had a plus 25% growth with an even higher Q4. So the visible deceleration, if I may say, is purely visible. We are at about plus 50% over 2 years. We're going to be close to plus 50% in Q4. But we have to acknowledge the fact that the basis for comparison in H2 and especially in Q4 is demanding for data center. So that's the story of this year as far as data center is concerned, very sustained growth all over the year, no deceleration, but a demanding basis for comparison. So it explains clearly the perceived deceleration that you are mentioning. Now if you look beside data center as a total of our sales, year-to-date, over 2 years, we are at plus 7%. And the midpoint of Q4 would imply 2 years plus 6%. Now it's not forbidden to think that we could do better than the midpoint. But again, the whole visible deceleration, if I may say, is coming from a base for comparison, not from a weaker data center business. As far as the building piece is concerned because I remind you that, of course, 25% of our sales is growing fast, but we also have 75% of our sales made in buildings. It is pretty flattish. As I said in my introduction with commercial being slightly better than resi, mostly because resi is very down in China and a little bit down in the U.S. But overall, it remains pretty flattish, and we don't expect it to recover in Q4. So to make a long story short, the story of 2025 is going to be a very strong sustained growth in data centers of about 30% and somehow quite a flattish building business with probably non-resi, a little bit better than resi. As far as pricing is concerned, which was your last question, we have a selling price over the first 9 months of the year of plus 1%. And for the full year, we will continue to do a bit of pricing. So for the full year, our pricing should be at about plus 1.5%. So if you look on a quarter-by-quarter basis, you will basically have Q1 pretty flat, Q2 plus 1%, Q3 plus 2%, Q4 plus 4%. This is more or less, let's say, with rounded numbers, the pattern of pricing. So our strategy has been, since the beginning of the year, to do progressive pricing, not too aggressive because, of course, we want to keep our competitive positioning. We are doing it to compensate the impact of tariff. I can share another number, which is interesting. Our purchase price are up by about plus 4% over the first 9 months of the year, entirely due to tariff. Yes, Q4 is -- sorry, plus 3%. Franck is mentioning. So pricing, again, 0 in Q1, plus 1% in Q2, plus 2% in Q3, plus 3% in Q4. And the net of all that, let's say, over 12 months is approximately plus 1.5% over the full year. Does it answer your question, Daniela? Sorry, I was a bit long, but I thought it was interesting to give you as much granularity as possible. Daniela Costa: Perfect -- just on the Q3 data center growth, I got the full year at 50%, but I'm not sure maybe I got lost. Benoît Coquart: Well, it's -- for the first 9 months, it's well above 30%. So it remains above 30% in Q3, and it will be about 30% for the full year. Operator: We will now take the next question from the line of Gael de-Bray from Deutsche Bank. Gael de-Bray: I have a couple of questions, please. The first one on pricing. It appears that the 1.5% price increase for the full year is a bit lower than what you had suggested previously. So do you think the price negotiations have changed versus a couple of quarters ago? I mean, have they become any harder? Or is it still the same environment, especially in the U.S. where data center customers are paying for the speed of delivery? So that's question number one. Benoît Coquart: Well, yes, you are true. When we released our 6 months number, we said that we would be close to 2%. Now we are more, let's say, guiding for 1.5%. The key difference is coming from tariff actually. So it's not that we have more difficulties to pass on price increases. But 3 months back, we told you that the tariff impact on a yearly basis should be somewhere between USD 140 million and USD 180 million on a full year basis. We now believe that it's going to be between $110 million and $130 million. So less negative impact, if I may say, coming from tariff. Well, I'm not sure I have to explain why. It's a very fluid situation. Things are moving almost from one week to another. So total impact, USD 110 million to USD 130 million; of which, let's say, $70 million to $80 million are already in the 9-month numbers. So we still have a bit to come in the last quarter. Hence, less need to do pricing. Now if I take one step back, I can confirm that the pricing environment hasn't changed. Our customers are always looking carefully at the price increases. They want to make good deals, whether in data centers or elsewhere. This hasn't changed. But at the same time, we keep our ability to do a bit of pricing because we have many other topics in which to play. Availability, as you rightly mentioned, reliability of our solutions, quality of our aftersales service and so on and so forth. So no change in pricing environment, but a little bit less impact from tariff. Gael de-Bray: Okay. Understood. And then the second question is on the incremental margin. I'm just curious as to kind of the outlook for incremental margins. I mean, in Q3, the margin was flat. But if revenues are looking better, let's say, in the course of 2026 in the European residential market, can we assume that we will also see much higher incremental margins with support from a better mix? Benoît Coquart: Well, guys, you are becoming greedy. We have a long-term guidance, which is 20%. For the fifth year in a row, we'll be above this guidance because we are shooting for 20.5% to 21% EBIT margin, which we believe is a pretty healthy level of margin. For '26, let's discuss that in February, if you don't mind. What I can confirm during this call is that, as you know, we raised our margin target in July, and we are confirming that we will be between 20.5% and 21%. And by the way, we are right in between over the first 9 months of the year with this 20.7% margin. For the '26 topic, let's discuss that in February. Gael de-Bray: And is there any reason to think that the usual negative margin seasonality in Q4 will not apply? Benoît Coquart: Well, again, you know our targets. So we have a year too margin, which is between 19.9% and 21.8%. If you look at what we did over the past 5 or 6 years, we've done both. So there's no reason to believe why our guidance margin wouldn't be met. So we were comfortable of the fact that we will be between 20.5% and 21%. Now if you want me to give you a bit more color on what happened in 9 months, it's a very, very clear story. As you could see in the numbers, we have a margin which is up 20 bps, right, at 20.7%, with a bit of evolution coming from acquisitions. So without acquisitions, our margin would be up 10%. Well, it would be up -- sorry, not 10%, 10 bps. It would be up 30 bps if we take out the other expenses, as you know, because you know Legrand well, you know that our EBIT margin is after one-off exceptional and so on. So it's plus 30 bps, of which minus 40 bps from gross margin, plus 70 bps from leverage on SG&A, all those numbers being like-for-like. So minus 40 bps gross margin, it's the fact that our pricing is not fully compensating in margin inflation, which was expected and plus 70 bps on SG&A is leverage coming from the growth. So it's a pretty clear-cut story. And I confirm that our P&L is well under control and that we will land where we said we would land. Gael de-Bray: Okay. Do I have time for just one more question. Benoît Coquart: Well, a quick one, Gael, because you have a couple of colleagues that are queuing. Gael de-Bray: Yes. So a very quick one. I mean, Eaton and Schneider have made big moves into liquid cooling recently. And I know you have, well, some kind of an offering here in rear door heat exchangers. I'm just wondering if you can increase the scale of that business so that it can really compete against the likes of Schneider, Eaton and Vertiv? Benoît Coquart: Well, it's increasing fast. And the growth rates are pretty impressive on this business, even though it's a small one. Of course, we are always looking at opportunities to expand our portfolio and to grow faster. So if we find good opportunities for additional customer catch for capacity expansion or even for M&A, why not? Now it is a fact that in this business, specifically this one, the price of the assets have gone up very significantly. And you know that, at Legrand, we are not found of deals where you have a return on invested capital of 2% or 3%. So yes, we will -- so we are growing fast already from a small base. We look at opportunities to expand. But of course, we will do it with our traditional value-accretive approach. And by the way, it's worth mentioning that even though we are less exposed to cooling than Vertiv, overall, those were the numbers I was mentioning a little bit earlier. Over 1 year and 2 years, we are growing as fast as Vertiv. So we don't need to be much bigger in liquid cooling in order to sustain very, very rapid growth. Operator: [Operator Instructions] We will now take the next question from George Featherstone from Barclays. George Featherstone: So I just wanted to start with a bit of a follow-up on the fourth quarter implied guidance. Because given your message on pricing up 3% in the quarter, it sort of implies that you're expecting volumes to come down based on your full year guidance. So what would be the reason for that? That would be the first question, please. Benoît Coquart: Well, it depends where you put yourself in the guidance. If you are in the mid, yes; if you are up, no. Well, again, I don't want to spend too much time on that. It's purely basis for comparison. To give you the numbers, Q4 was up by more than 6% last year. First 9 months were down about 1% last year. So there's a significant basis for comparison, which we highlighted already 3 months back and which we are highlighting again today. No change in trend. I really -- I cannot say it louder than that. No change in trends as far as data center is concerned. No change in trend, neither actually positive nor negative when it comes to the building side. So it's purely basis for comparison. It was factored in our initial guidance back in February. It was factored in our upgraded guidance back in July, and it is factored in the fact that we are confirming the guidance today. George Featherstone: Okay. And then maybe just on the data center business. You've been quite helpful in the past, giving us some color on backlog and visibility you have. Is there any color you can give on that again? And then maybe on the orders for the quarter, just sort of growth rates so we can frame that? Benoît Coquart: No, no, it's a fair question. Well, the KPIs are pretty well positive. We have a book-to-bill in Q3, which is still above 1% -- sorry 1, by 1%. We have a backlog which is above USD 1 billion. So no worries at all when it comes to, let's say, the leading indicator of our data center business. We have a good inflow of orders. We are looking with great interest at all the investments, which have been announced by the big guys and which says a lot about the potential business in '26 and '27. So again, I read a few notes this morning saying that our sales are a bit disappointing, but I want to say clear and loud that we are extremely confident on the fact that we're going to grow nicely of data center business in 2025, again, by about plus 30% and that this trend should continue going into 2026. No worries at all of the fact that this business would slow down. It will not. George Featherstone: Okay. Just maybe if I could just press you a little bit more on that. Some of your peers have talked to order growth in the third quarter of over 65%, 70% year-over-year. And the more exposure you have to white space and areas like cooling, the stronger that number is. Can you give us some context where your orders year-over-year landed relative to those peers? Benoît Coquart: Well, yes, the comparison is a bit difficult from one player to another because either you are on product families where you have shortage, in which case, orders are placed sometimes a year or 2 in advance, right? Or you are on business families where you don't have shortage because the companies have managed to increase capacity in the right pace, in which case, the orders do not need to be placed a year or 2 in advance. So I'm not sure it is relevant to compare the order growth of the company X to the order growth of the company Y. What matter is really the book-to-bill, number one. And at the end, what matters is the actual sales. And again, we've been consistently telling you for 5 years now that our sales growth in data centers were, at worst, comparable to what our peers were releasing and quite often better. And again, looking at what we're going to do in '25 and what we did in '24, this is exactly what we are demonstrating. So there's no worry at all. Again, on the data center front, we have very good inflow of orders from all customers. There's no customers missing, if I may say, from all geographies. It's not solely a U.S. stuff, but we have a good inflow of orders coming in Southeast Asia, in Western Europe, in Eastern Europe, in Africa and so on and so forth. And we are confident on the fact that this business is going to continue to perform very well in the quarters to come. Operator: We will now take the next question from the line of Jonathan Mounsey from BNP Paribas Exane. Jonathan Mounsey: I just want to really understand how the business mix, maybe pricing power ultimately is evolving. I mean, we all know that I think you've delivered price rises every year, at least going back to the '90s. And this pricing power has obviously protected margins in many environments. But I'm just wondering now over the long term going forward, you have 1/4 data centers. It seems to me the business model, the go-to-market is not the traditional construction building go-to-market via distributors selling to electricians. Instead, you're competing for tenders into hyperscalers, et cetera. I'm just wondering what that means for the through-cycle pricing power. It seems to me that while things are great today, and I'm not calling the end to that, at some point when volume growth maybe slows or industry capacity catches up with the growth, is this really altering the through-cycle pricing power of your group to be -- to have an increasing proportion of it dominated by data centers? Benoît Coquart: Well, I don't believe that our pricing power came from the fact that we are selling or building stuff through distributors. The pricing power is coming from the fact that price matters a lot for our customers, contractors, whether big or small, but it's not the #1 criteria. The #1 criteria is, let's say, 3 or 4 first criteria is, are the products reliable? Will I have to come back on site to fix a quality issue? Are the products available very easily? Can I save time when installing the product and so on and so forth. And the same applies to data center customers. I can tell you that the Amazon, Google, Microsoft of the world are very price sensitive. They've always been very price sensitive. But on top of price or even before pricing, they want to make sure to have the product on time. They want to make sure that once the product is installed, things will work because any service interruption is a loss of money. They want to make sure that if there is an issue, somebody will fix it quickly on site within a few hours and so on and so forth. And of course, they want to have all that in a cost competitive way. So in other words, I don't believe that the fact that we are doing 25% of our sales in data center change anything when it comes to our pricing power. And going forward, I'm confident on our ability to pass on small price increases year-on-year, providing, of course, we are doing things well when it comes to product quality, service and so on and so forth. So no, I don't believe it will change anything as far as pricing is concerned. And actually, if you look at the past couple of years, we've not done a lot more pricing nor a lot less pricing in data centers than in building. So the pricing pattern has been more or less similar. Jonathan Mounsey: Okay. Just as a follow-up, thinking about the inherent lumpiness of data centers. I mean we can see that consensus maybe struggle somewhat to forecast the growth rate, at least on a quarterly basis as we see this quarter. I'm just trying to think -- maybe you give us some color on the largest customers and projects. I mean, after all the growth we've seen over the last 12 months, what's the kind of typical mix in terms of hyperscalers, say, or the top 5 projects that you sell into? I mean, do they represent a considerable amount of the data centers exposure? And how fast does that sort of mix evolve? In a couple of quarters, could it look radically different? Just trying to understand what the sales mix looks like on those 2 axes and, therefore, maybe better understand how the sales bridge works for data centers. Do you basically just track data center CapEx? Or is our revenues at least on a quarterly basis, often quite concentrated around, say, a few big projects and customers? Benoît Coquart: Well, we'll give you probably a bit more color in February because, of course, we are performing this kind of analysis, but not necessarily on a quarter-by-quarter basis. Now to be a bit candid, the difficulty to forecast is your difficulty to forecast, not our difficulty to forecast. Because from the very beginning of the year, we highlighted the basis for comparison, number one. And number two, again, I'm saying it clear and loud, and I cannot be clearer and louder, but a plus 30% growth in data center in 2025, following a plus 15% growth in 2024 is very good performance, slightly above the market and completely consistent with what the only other peer releasing its numbers, i.e., Vertiv has announced. Midterm, we are -- we said in July that we expected the market to grow in the low teens. I don't know if it's going to be 10%, 12% or 14% throughout 2030. So we've been very clear on the numbers. We've been very clear on the basis for comparison. Now to be a bit more precise, the performance in the first 9 months of the year is not coming from 1 single customer nor from 1 or 2 big projects that would have been game changers as far as performance is concerned. So it's, of course, pulled a lot by hyperscalers because those are the guys spending the most money, but it's not the only one. Colocation is growing nicely. We are also active on other type of customers. We also have some business going through distributors to data center guys, especially aftermarket or smaller type of data centers. The growth is about the same in the 3 geographies: North America, Europe and Rest of the World. Of course, data centers represented the first 9 months of the year, 40% of our sales in North and Central America. So the total impact on our global performance is much higher in North and Central America than elsewhere. But as far as the growth is concerned, it's pretty the same between the 3 zones. So again, it's nothing special to mention except that the market has been growing nicely, and we will grow by a great plus 30%. And going forward, we expect some growth to continue. And we will try to give you more color in February where we will have more detailed analysis by type of customers and so on and so forth. Operator: We will now take the next question from the line of Alasdair Leslie from Bernstein. Alasdair Leslie: Just a sort of follow-up questions really. Sorry, I don't want to re-litigate this too much, but I know you say no change in data center trends quarter-on-quarter. But can we just kind of definitively rule out any kind of mix impacts in the quarter in terms of project deliveries? I know it's lumpy. So maybe last quarter, we just kind of had a lot of larger orders, just the kind of mix impacts or any capacity issues, capacity constraints, execution issues in Q3? Just so we're absolutely clear, there's no [indiscernible] in trends... Benoît Coquart: You're trying to understand whether there was a problem in Q3 or there will be a problem in Q4 in data center. The answer, again, read on my leaps, if you could. The answer is no. Everything is going very fine. The business is great. We have very strong sales, very strong orders, and we're going to grow 30%. Now you may have included in your model a growth of 40% or 50%, but we've never guided for that. Our previous guidance for data center was 20% to 25%, and we are even upgrading this guidance, telling you that it won't be -- 2025, it will be closer to 30%. So there's nothing specific happening except that, again, I can only remind you the pattern of last year, 0, plus 10%, plus 20%, plus 30% when it comes to our data center sales quarter-by-quarter in 2024. So it's purely entirely basis for comparison. Things are going very nicely in the data center business. Alasdair Leslie: Fantastic. Thanks for confirming that. And I guess just a follow-up question. I think you've got 12 months visibility from your backlog. That obviously stretches now, I guess, across most of 2026. So I guess, are you seeing indications in that pipeline that maybe deployment growth could be even higher in '26 than 2025? Benoît Coquart: Well, be careful. I'm not sure I would call that visibility. Yes, indeed, our backlog is mostly over a year. It doesn't extend much beyond 1 year. Now we've always been very careful in mechanically extrapolating a backlog into sales for many good reasons because backlog orders can be pushed, that can be canceled, they can be doubled down actually. So I wouldn't go as far as extending the backlog -- I mean, mechanically, let's say, converting the backlog into sales. When it comes to our 2026 guidance, both for total sales and for its 2 components, i.e., building and data center, we will do that in February. We are releasing our 9 months numbers. It's a bit too early to give you a guidance for '26. Operator: We will now take the next question from the line of Phil Buller from JPMorgan. Philip Buller: Can I ask why you've chosen not to narrow the range at this point in the year? It sounds like you're very confident about landing above the midpoint of the data center outlook in Q4. You sound very confident about -- it sounds like actually you just upgraded the data center outlook underlying for H2. So I'm struggling to understand what end markets has led you to keep the lower end of the range unchanged? And the follow-up to that is, I know it's a bit early to talk about 2026, of course, I was hoping you could offer your current thoughts on what you're seeing on the EU resi end market and the U.S. office market going forward? Are there signs of green shoots? Or have you seen anything this quarter that has made you more or less positive on the outlook for those 2 key markets? Benoît Coquart: Well, it's not Legrand practice to narrow the range in November, and we still have a quarter to go. We still have 75% of our sales in the building where we have absolutely zero visibility. So we decided to keep the guidance as it is. I'm not sure it would have helped a lot the market to narrow the guidance. So we talk a lot about data center because it's the most exciting piece of the business today. It's growing fast and so on and so forth. But don't forget that on 75% of our business, we have no visibility. As far as the building is concerned, I cannot, of course, comment on '26. I can do the same comment as 3 months back. We see some positive signs. I can give you an example, France, for example. If you look at the building permits in France, there has been a sequential improvement quarter-on-quarter for the past 4 quarters. And if you look at the last 12 months ending September, it's up mid-single digit, which is a good signal, and we like to see that. And it's consistent with the fact that 2025 will be the third year in a row of market going down. Now of course, when will it translate in our sales, this is always the same question mark. We are quite late in the cycle, and we love to see those early signs of improvement, but we prefer, of course, to see them flowing into our P&L. So -- and the same would apply for the commercial building in the market. We see also positive signs. You all have seen, especially you, some iconic building being built and opened in the U.S., which we love to see. Those are signs that the market is not bad and that some investors are starting to come back. But again, those are early signs, not yet flowing into our P&L. As far as guidance on '26 is concerned, of course, we'll discuss that in February when we release our full year numbers. Operator: We will now take the next question from the line of Max Yates from Morgan Stanley. Max Yates: I just wanted to ask around prebuying. And I guess you've continued to talk about prices rising into the fourth quarter. And I guess I just want to understand your sort of level of confidence around whether you have seen in perhaps your kind of non-data center business, any prebuying from your distributors? And to what extent can you actually have good visibility on this? Is it an easy thing to check? Or is it really sort of something qualitatively that you have conversations with your distributors about, particularly in the U.S., obviously, where the price rises are most significant? Benoît Coquart: No, it's quite difficult to measure because we don't have 2 distributors. We have a lot of them. And -- but -- so it's more based on conversations we have with them rather than a solid fully reliable KPI that we would track. Based on our conversation, we don't believe there's been any prebuy. So no prebuy. The reason being that -- or no significant prebuy, let's say. The reason being that it's super complicated to estimate what the impact of the tariff is going to be. See what happened with China, 100% additional tariff, then negotiations, it was canceled. So my feeling is that our distributors are not playing this game of prebuying. All the more as they have the ability to pass on price increases pretty quickly to the market. So I think no significant prebuy. No significant other, let's say, technical impact in 2025. So the number of days is not really playing significantly. We haven't seen any inventory building or destocking from our distributors in a given geography, no significant. So I don't believe that any of those technical factors, if I may say, has played on the performance. Max Yates: Okay. And maybe just a very quick clarification. When you were talking about your data center business for next year, I wasn't sure if I heard you say we're going to grow 30% in 2025. And that is a good expectation for next year in '26. Did I hear you say that or not? Benoît Coquart: No, no. I didn't say that at all. Good that you asked the question. No, I -- so sorry to guys, if I wasn't clear. I said, we grew significantly higher than plus 30% over the first 9 months of the year. We're going to grow 30% in 2025 for the full year. For 2026, we don't know yet, and we will give you a guidance in February 2026. And for the market throughout 2030, we still expect to grow mid-teens. Of course, I'm not guiding for a plus 30% in 2026 in data centers. Good that you asked that question. Operator: We will now take the next question from the line of Ben Uglow from Oxcap. Benedict Uglow: On -- within North America, and obviously, I'm trying to back out the portion of non-data centers. Is it correct to think that your underlying growth rate outside the data center business is year-over-year down mid-single digit or more. And it does look as though that, that's worse than the preceding quarter. I may have gotten the wrong end of the stick and these, day I say, these mini models don't really work. But I did want to understand your take on what the underlying trend, year-over-year growth trend is in the non-data center portion in North America. And if there is a change, is that due to residential or office or what's going on there? Benoît Coquart: Yes. Well, no, actually, if you look at the first 9 months of the year, in North America, the residential is down. The nonresidential is slightly up. And given the relative size of each of the 2, overall, it's probably about flat. Flat plus, if I may say, because we have a bigger exposure to non-resi and resi in the U.S. So -- which implies, of course, that the data center is growing nicely. Benedict Uglow: Yes. I guess my question is, sequentially, is there any divergence -- i.e., between 2Q and 3Q, and I apologize for being unbelievably short term, but is there any change in that trend? Or would you say it's the same? Benoît Coquart: No, it's about the same. No significant change in trend. Now of course, the numbers can slightly change one way or the other, but we're not seeing any significant change in trend between H1 and Q3. Benedict Uglow: Understood. And then my follow-up is just on North America, in terms of the operating margin, could you give us a sort of sense or a flavor of the margins that come into your data center backlog versus what your, let's call it, traditional business has been? How potentially accretive or non-accretive to the divisional margin could that be? Benoît Coquart: Well, I don't want to be too specific on North America or the rest of the -- so let me take this question at the group level. There's no significant difference between our data center business margin and our non-data center business. So of course, let's say, the geography of the profitability could be a bit different. In other words, you can have a lower gross margin, lower SG&A. But the net of that is that we have approximately the same profitability between data center and building. This is at group level. There's no reason to believe that it's different at a geographical level. Operator: We will now take the next question from the line of Eric Lemarie from CIC Market Solutions. Eric Lemarié: I've got a first one on data center in the U.S. and on market shares. Could you tell us if Legrand still hold leadership position in the U.S. in busbar and in PDU for data centers? Or did you observe any change in market shares in data centers? Benoît Coquart: Well, we tend to assess our market shares on a yearly basis more than on a quarterly basis. But yes, I can confirm without any doubt that we are leaders in both busway and PDUs as well as a few other product families actually. So to maybe one step back, our market shares in the product families in which we operate have been pretty healthy. When we look at our growth rate compared to the market growth rate, I can confirm that we are doing pretty well. I don't want to be too specific on a number of product families. But yes, to answer your question, yes, we remain by far leaders in those 2 product families. Eric Lemarié: And maybe if I can follow-up one still on data centers. If I'm not wrong, Legrand doesn't seem to be listed as an NVIDIA partner in the website of NVIDIA. And I was wondering if I was wrong or any thought why actually you are not listed? Benoît Coquart: Well, actually, you have -- a lot of people are releasing press releases about the partnership with NVIDIA. A lot are queuing to apply for being NVIDIA partners. We love NVIDIA. We work very, very well with NVIDIA. But we are maybe -- we have a different commercial approach. So we like partnerships. We like working together. We like developing concepts. We like selling products. We are a bit less obsessed by saying that clear and loud to the market. Operator: We will now take the next question from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: I just wanted to ask a question on pricing again, and thank you for the phasing of pricing through the year. Is there a way to disaggregate how you're seeing pricing in data center and your data center exposure versus the rest of the business? And the reason I ask is because some of the competitors in Europe have talked about deflation in certain parts of the market. And also across the data center infrastructure kind of wider piece, you are seeing some very, very strong pricing trends in certain areas of that. So just interested in terms of how you're seeing your pricing in data center and how we should think about that medium term? Do you have pricing power? Do you think you can see good pricing there medium term? Benoît Coquart: No, we haven't seen anything of specific pricing pressure, neither in Europe nor elsewhere on data center. Again, referring to what I was saying a bit earlier in this call, data center customers are price sensitive, but it hasn't changed. They were already price sensitive a year or 2 back, and they remain price sensitive. But it does not, let's say, hamper our ability to do price increase because, again, price is not the only criteria in the customers' mind. Now be careful because there was huge price increases apparently in some spaces in the U.S., especially in gray space in the U.S. because of a lack of products. Like transformers or stuff like that. So when people were ordering products, it could take as much as a year or 2 before they got delivered. And apparently, a number of players have increased significantly their price. But we are not in a great place in the U.S. As far as our products are concerned, the lead time has always been pretty reasonable, 8 weeks, 10 weeks, 12 weeks. And we've always had a reasonable price increases. And we believe that because we are reasonable and doing it carefully, we believe that we keep our ability to do further price increase in the years to come. So no significant changes in trends when it comes to pricing vis-a-vis neither data center customers nor building customers. Operator: We will now take the final question from the line of Nick Housden from RBC Capital Markets. Nicholas Housden: Just a quick one. I was wondering if you could just give us an update on how your energy transition segment is performing? Any growth rates, regional commentary, some commentary in terms of product lines, just anything, that would be great. Benoît Coquart: Yes. It's indeed a good question because the call has been much focused on data center, but the rest also matters. So as I said, for the first 9 months of the year, apart from data center, our sales are flat, and it means slightly up in the energy transition segment. Slightly down in what we call Essentials, so the traditional product families of Legrand and digital -- and sorry, smart home or digital lifestyle. So energy transition are slightly up. Well, of course, why only slightly up? Well, it's because a lot of those products are exposed to the building market. So when you have the residential market being very down in China, for example, whatever the quality of your products and whatever the strength of your market share, your sales are going down also. So that's what I can tell you, slightly up versus essentials and digital lifestyle, slightly down. Operator: I would like to turn the conference back to Benoît Coquart for closing remarks. Benoît Coquart: Well, thanks a lot for your time. I hope we answered all questions you had. If not, well, Ronan and the financial communication team are at your disposal for further clarification. Thanks a lot. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to today's Legrand 2025 9 Months Results Conference Call. For your information, this conference is being recorded. [Operator Instructions] At this time, I would like to hand the call over to CEO, Mr. Benoît Coquart and CFO, Mr. Franck Lemery. Please go ahead, sir. Benoît Coquart: Thank you very much. Good morning, everybody. Franck Lemery, Ronan Marc and myself are happy to welcome you to the Legrand 2025 9 Months Results Conference Call and Webcast. Please note that as usual, this call is recorded. We have published today our press release, financial statements and a slide show to which we will refer. I begin on Page 4 with the 3 key highlights of this release. First, Legrand delivered robust sales growth and very solid margins over 9 months. Second, we are sustaining a strong acquisition momentum and, third, our 2025 full year target rate in July are confirmed. So moving to Page 6. I will start with an overview of sales. Over 9 months, excluding FX, our sales grew by plus 14.5%. This includes an organic growth of plus 8.2%, driven by an outstanding performance in data centers of well above plus 30%. This also includes a positive scope effect of plus 5.8%. And based on acquisitions announced and their likely date of consolidation, the full year impact of scope changes should be around plus 5%. For exchange rates, the effect was a negative minus 2.2% in the first 9 months of 2025. And based on the rates of the month of October, it would be around minus 3% for the full year. On Page 7, you will find the key takeaways per geography on a like-for-like basis. In Europe, in a market that remains overall contrasted, sales were up plus 1.5% over the first 9 months of 2025. In North and Central America, sales were up a strong plus 18%, driven by an outstanding performance of data center offerings. Finally, in the Rest of the World, sales increased by plus 2.5% with growth in Asia Pacific and the Middle East, partially offset by a retreat in South America and Africa. Overall, at group level, as expected, most of the organic growth is coming from data centers that represent 25% of our sales at the end of September, while our sales in residential and other nonresidential buildings are flattish with residential slightly down. These were the main comments I wanted to share on sales. I will now hand over to Franck for more color on our financial performance. Franck Lemery: Thank you, Benoît , and good morning to all of you. I will start on Page 8 with adjusted operating margin. At September end, we recorded a solid adjusted operating margin of 20.7% after acquisition. This represents 20 bps of increase year-on-year, including 10 bps on organic improvement and 10 bps favorable impact coming from acquisitions. The group's profitability over the first 9 months demonstrates the strength of our strategic model and the solid capacity for execution and adaptation, notably, amid evolving global trade policies. Going now to Page 9. The net profit stood at EUR 892 million, representing 12.8% of our sales. The increase coming from operating profit is partially offset by the impact of financial results and a modest rise in corporate income tax. The free cash flow came to EUR 871 million, growing plus 16.3% over the same period of last year. This concludes our key financial topics I wanted to share with you this morning. And I'm now handing over back to Benoît . Benoît Coquart: Thank you, Franck. We are now moving to Page 11, detailing our recent acquisitions. Since Jan, we have announced 7 acquisitions, all in buoyant markets tied to the energy and digital transition for a total acquired annualized sales of approximately EUR 500 million. It includes Avtron, Page 12, a very promising leader in North America and a highly strategic acquisition. First, Avtron strengthens our presence in growing data centers, gray space and energy transition in North America. Second, financial metrics are robust, close to $350 million of sales with high profitability. Third, the transaction is fully compliant with our usual financial criteria of value accretive deals. By the way, I'm happy to confirm that we have just closed the deal a couple of days back. These transactions illustrate our ability and expertise in continuously strengthening our leadership in buoyant fields of activity. To conclude this section on Page 14, we confirm the 2025 full year targets we raised in July '25, building on the achievements we've just mentioned. And taking into account the first 9 months of 2025 results, we target for the full year sales growth organic and through acquisitions, excluding currency effects of between plus 10% and plus 12%. This includes expected organic growth of plus 5% to plus 7% and growth from acquisitions of approximately plus 5%. And adjusted operating margin after acquisitions of 20.5% to 21% of sales. And at least 100% CSR achievement rate for the first year of the 2025-2027 road map. Those were the key topics of this release. I suggest we now switch to Q&A. Operator: [Operator Instructions] We will now take the first question from the line of Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions, but they are quick. But the first one is in terms of looking at your guidance and given what you've done already in the first 9 months, the -- I guess, if you take the midpoint of the organic sales growth, you're expecting a flat Q4, which implies -- seems to imply sequentially even more deceleration than what a tough comp means. Can you talk through what would be the things that would get you to that level and why? The other 2 questions are quicker are just where was data center growth and what was your pricing and tariff headwinds? Benoît Coquart: Okay. Daniela, I will take the 3 questions. I will start actually by the data center growth because it explains a lot about our performance in 2025. So as I told you, over the first 9 months of the year, we grew well above 30% in data center. For the full year, we are somehow raising our guidance target for data center growth. We expect now that we should grow in data centers by about 30% in 2025 full year. As you remember that we started the year hinting that we would grow from 10% to 20%. Then we narrowed that and we increased it 3 months back by saying that we should grow 20% to 25%. And we now believe that given what orders in hand and so on and so forth, that we should grow 30%, which is a good performance because at the end, it would imply that over 2 years compounded, we would have grown 50% in data centers, 50%, 5-0. Plus 15, 1-5 in 2024, plus 30, 3-0 in 2025. So plus 50%, which, by the way, is pretty in line with what our listed peer has released because I trust is also at about plus 50% of what we are. So it's a very good performance, probably slightly above what the data center market growth is doing. And we believe that nice growth will continue into 2026. Now the fact is that we have a demanding basis for comparison. You remember that in 2024, we started the year very flattish in data center in Q1. And then we did plus 10%, plus 20%, plus 30%. In other words, in H2 2024, we had a plus 25% growth with an even higher Q4. So the visible deceleration, if I may say, is purely visible. We are at about plus 50% over 2 years. We're going to be close to plus 50% in Q4. But we have to acknowledge the fact that the basis for comparison in H2 and especially in Q4 is demanding for data center. So that's the story of this year as far as data center is concerned, very sustained growth all over the year, no deceleration, but a demanding basis for comparison. So it explains clearly the perceived deceleration that you are mentioning. Now if you look beside data center as a total of our sales, year-to-date, over 2 years, we are at plus 7%. And the midpoint of Q4 would imply 2 years plus 6%. Now it's not forbidden to think that we could do better than the midpoint. But again, the whole visible deceleration, if I may say, is coming from a base for comparison, not from a weaker data center business. As far as the building piece is concerned because I remind you that, of course, 25% of our sales is growing fast, but we also have 75% of our sales made in buildings. It is pretty flattish. As I said in my introduction with commercial being slightly better than resi, mostly because resi is very down in China and a little bit down in the U.S. But overall, it remains pretty flattish, and we don't expect it to recover in Q4. So to make a long story short, the story of 2025 is going to be a very strong sustained growth in data centers of about 30% and somehow quite a flattish building business with probably non-resi, a little bit better than resi. As far as pricing is concerned, which was your last question, we have a selling price over the first 9 months of the year of plus 1%. And for the full year, we will continue to do a bit of pricing. So for the full year, our pricing should be at about plus 1.5%. So if you look on a quarter-by-quarter basis, you will basically have Q1 pretty flat, Q2 plus 1%, Q3 plus 2%, Q4 plus 4%. This is more or less, let's say, with rounded numbers, the pattern of pricing. So our strategy has been, since the beginning of the year, to do progressive pricing, not too aggressive because, of course, we want to keep our competitive positioning. We are doing it to compensate the impact of tariff. I can share another number, which is interesting. Our purchase price are up by about plus 4% over the first 9 months of the year, entirely due to tariff. Yes, Q4 is -- sorry, plus 3%. Franck is mentioning. So pricing, again, 0 in Q1, plus 1% in Q2, plus 2% in Q3, plus 3% in Q4. And the net of all that, let's say, over 12 months is approximately plus 1.5% over the full year. Does it answer your question, Daniela? Sorry, I was a bit long, but I thought it was interesting to give you as much granularity as possible. Daniela Costa: Perfect -- just on the Q3 data center growth, I got the full year at 50%, but I'm not sure maybe I got lost. Benoît Coquart: Well, it's -- for the first 9 months, it's well above 30%. So it remains above 30% in Q3, and it will be about 30% for the full year. Operator: We will now take the next question from the line of Gael de-Bray from Deutsche Bank. Gael de-Bray: I have a couple of questions, please. The first one on pricing. It appears that the 1.5% price increase for the full year is a bit lower than what you had suggested previously. So do you think the price negotiations have changed versus a couple of quarters ago? I mean, have they become any harder? Or is it still the same environment, especially in the U.S. where data center customers are paying for the speed of delivery? So that's question number one. Benoît Coquart: Well, yes, you are true. When we released our 6 months number, we said that we would be close to 2%. Now we are more, let's say, guiding for 1.5%. The key difference is coming from tariff actually. So it's not that we have more difficulties to pass on price increases. But 3 months back, we told you that the tariff impact on a yearly basis should be somewhere between USD 140 million and USD 180 million on a full year basis. We now believe that it's going to be between $110 million and $130 million. So less negative impact, if I may say, coming from tariff. Well, I'm not sure I have to explain why. It's a very fluid situation. Things are moving almost from one week to another. So total impact, USD 110 million to USD 130 million; of which, let's say, $70 million to $80 million are already in the 9-month numbers. So we still have a bit to come in the last quarter. Hence, less need to do pricing. Now if I take one step back, I can confirm that the pricing environment hasn't changed. Our customers are always looking carefully at the price increases. They want to make good deals, whether in data centers or elsewhere. This hasn't changed. But at the same time, we keep our ability to do a bit of pricing because we have many other topics in which to play. Availability, as you rightly mentioned, reliability of our solutions, quality of our aftersales service and so on and so forth. So no change in pricing environment, but a little bit less impact from tariff. Gael de-Bray: Okay. Understood. And then the second question is on the incremental margin. I'm just curious as to kind of the outlook for incremental margins. I mean, in Q3, the margin was flat. But if revenues are looking better, let's say, in the course of 2026 in the European residential market, can we assume that we will also see much higher incremental margins with support from a better mix? Benoît Coquart: Well, guys, you are becoming greedy. We have a long-term guidance, which is 20%. For the fifth year in a row, we'll be above this guidance because we are shooting for 20.5% to 21% EBIT margin, which we believe is a pretty healthy level of margin. For '26, let's discuss that in February, if you don't mind. What I can confirm during this call is that, as you know, we raised our margin target in July, and we are confirming that we will be between 20.5% and 21%. And by the way, we are right in between over the first 9 months of the year with this 20.7% margin. For the '26 topic, let's discuss that in February. Gael de-Bray: And is there any reason to think that the usual negative margin seasonality in Q4 will not apply? Benoît Coquart: Well, again, you know our targets. So we have a year too margin, which is between 19.9% and 21.8%. If you look at what we did over the past 5 or 6 years, we've done both. So there's no reason to believe why our guidance margin wouldn't be met. So we were comfortable of the fact that we will be between 20.5% and 21%. Now if you want me to give you a bit more color on what happened in 9 months, it's a very, very clear story. As you could see in the numbers, we have a margin which is up 20 bps, right, at 20.7%, with a bit of evolution coming from acquisitions. So without acquisitions, our margin would be up 10%. Well, it would be up -- sorry, not 10%, 10 bps. It would be up 30 bps if we take out the other expenses, as you know, because you know Legrand well, you know that our EBIT margin is after one-off exceptional and so on. So it's plus 30 bps, of which minus 40 bps from gross margin, plus 70 bps from leverage on SG&A, all those numbers being like-for-like. So minus 40 bps gross margin, it's the fact that our pricing is not fully compensating in margin inflation, which was expected and plus 70 bps on SG&A is leverage coming from the growth. So it's a pretty clear-cut story. And I confirm that our P&L is well under control and that we will land where we said we would land. Gael de-Bray: Okay. Do I have time for just one more question. Benoît Coquart: Well, a quick one, Gael, because you have a couple of colleagues that are queuing. Gael de-Bray: Yes. So a very quick one. I mean, Eaton and Schneider have made big moves into liquid cooling recently. And I know you have, well, some kind of an offering here in rear door heat exchangers. I'm just wondering if you can increase the scale of that business so that it can really compete against the likes of Schneider, Eaton and Vertiv? Benoît Coquart: Well, it's increasing fast. And the growth rates are pretty impressive on this business, even though it's a small one. Of course, we are always looking at opportunities to expand our portfolio and to grow faster. So if we find good opportunities for additional customer catch for capacity expansion or even for M&A, why not? Now it is a fact that in this business, specifically this one, the price of the assets have gone up very significantly. And you know that, at Legrand, we are not found of deals where you have a return on invested capital of 2% or 3%. So yes, we will -- so we are growing fast already from a small base. We look at opportunities to expand. But of course, we will do it with our traditional value-accretive approach. And by the way, it's worth mentioning that even though we are less exposed to cooling than Vertiv, overall, those were the numbers I was mentioning a little bit earlier. Over 1 year and 2 years, we are growing as fast as Vertiv. So we don't need to be much bigger in liquid cooling in order to sustain very, very rapid growth. Operator: [Operator Instructions] We will now take the next question from George Featherstone from Barclays. George Featherstone: So I just wanted to start with a bit of a follow-up on the fourth quarter implied guidance. Because given your message on pricing up 3% in the quarter, it sort of implies that you're expecting volumes to come down based on your full year guidance. So what would be the reason for that? That would be the first question, please. Benoît Coquart: Well, it depends where you put yourself in the guidance. If you are in the mid, yes; if you are up, no. Well, again, I don't want to spend too much time on that. It's purely basis for comparison. To give you the numbers, Q4 was up by more than 6% last year. First 9 months were down about 1% last year. So there's a significant basis for comparison, which we highlighted already 3 months back and which we are highlighting again today. No change in trend. I really -- I cannot say it louder than that. No change in trends as far as data center is concerned. No change in trend, neither actually positive nor negative when it comes to the building side. So it's purely basis for comparison. It was factored in our initial guidance back in February. It was factored in our upgraded guidance back in July, and it is factored in the fact that we are confirming the guidance today. George Featherstone: Okay. And then maybe just on the data center business. You've been quite helpful in the past, giving us some color on backlog and visibility you have. Is there any color you can give on that again? And then maybe on the orders for the quarter, just sort of growth rates so we can frame that? Benoît Coquart: No, no, it's a fair question. Well, the KPIs are pretty well positive. We have a book-to-bill in Q3, which is still above 1% -- sorry 1, by 1%. We have a backlog which is above USD 1 billion. So no worries at all when it comes to, let's say, the leading indicator of our data center business. We have a good inflow of orders. We are looking with great interest at all the investments, which have been announced by the big guys and which says a lot about the potential business in '26 and '27. So again, I read a few notes this morning saying that our sales are a bit disappointing, but I want to say clear and loud that we are extremely confident on the fact that we're going to grow nicely of data center business in 2025, again, by about plus 30% and that this trend should continue going into 2026. No worries at all of the fact that this business would slow down. It will not. George Featherstone: Okay. Just maybe if I could just press you a little bit more on that. Some of your peers have talked to order growth in the third quarter of over 65%, 70% year-over-year. And the more exposure you have to white space and areas like cooling, the stronger that number is. Can you give us some context where your orders year-over-year landed relative to those peers? Benoît Coquart: Well, yes, the comparison is a bit difficult from one player to another because either you are on product families where you have shortage, in which case, orders are placed sometimes a year or 2 in advance, right? Or you are on business families where you don't have shortage because the companies have managed to increase capacity in the right pace, in which case, the orders do not need to be placed a year or 2 in advance. So I'm not sure it is relevant to compare the order growth of the company X to the order growth of the company Y. What matter is really the book-to-bill, number one. And at the end, what matters is the actual sales. And again, we've been consistently telling you for 5 years now that our sales growth in data centers were, at worst, comparable to what our peers were releasing and quite often better. And again, looking at what we're going to do in '25 and what we did in '24, this is exactly what we are demonstrating. So there's no worry at all. Again, on the data center front, we have very good inflow of orders from all customers. There's no customers missing, if I may say, from all geographies. It's not solely a U.S. stuff, but we have a good inflow of orders coming in Southeast Asia, in Western Europe, in Eastern Europe, in Africa and so on and so forth. And we are confident on the fact that this business is going to continue to perform very well in the quarters to come. Operator: We will now take the next question from the line of Jonathan Mounsey from BNP Paribas Exane. Jonathan Mounsey: I just want to really understand how the business mix, maybe pricing power ultimately is evolving. I mean, we all know that I think you've delivered price rises every year, at least going back to the '90s. And this pricing power has obviously protected margins in many environments. But I'm just wondering now over the long term going forward, you have 1/4 data centers. It seems to me the business model, the go-to-market is not the traditional construction building go-to-market via distributors selling to electricians. Instead, you're competing for tenders into hyperscalers, et cetera. I'm just wondering what that means for the through-cycle pricing power. It seems to me that while things are great today, and I'm not calling the end to that, at some point when volume growth maybe slows or industry capacity catches up with the growth, is this really altering the through-cycle pricing power of your group to be -- to have an increasing proportion of it dominated by data centers? Benoît Coquart: Well, I don't believe that our pricing power came from the fact that we are selling or building stuff through distributors. The pricing power is coming from the fact that price matters a lot for our customers, contractors, whether big or small, but it's not the #1 criteria. The #1 criteria is, let's say, 3 or 4 first criteria is, are the products reliable? Will I have to come back on site to fix a quality issue? Are the products available very easily? Can I save time when installing the product and so on and so forth. And the same applies to data center customers. I can tell you that the Amazon, Google, Microsoft of the world are very price sensitive. They've always been very price sensitive. But on top of price or even before pricing, they want to make sure to have the product on time. They want to make sure that once the product is installed, things will work because any service interruption is a loss of money. They want to make sure that if there is an issue, somebody will fix it quickly on site within a few hours and so on and so forth. And of course, they want to have all that in a cost competitive way. So in other words, I don't believe that the fact that we are doing 25% of our sales in data center change anything when it comes to our pricing power. And going forward, I'm confident on our ability to pass on small price increases year-on-year, providing, of course, we are doing things well when it comes to product quality, service and so on and so forth. So no, I don't believe it will change anything as far as pricing is concerned. And actually, if you look at the past couple of years, we've not done a lot more pricing nor a lot less pricing in data centers than in building. So the pricing pattern has been more or less similar. Jonathan Mounsey: Okay. Just as a follow-up, thinking about the inherent lumpiness of data centers. I mean we can see that consensus maybe struggle somewhat to forecast the growth rate, at least on a quarterly basis as we see this quarter. I'm just trying to think -- maybe you give us some color on the largest customers and projects. I mean, after all the growth we've seen over the last 12 months, what's the kind of typical mix in terms of hyperscalers, say, or the top 5 projects that you sell into? I mean, do they represent a considerable amount of the data centers exposure? And how fast does that sort of mix evolve? In a couple of quarters, could it look radically different? Just trying to understand what the sales mix looks like on those 2 axes and, therefore, maybe better understand how the sales bridge works for data centers. Do you basically just track data center CapEx? Or is our revenues at least on a quarterly basis, often quite concentrated around, say, a few big projects and customers? Benoît Coquart: Well, we'll give you probably a bit more color in February because, of course, we are performing this kind of analysis, but not necessarily on a quarter-by-quarter basis. Now to be a bit candid, the difficulty to forecast is your difficulty to forecast, not our difficulty to forecast. Because from the very beginning of the year, we highlighted the basis for comparison, number one. And number two, again, I'm saying it clear and loud, and I cannot be clearer and louder, but a plus 30% growth in data center in 2025, following a plus 15% growth in 2024 is very good performance, slightly above the market and completely consistent with what the only other peer releasing its numbers, i.e., Vertiv has announced. Midterm, we are -- we said in July that we expected the market to grow in the low teens. I don't know if it's going to be 10%, 12% or 14% throughout 2030. So we've been very clear on the numbers. We've been very clear on the basis for comparison. Now to be a bit more precise, the performance in the first 9 months of the year is not coming from 1 single customer nor from 1 or 2 big projects that would have been game changers as far as performance is concerned. So it's, of course, pulled a lot by hyperscalers because those are the guys spending the most money, but it's not the only one. Colocation is growing nicely. We are also active on other type of customers. We also have some business going through distributors to data center guys, especially aftermarket or smaller type of data centers. The growth is about the same in the 3 geographies: North America, Europe and Rest of the World. Of course, data centers represented the first 9 months of the year, 40% of our sales in North and Central America. So the total impact on our global performance is much higher in North and Central America than elsewhere. But as far as the growth is concerned, it's pretty the same between the 3 zones. So again, it's nothing special to mention except that the market has been growing nicely, and we will grow by a great plus 30%. And going forward, we expect some growth to continue. And we will try to give you more color in February where we will have more detailed analysis by type of customers and so on and so forth. Operator: We will now take the next question from the line of Alasdair Leslie from Bernstein. Alasdair Leslie: Just a sort of follow-up questions really. Sorry, I don't want to re-litigate this too much, but I know you say no change in data center trends quarter-on-quarter. But can we just kind of definitively rule out any kind of mix impacts in the quarter in terms of project deliveries? I know it's lumpy. So maybe last quarter, we just kind of had a lot of larger orders, just the kind of mix impacts or any capacity issues, capacity constraints, execution issues in Q3? Just so we're absolutely clear, there's no [indiscernible] in trends... Benoît Coquart: You're trying to understand whether there was a problem in Q3 or there will be a problem in Q4 in data center. The answer, again, read on my leaps, if you could. The answer is no. Everything is going very fine. The business is great. We have very strong sales, very strong orders, and we're going to grow 30%. Now you may have included in your model a growth of 40% or 50%, but we've never guided for that. Our previous guidance for data center was 20% to 25%, and we are even upgrading this guidance, telling you that it won't be -- 2025, it will be closer to 30%. So there's nothing specific happening except that, again, I can only remind you the pattern of last year, 0, plus 10%, plus 20%, plus 30% when it comes to our data center sales quarter-by-quarter in 2024. So it's purely entirely basis for comparison. Things are going very nicely in the data center business. Alasdair Leslie: Fantastic. Thanks for confirming that. And I guess just a follow-up question. I think you've got 12 months visibility from your backlog. That obviously stretches now, I guess, across most of 2026. So I guess, are you seeing indications in that pipeline that maybe deployment growth could be even higher in '26 than 2025? Benoît Coquart: Well, be careful. I'm not sure I would call that visibility. Yes, indeed, our backlog is mostly over a year. It doesn't extend much beyond 1 year. Now we've always been very careful in mechanically extrapolating a backlog into sales for many good reasons because backlog orders can be pushed, that can be canceled, they can be doubled down actually. So I wouldn't go as far as extending the backlog -- I mean, mechanically, let's say, converting the backlog into sales. When it comes to our 2026 guidance, both for total sales and for its 2 components, i.e., building and data center, we will do that in February. We are releasing our 9 months numbers. It's a bit too early to give you a guidance for '26. Operator: We will now take the next question from the line of Phil Buller from JPMorgan. Philip Buller: Can I ask why you've chosen not to narrow the range at this point in the year? It sounds like you're very confident about landing above the midpoint of the data center outlook in Q4. You sound very confident about -- it sounds like actually you just upgraded the data center outlook underlying for H2. So I'm struggling to understand what end markets has led you to keep the lower end of the range unchanged? And the follow-up to that is, I know it's a bit early to talk about 2026, of course, I was hoping you could offer your current thoughts on what you're seeing on the EU resi end market and the U.S. office market going forward? Are there signs of green shoots? Or have you seen anything this quarter that has made you more or less positive on the outlook for those 2 key markets? Benoît Coquart: Well, it's not Legrand practice to narrow the range in November, and we still have a quarter to go. We still have 75% of our sales in the building where we have absolutely zero visibility. So we decided to keep the guidance as it is. I'm not sure it would have helped a lot the market to narrow the guidance. So we talk a lot about data center because it's the most exciting piece of the business today. It's growing fast and so on and so forth. But don't forget that on 75% of our business, we have no visibility. As far as the building is concerned, I cannot, of course, comment on '26. I can do the same comment as 3 months back. We see some positive signs. I can give you an example, France, for example. If you look at the building permits in France, there has been a sequential improvement quarter-on-quarter for the past 4 quarters. And if you look at the last 12 months ending September, it's up mid-single digit, which is a good signal, and we like to see that. And it's consistent with the fact that 2025 will be the third year in a row of market going down. Now of course, when will it translate in our sales, this is always the same question mark. We are quite late in the cycle, and we love to see those early signs of improvement, but we prefer, of course, to see them flowing into our P&L. So -- and the same would apply for the commercial building in the market. We see also positive signs. You all have seen, especially you, some iconic building being built and opened in the U.S., which we love to see. Those are signs that the market is not bad and that some investors are starting to come back. But again, those are early signs, not yet flowing into our P&L. As far as guidance on '26 is concerned, of course, we'll discuss that in February when we release our full year numbers. Operator: We will now take the next question from the line of Max Yates from Morgan Stanley. Max Yates: I just wanted to ask around prebuying. And I guess you've continued to talk about prices rising into the fourth quarter. And I guess I just want to understand your sort of level of confidence around whether you have seen in perhaps your kind of non-data center business, any prebuying from your distributors? And to what extent can you actually have good visibility on this? Is it an easy thing to check? Or is it really sort of something qualitatively that you have conversations with your distributors about, particularly in the U.S., obviously, where the price rises are most significant? Benoît Coquart: No, it's quite difficult to measure because we don't have 2 distributors. We have a lot of them. And -- but -- so it's more based on conversations we have with them rather than a solid fully reliable KPI that we would track. Based on our conversation, we don't believe there's been any prebuy. So no prebuy. The reason being that -- or no significant prebuy, let's say. The reason being that it's super complicated to estimate what the impact of the tariff is going to be. See what happened with China, 100% additional tariff, then negotiations, it was canceled. So my feeling is that our distributors are not playing this game of prebuying. All the more as they have the ability to pass on price increases pretty quickly to the market. So I think no significant prebuy. No significant other, let's say, technical impact in 2025. So the number of days is not really playing significantly. We haven't seen any inventory building or destocking from our distributors in a given geography, no significant. So I don't believe that any of those technical factors, if I may say, has played on the performance. Max Yates: Okay. And maybe just a very quick clarification. When you were talking about your data center business for next year, I wasn't sure if I heard you say we're going to grow 30% in 2025. And that is a good expectation for next year in '26. Did I hear you say that or not? Benoît Coquart: No, no. I didn't say that at all. Good that you asked the question. No, I -- so sorry to guys, if I wasn't clear. I said, we grew significantly higher than plus 30% over the first 9 months of the year. We're going to grow 30% in 2025 for the full year. For 2026, we don't know yet, and we will give you a guidance in February 2026. And for the market throughout 2030, we still expect to grow mid-teens. Of course, I'm not guiding for a plus 30% in 2026 in data centers. Good that you asked that question. Operator: We will now take the next question from the line of Ben Uglow from Oxcap. Benedict Uglow: On -- within North America, and obviously, I'm trying to back out the portion of non-data centers. Is it correct to think that your underlying growth rate outside the data center business is year-over-year down mid-single digit or more. And it does look as though that, that's worse than the preceding quarter. I may have gotten the wrong end of the stick and these, day I say, these mini models don't really work. But I did want to understand your take on what the underlying trend, year-over-year growth trend is in the non-data center portion in North America. And if there is a change, is that due to residential or office or what's going on there? Benoît Coquart: Yes. Well, no, actually, if you look at the first 9 months of the year, in North America, the residential is down. The nonresidential is slightly up. And given the relative size of each of the 2, overall, it's probably about flat. Flat plus, if I may say, because we have a bigger exposure to non-resi and resi in the U.S. So -- which implies, of course, that the data center is growing nicely. Benedict Uglow: Yes. I guess my question is, sequentially, is there any divergence -- i.e., between 2Q and 3Q, and I apologize for being unbelievably short term, but is there any change in that trend? Or would you say it's the same? Benoît Coquart: No, it's about the same. No significant change in trend. Now of course, the numbers can slightly change one way or the other, but we're not seeing any significant change in trend between H1 and Q3. Benedict Uglow: Understood. And then my follow-up is just on North America, in terms of the operating margin, could you give us a sort of sense or a flavor of the margins that come into your data center backlog versus what your, let's call it, traditional business has been? How potentially accretive or non-accretive to the divisional margin could that be? Benoît Coquart: Well, I don't want to be too specific on North America or the rest of the -- so let me take this question at the group level. There's no significant difference between our data center business margin and our non-data center business. So of course, let's say, the geography of the profitability could be a bit different. In other words, you can have a lower gross margin, lower SG&A. But the net of that is that we have approximately the same profitability between data center and building. This is at group level. There's no reason to believe that it's different at a geographical level. Operator: We will now take the next question from the line of Eric Lemarie from CIC Market Solutions. Eric Lemarié: I've got a first one on data center in the U.S. and on market shares. Could you tell us if Legrand still hold leadership position in the U.S. in busbar and in PDU for data centers? Or did you observe any change in market shares in data centers? Benoît Coquart: Well, we tend to assess our market shares on a yearly basis more than on a quarterly basis. But yes, I can confirm without any doubt that we are leaders in both busway and PDUs as well as a few other product families actually. So to maybe one step back, our market shares in the product families in which we operate have been pretty healthy. When we look at our growth rate compared to the market growth rate, I can confirm that we are doing pretty well. I don't want to be too specific on a number of product families. But yes, to answer your question, yes, we remain by far leaders in those 2 product families. Eric Lemarié: And maybe if I can follow-up one still on data centers. If I'm not wrong, Legrand doesn't seem to be listed as an NVIDIA partner in the website of NVIDIA. And I was wondering if I was wrong or any thought why actually you are not listed? Benoît Coquart: Well, actually, you have -- a lot of people are releasing press releases about the partnership with NVIDIA. A lot are queuing to apply for being NVIDIA partners. We love NVIDIA. We work very, very well with NVIDIA. But we are maybe -- we have a different commercial approach. So we like partnerships. We like working together. We like developing concepts. We like selling products. We are a bit less obsessed by saying that clear and loud to the market. Operator: We will now take the next question from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: I just wanted to ask a question on pricing again, and thank you for the phasing of pricing through the year. Is there a way to disaggregate how you're seeing pricing in data center and your data center exposure versus the rest of the business? And the reason I ask is because some of the competitors in Europe have talked about deflation in certain parts of the market. And also across the data center infrastructure kind of wider piece, you are seeing some very, very strong pricing trends in certain areas of that. So just interested in terms of how you're seeing your pricing in data center and how we should think about that medium term? Do you have pricing power? Do you think you can see good pricing there medium term? Benoît Coquart: No, we haven't seen anything of specific pricing pressure, neither in Europe nor elsewhere on data center. Again, referring to what I was saying a bit earlier in this call, data center customers are price sensitive, but it hasn't changed. They were already price sensitive a year or 2 back, and they remain price sensitive. But it does not, let's say, hamper our ability to do price increase because, again, price is not the only criteria in the customers' mind. Now be careful because there was huge price increases apparently in some spaces in the U.S., especially in gray space in the U.S. because of a lack of products. Like transformers or stuff like that. So when people were ordering products, it could take as much as a year or 2 before they got delivered. And apparently, a number of players have increased significantly their price. But we are not in a great place in the U.S. As far as our products are concerned, the lead time has always been pretty reasonable, 8 weeks, 10 weeks, 12 weeks. And we've always had a reasonable price increases. And we believe that because we are reasonable and doing it carefully, we believe that we keep our ability to do further price increase in the years to come. So no significant changes in trends when it comes to pricing vis-a-vis neither data center customers nor building customers. Operator: We will now take the final question from the line of Nick Housden from RBC Capital Markets. Nicholas Housden: Just a quick one. I was wondering if you could just give us an update on how your energy transition segment is performing? Any growth rates, regional commentary, some commentary in terms of product lines, just anything, that would be great. Benoît Coquart: Yes. It's indeed a good question because the call has been much focused on data center, but the rest also matters. So as I said, for the first 9 months of the year, apart from data center, our sales are flat, and it means slightly up in the energy transition segment. Slightly down in what we call Essentials, so the traditional product families of Legrand and digital -- and sorry, smart home or digital lifestyle. So energy transition are slightly up. Well, of course, why only slightly up? Well, it's because a lot of those products are exposed to the building market. So when you have the residential market being very down in China, for example, whatever the quality of your products and whatever the strength of your market share, your sales are going down also. So that's what I can tell you, slightly up versus essentials and digital lifestyle, slightly down. Operator: I would like to turn the conference back to Benoît Coquart for closing remarks. Benoît Coquart: Well, thanks a lot for your time. I hope we answered all questions you had. If not, well, Ronan and the financial communication team are at your disposal for further clarification. Thanks a lot. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to the Commerzbank AG Conference Call regarding the third quarter results of 2025. Please note that this call is being transmitted as well as recorded by audio webcast and will subsequently be made available for replay in the Internet. [Operator Instructions] The floor will be opened for questions following Bettina Orlopp's and Carsten Schmitt's presentation. Let me now turn the floor over to our CEO, Bettina Orlopp. Bettina Orlopp: Good morning, everyone, and welcome to our earnings call. Our growth story in Commerzbank continues, and we have achieved the best 9 months operating result in the history of Commerzbank. This strong momentum also drives our outlook. With increased expectations for net interest income, we are very confident to deliver on our targets in 2025. I will present to you the financial overview after 9 months of this year and the key strategic topics before Carsten will walk you through the financial performance of the third quarter. Let me start with our view on the last 12 months. It was a special journey that we embarked on. Based on an exceptionally good team spirit, we created a very strong momentum for Commerzbank. We developed our momentum strategy with ambitious targets for 2028, 50% cost-income ratio, 15% return on tangible equity and 100% payout each year. In this process, the extremely high commitment of everybody involved was as important as the bare numbers and targets. And this has translated into strong focus on delivery. The success is impressive. 13% loan growth in Corporate Clients, 8% growth in fee income and a 11% increase in total revenues are proof of the strength of our Team Yellow. This is, however, only possible because we have a strong and robust business model that meets the needs of our clients. We further strengthened our client franchise and are proud of the deep relationships -- deep client relationships, I have to say, that are underpinned by many awards we have won. The very good performance and positive prospects have also driven our share price, which has almost doubled in the last 12 months. Based on our team spirit, our well-established client relationships and with some support from macro developments, I see a lot of further potential to be lifted. Our focus on shareholder value will also be further strengthened by the employee share program, which has started in October and aims to make every employee a shareholder of Commerzbank. Now let us have a look -- a closer look at the 9 months financial performance of this year. The material growth in fee income and around EUR 500 million higher revenues in mBank, including less burdens from the provisions of FX loans have led to the record operating result after 9 months. Together with high cost discipline, this growth is reflected in the cost-income ratio of 56%, which is exactly where we wanted to be on the path towards increasing efficiency going forward. In terms of return on tangible equity, we have achieved 10% after 9 months when excluding the restructuring charges. The double-digit return level is our new baseline for growth from 2026 onwards and demonstrates the significantly increased strength of Commerzbank. The high revenue growth of 11% is based on our significantly increased fee income. But equally important is a very successful management of net interest income in an environment of significantly lower rates compared to last year. The decrease of just 1% in NII provides us with lots of confidence for the next quarters. At the divisional level, the somewhat lower net fair value result in Corporate Clients has been broadly offset by the strong fee income in PSBC, and the group overall benefited from the strong trajectory in mBank. So the first 9 months have been very successfully -- successful financially. And this also applies to the implementation of our strategy. Let me highlight five areas in which we have made significant progress. First, on customer focus. Since last month, the new client coverage model in PSBC Germany is live. Key elements are personal one-on-one relationships for affluent clients and more time for high-quality advice in wealth management. Second, on growth. Based on our deep client relationships in Corporate Clients, we are the leading go-to bank. This has led to significant capital accretive loan growth of 13% in the last 12 months. Carsten will further elaborate on this. Important to note is that this growth is thanks to strong ties with our clients rather than any pricing concessions. Third, on AI. We already reported on use cases such as fraud detection and AI-assisted documentation for advisory calls with Corporate Clients. One of the latest applications is the AI enhancement of our KYC processes. Fourth, on costs. The implementation of the restructuring program is fully on track. The latest milestones have been the successful completion of all negotiations with the workers' representatives and the offering of part-time early retirements to a selective group of people. The acceptance rate of almost 50% is very high. And fifth, on capital. In Q3, we have successfully completed our first SRT of the year. The EUR 3 billion notional and EUR 1.6 billion RWA relief came at low cost in the area of 1% of RWA. This is very capital efficient. And in placing the first loss, we also achieved some risk mitigation. We plan for further SRTs in the weeks to come. All these achievements and the financial performance contribute to the confidence of the regulators into Commerzbank. This is reflected in our improved SREP results with a 10 basis points relief in Pillar 2 requirement. Looking into the next years, our regular planning update has confirmed our strategy. A few topics of special strategic importance have been identified and addressed. First, we stay focused on our growth path and pay special attention to the German stimulus package. This is a meaningful additional catalyst for our financial performance. Second, AI is one of the most important drivers to transform our bank and ensure increasing efficiency levels. What we have seen so far is just the beginning, and we will further invest heavily into AI. One example is the support of our staff in the advisory center. Live transcription of calls, proposals for client solutions and support for outbound calls will contribute to increasing efficiency and client satisfaction. And third, we strive to optimize the deployment of capital above 13.5%. Besides capital return by means of dividends and share buybacks, this includes the exploration of further organic growth opportunities as well as inorganic options such as bolt-on acquisitions. In an ongoing screening, all options must meet our investment criteria in terms of business fit and value accretion. Now back to macro and the German stimulus. The German investment package for defense and infrastructure, combined with legislative changes such as taxation relief and depreciation rules will significantly support our growth ambitions. Within our GDP forecast of 1.2% for 2026, we expect a considerable fiscal stimulus of 0.8% of GDP. The recently weaker German economic data do not contradict the expectation that a more expansionary fiscal policy will boost the economy. The budget for 2025 and the law on the extrabudgetary fund only came into force at the beginning of October. Hence, the positive impact will only be visible in future economic data. Furthermore, the federal government has shifted a considerable amount of investment spending from the core budget to the extrabudgetary fund in the budget for 2026. This increases the federal government's financial leeway and it can quickly increase other expenditures. This will help the economy in 2026 and 2027, even if the extra spending is partially directed at consumption instead of investments. The halving of the ECB deposit rates to 2.0% also points to higher economic growth. The positive view into 2026, however, still needs to translate into higher economic activity of corporates and especially the German Mittelstand. In this regard, the highest business expectations since 2022 according to the [ ifo] survey are positive. So sentiment has improved, the Mittelstand still remains cautious when it comes to investments in Germany. Bureaucracy energy prices and shortage of skilled workers still weigh on the business prospects of many corporates. Government-induced reforms to tackle these issues are important to unfold the huge potential of the stimulus package. Now let's move on with our own capital return program. We are very well on track and plan for a steady increase in capital return. Our currently active EUR 1 billion buyback program for 2025 is progressing well, and we have applied for a second tranche of up to EUR 600 million. Once we have a clear view on the full year results, we will decide on how much we will propose as dividend for 2025 and what the exact size of the second share buyback will be. Both steadily increasing dividends and the flexible use of buybacks will remain integral parts of the capital return program. Returning 100% of net profit after AT1 translates into attractive capital return yields of 8%, increasing to 11% over the next years. This is a key element of our strategy and our equity story. Let me now conclude with our outlook for 2025. Based on the strong performance after 9 months, we raised our outlook for net interest income from EUR 8 billion to EUR 8.2 billion. Furthermore, we improved our expectation for the risk result to below EUR 850 million. We stick to our cost-income ratio target of 57% and our target for the net result of EUR 2.5 billion, which translates into EUR 2.9 billion when excluding the restructuring charges. And we consider this to be the floor of our full year expectations. And we maintain our expectations for the CET1 ratio of at least 14.5% at the end of this year. Looking at 2026, our view is also very positive. The strong NII trajectory and the macro tailwind from the German stimulus forms significant support for our momentum strategy. With the presentation of our full year results next February, we will provide the full view on our outlook for 2026. Now let me hand over to Carsten for the financial performance of the third quarter. Over to you, Carsten. Carsten Schmitt: Thank you, Bettina, and good morning, everyone. It is my pleasure to present the results of the quarter. Let's start with a brief overview. Based on strong revenue growth, the operating result is up 18% compared to Q3 last year. The net result is lower, but only due to a one-off tax effect from DTAs driven by the reduction of the German corporate tax rate from 2028. Net RoTE thus came in at 7.8% for the quarter. For the whole financial year, we are on track to reach our RoTE target despite the tax effect; thanks to the good underlying performance of the business. The CET1 ratio of 14.7% is 18 basis points higher than in Q2 and fully in line with our target of at least 14.5% by year-end. I will now go through the details, starting with revenues. In the quarter, we achieved a 7% increase in revenues compared to last year. Net interest income is holding up very well, being on the same level as Q3 last year despite significantly lower ECB rates. In net commission income, we have maintained our momentum with income growth in line with our target of around 7% year-on-year. While opposing effects are largely canceling out, the net fair value result is marginally negative due to a minus EUR 34 million valuation effect from our holding in eToro. Other income, excluding FX loan provisions, mainly stems from a positive hedge result. Now [Technical Difficulty] in more detail. All customer segments grew their business year-on-year with mBank additionally benefiting from a one-off from the cards business. Corporate Clients generated good revenues in the generally slower summer quarter. Trade Finance has increased revenues despite the ongoing weakness in exports, and Capital Markets had a very healthy syndication business. The biggest increase came from Lending, where fee income linked to loan origination was significantly higher, in line with volume growth. Green Energy was especially strong. Private and Small-Business Customers in Germany continued to grow the fees from Securities business, both from securities volumes and transactions compared to last year. In Payments, the higher account fees that were introduced at the end of Q2 are starting to contribute. We have finished the first round of reach out to customers with a good acceptance rate. It has also resulted in customers increasing volumes. Asset Management benefited from higher transaction fees at Commerz Real and growth with wealth management products. With our ongoing initiatives, we have maintained momentum and are on track to reach our growth target for the year. Let's move on to interest income. We again had some headwinds from rates. In Q3, ECB rates were on average 25 basis points and Polish rates 50 basis points lower than in Q2. Nevertheless, net interest income is nearly on the same level as in Q3 last year. This clearly demonstrates the resilience of our business model. In Corporate Clients, net interest income is up compared with Q2 and Q3 last year. Lower funding costs for trading positions and higher income from the lending business were the main drivers. The lower funding costs linked to lower ECB rates are, however, partly offset in net fair value of trading book positions. In PSBC Germany, net interest income is up year-on-year and on the same level as in Q2. The effect of lower ECB rates and our investment in promotional offers for new deposits were offset by increased contributions from the replication portfolios and mortgages. In mBank, the lower NII results mainly from the cut in policy rates. The effect has been offset by higher net fair value from derivatives. In Others & Consolidation, NII is also lower, mainly due to rate cuts. Again, there is a positive offset in the net fair value result from derivatives. Looking at volumes, we had a very strong quarter. Corporate Clients has continued to grow the loan business with all customer groups. The loan volume is now up 13% year-on-year. The deposit volumes have been stable. PSBC Germany has maintained stable site deposit volumes and increased call money by almost EUR 8 billion with the promotional offers in July. This strong inflow has led to an expected uptick in the average deposit beta to 42%. In the mortgage business, the volume of new contracts has increased further, indicating a recovery in demand as house prices have stabilized and interest rates have reached a steady level. The outstanding volume is somewhat lower due to seasonally higher early repayments. On the next slide, I will give you more details on the loan growth in Corporate Clients. As mentioned, Corporate Clients is well ahead of its 8% annual growth target and achieved this growth based on our diversified franchise. This franchise extends to customers worldwide who have a connection to Germany. It also includes the foreign activities of German companies. As expected, with the sluggish German economy, there has been only moderate growth with corporates in Germany. In contrast, demand from the public sector has picked up over the last quarters. Another area of growth has been green infrastructure, both inside and outside of Germany. We have steadily grown the portfolio over the last years. We expect this to continue despite the changes in the political environment, given the economic attractiveness of the projects we are involved in. Also, demand outside of Germany has been healthy. Around 80% of the growth has been equally spread across Europe and the U.S. and the rest came from Asia. The new business has been diversified by sector with the largest demand from energy, chemicals and consumption. Finally, in line with our Momentum strategy, we expanded our relationship with Institutionals, especially financial institutions in emerging markets in loan and trade finance products. All this business has been generated at attractive risk-adjusted margins as we maintain our focus on the RWA efficiency of our client relationships. Looking into 2026, we expect demand in Germany to pick up as the extra spending by the German government should start stimulating the economy. The significant growth we have seen in renewable energy and in financing for the electricity grid as well as guarantees for the defense projects are first halving us. We are, therefore, confident that we will maintain our profitable growth trajectory. This brings me to the next slide with the outlook for NII. On the back of the successful loan growth and deposit management of the last quarters, we again raised our NII outlook from EUR 8 billion to around EUR 8.2 billion for the year. We believe that we have reached the trough in interest income in the second half of this year. For Q4, we do not expect significant deviations of the main drivers and net interest income should therefore be on the same level as in Q3. We anticipate an ongoing increase in contributions from the replication portfolio, offset by slightly higher deposit beta and continued volume growth. The contribution from mBank will be somewhat lower due to the expected rates development in Poland. 2025 proves that our business model is holding up well even during a rate cut cycle with ECB rates on average around 1.5% lower than in 2024. While lower rates have reduced NII in 2025, we also had a positive effect in the net fair value of around EUR 300 million. For 2026, we expect ECB rates to remain at the current level. We, therefore, do not anticipate the contribution of positions that are rate sensitive to ECB interest rates to change significantly, neither in interest income nor in the fair value result. With an expected EUR 2 billion NII in the fourth quarter, we, therefore, start with a baseline of EUR 8 billion NII for 2026. From this starting point, the main drivers of net interest income in 2026 will be rising contributions from the replication portfolios and continued growth, partially offset by headwinds from the beta and rate cuts in Poland. In total, these drivers should contribute approximately EUR 400 million, resulting in an expected net interest income of around EUR 8.4 billion. This is a good basis to reach our profitability target for 2026 and subsequent years. Now to costs on Slide 19. We have continued to manage our operating expenses in accordance with our target cost-income ratio of 57% for 2025. The main driver of costs, excluding mBank, has been personnel expenses. Half of the increase is attributable to planned increases and half to valuation effects of a higher share price on equity-based compensation. Additionally, in H1, we had impaired intangibles of EUR 65 million of Aquila Capital, which is reflected in the cost line. mBank has, as planned, a higher cost increase from significant investments in business growth. Additionally, compulsory contributions were higher. For Q4, we expect higher costs than in Q3 as there will be some seasonal effects, further growth in mBank and higher personnel costs as we continue to ramp up shoring and sourcing centers to transfer further tasks currently done in Germany. After booking the momentum restructuring expenses in Germany in the first half of 2025, we booked the majority of the provisions for staff reductions at our international locations in Q3. In Q4, we expect an additional booking of less than EUR 20 million. The next slide covers the risk result. The risk result came in at EUR 215 million. This is fully in line with our expectations. The portfolio continues to be resilient. And while the -- while we expect a somewhat higher risk result in the longer fourth quarter, we are very confident that we will end up below EUR 850 million given the good performance so far. As this has been a topic recently, we have added a slide on our NBFI portfolio in the appendix. This portfolio mainly reflects our well-established Institutionals business in Corporate Clients, which we are very comfortable with. Our exposure to private credit is not noteworthy. We have no direct exposure to U.S. private credit markets. This concludes the view on the key line items. I've already covered the main drivers of the excellent operating results and will therefore focus on the tax rate. With 36%, the tax rate was well outside our normal range of 25% to 30%. This is primarily due to a change in the German tax law. From 2028, the corporate tax rate will be reduced in 1% steps from 15% to 10% in 2032. While this will be positive long term, it reduces the current value of future tax credits. We, therefore, had to reflect this in the DTAs that we hold and is a one-off event. In case the proposed tax increases in Poland come into law, we will have an opposite effect in Q4 with a write-up of Polish DTAs. Overall, we expect the 2025 tax rate to be rather in the upper half of our expected range of 25% to 30%. The next slides cover the results of the operating segments, starting with Corporate Clients. As already mentioned, Corporate Clients had a good performance in the quarter, increasing the operating result by 15% year-on-year. Revenues benefited from the strong loan growth and the good Capital Markets business. This is most visible in International Corporates with 14% higher revenues and the strongest loan growth. In Mittelstand and Institutionals, the business has also performed well. However, the effect of lower rates on deposits could not be fully compensated. And finally, the risk result has remained well contained, supporting the operating result. PSBC Germany has also improved its operating results, both year-on-year and quarter-on-quarter. As mentioned, the main revenue drivers have been the Securities business, the new account fees as well as some contribution from loans and deposits. In Private Customers, the investment and promotional offers had the expected impact in Q3 and will start to pay off in 2026. Asset Management held revenues on the level of Q2 in the rather slower summer months. mBank has maintained its profitability nearly at the record level of Q2. As expected, provisions for FX loans have been lower than in the previous quarter, and we expect Q4 to be the last quarter of sizable provisions. In September, mBank published its new strategy until 2030. mBank targets continued growth with the ambition to reach a 10% market share in Poland. With this growth and a target cost-income ratio below 35% before banking tax, mBank will materially contribute to the financials of the group. For 2026, mBank aims to start paying a dividend. This will ultimately benefit Commerzbank shareholders as it supports our capacity to distribute capital. Others & Consolidation reported an operating loss of EUR 53 million in the quarter, nearly on the same level as Q3 last year. Year-to-date, the operating result is plus EUR 66 million, in line with our expectation of a more or less neutral result for the full year. Revenues are slightly higher than Q3 last year with lower NII compensated by the fair value result. Compared to Q2, there has been some additional valuation effects. Most noteworthy has been our stake in eToro. In Q2, we booked a gain of EUR 63 million following the IPO, while we needed to book a valuation loss of EUR 34 million in Q3 as the share price fell during the quarter. We will also see some effects in Q4 depending on share price performance. On the next slide, I will cover the RWA and capital development. The CET1 ratio stood at 14.7% at the end of the quarter, up 18 basis points from Q2. There were two main drivers. Risk-weighted assets are lower as RWA from loan growth were more than offset by an SRT issuance and model effects. We plan to issue further SRTs in Q4, optimizing the return from the loan book of corporate clients. At the same time, capital has increased as the deductions from Prudential Valuation were lower due to decreased market volatility after spiking up in spring of this year. In line with our distribution target of 100%, we have not included the quarterly profit for the calculation of the CET1 ratio. In total, we have already dedicated EUR 2.1 billion for distribution to shareholders in the first 9 months of the year. The MDA has gone up from 10.2% in Q2 to 10.4%. The reason is the introduction of a countercyclical buffer in Poland. A similar impact is expected in Q3 next year when the Polish countercyclical buffer is increased further. Finally, we have received the SREP letter from the ECB. Our 2026 capital requirements were lowered by 10 basis points. For us, this is a recognition of our solid business model and our increased resilience in recent years. As we must hold only part of the regulatory capital requirements as CET1, the MDA will be reduced by around 6 basis points effective from January. The outlook for 2025. As already mentioned, we have improved our outlook for NII from EUR 8 billion to EUR 8.2 billion and for the risk result from around EUR 850 million to below EUR 850 million. We confirm all other targets. We continue to expect growth of the net commission income of around 7% compared to last year, a cost-income ratio of 57%, a net result of around EUR 2.5 billion, and a CET1 ratio of at least 14.5%. We will provide our outlook for 2026 alongside the full year results in February. We clearly see upside of NII -- on NII compared to our original plan that we published in February and expect support from an improving macro environment. Thank you very much for your attention. Bettina and I are now looking forward to taking your questions. Operator: [Operator Instructions] The first question at this point comes from Benjamin Goy, Deutsche Bank. Benjamin Goy: Two questions, please, on net interest income. The first, thanks for Slide 17, the breakdown on the Corporate Clients growth, but maybe you can speak a bit more about your growth expectations for corporates in Germany and when this is going to inflect, whether it's early '26 or a bit later? And then secondly, you also mentioned that your '26 NII is likely impacted by higher deposit beta, which you consistently -- I think, conservatively assumed. So just wondering what increase you have expected? And how much was actually the comdirect campaign in July increasing the deposit beta last quarter? Bettina Orlopp: Thank you, Benjamin. So I mean, what is the outlook for corporates in Germany? You see that the growth is also already now in Germany when it comes to public institutions and also partly Green Infrastructure. But the majority we expect for 2026, one factor will be clearly the stimulus package of the German government. But then also given the improving business sentiment, which we see, there should be also more activity, specifically from Mittelstand clients for Germany. And there is apparently also the Made for Germany initiative, which means to have significant investments in Germany in the coming years. And on NII 2026, I hand over to Carsten. Carsten Schmitt: Yes. Thanks, Benjamin. Let me start with the increase in the deposit volume that we've seen in the third quarter. As you asked for it, so in July, we increased our deposit volume by around EUR 8 billion from the offers that we had out via comdirect. This led to an increase in the beta. On the personal customer side, we expected this, which is why you also see the beta coming up in Q3 to 42%. We've now said that we expect a slight increase into Q4, which is not stemming from the personal customer business, but rather from the Corporate Clients side. Given the generally lower rate environment at the moment, it becomes harder to actually fully transmit the rate cuts into the client business. And hence, you have a structural increase of the beta from that side. So for the full year, we are still expecting an average beta of around the 40% mark we indicated beginning of the year, potentially minimally higher. And for '26, as you asked for the development towards the EUR 8.4 billion NII, for '26, we expect that the current rate environment actually will come with the same strain on the corporate client beta. On the personal customer side, as mentioned, we expect this to come down again in Q4 and then manage it as we go in the quarters of next year. Operator: The next question comes from Tarik El Mejjad, Bank of America. Tarik El Mejjad: Just a couple, please. On cost savings, can you update us a bit on the progress on the different initiatives you've launched with your CMD earlier this year and how you're confident to deliver especially the trajectory on that? And second one on the capital. So if I understand well, by year-end, we will have a better view on the mix between the cash and buyback. So you say paying 100%, is it possible to pay more than 100% if you are above 14.5% CET1? Because we know that it will be EUR 1.6 billion or so of buyback, and then the components on the cash, given where you trade, could that be higher to lead you more than 100% from this year? Because I think that now what we need to look at is the 14.5% CET1. Bettina Orlopp: So Tarik, thank you for your questions. On cost savings, we make very good progress. First, when it comes to the restructuring program itself and the headcount reductions, we concluded all necessary negotiations with the workers' council, and we have already announced all structural changes, and we are in the process of implementing them. And we also started with one instrument, which is kind of a part-time retirement program, which has a benefit that people stay on for the next 1 to 3 years, so you can really manage transition and then they will go in the passive retirement phase. And we had a very high acceptance rate higher than we expected with 50% of the people we address that to. And then all other social instruments are also now available. And therefore, we are very much developing according to plan. When it comes to the necessary measures, when it comes to efficiency, streamlining, AI showing, we are also showing exactly the progress we expect. We are delivering AI use cases day by day. One can really say there's a lot of speed in that. And also the sharing activities are ongoing. We have already hired a number of people in Sofia, in KL for the different teams. So all well underway and on track. When it comes to capital, actually, I mean, we are paying more than 100% because we have the benefit that we can exclude the restructuring costs from our payout ratio. So if you take really the net result after restructuring costs, we will pay out more than 100% this year. But we will stick with 100% net income after AT1 before restructuring costs because that is exactly what we aligned also with the regulator as a basis for our share buyback requests. But the clear mix between dividend and share buybacks, we will finally decide. When we see the results, it's clear that we want to show a very attractive dividend as well. We now had EUR 0.30, EUR 0.65. And apparently, we want to have a further increase also given that share price has nicely improved over the last months, and it will be very attractive, and it will be a very attractive mix. And as said, the EUR 1 billion share buyback program is currently underway. The next one we have just applied for and then the rest, we will update in February. Operator: The next question comes from Jeremy Sigee, BNP Paribas Exane. Jeremy Sigee: Two questions, both on capital, please. Firstly, is there anything specific coming in Q4 that would bring the 14.7% down to 14.5%? Or does the sort of greater than 14.5% mean actually it could stay at 14.7%? So anything specific you're expecting in Q4? And then the second question I had was on your Slide 6, when you talked about sort of future strategy elements, topics of special strategic importance for the coming quarters, you mentioned optimizing deployment of capital above 13.5% target. Are there any new ideas that you have in mind or any new areas of focus? Or are you just reflecting something that's already a core plank of your strategy? Bettina Orlopp: Thank you, Jeremy. I mean on capital, we always know that a 0.1% up and down can also be just reflected by currency changes, FX changes and stuff like that. But overall, we expect more growth to come in Q4, and that will have an impact. There will be also more SRTs to come, but that's the whole story around that. When it comes to future capital deployment, I mean, we're thinking about investments all the time. The whole discussion around AI, specifically Agentic AI is accelerating. So we definitely also think to invest more into it to accelerate certain things. And then we explore -- as we have said beforehand, we explore different M&A opportunities to make sure that we can strengthen our business model. But the problem is they have to meet very strict criteria because we have very clear targets out there when it comes to 2028. So it needs to be value accretive and supporting our growth ambitions, but also our profitability ambitions for the years to come. Operator: The next question comes from Kian Abouhossein, JPMorgan. Kian Abouhossein: The first one is related to loan growth in the Corporate Clients where you have given very helpful details on Slide 17. Can you talk about the asset spread margin environment in the different areas? And what are you doing differently versus peers, which is driving this very strong growth rate that we are seeing? And the second question is on PSBC deposits, where we've seen also very strong growth. And should we be looking for more flattish growth going forward? How should we look around deposit growth in PSBC? And in this context, you mentioned that the structural hedge could grow from EUR 147 billion, which was flat. Wondering how should we think about the deposit growth and in conversion, the structural hedge? Is there any guidance you can give us? Bettina Orlopp: Let me start off with the PSBC deposit growth. I mean, the deposit growth has been very much supported by the attacker products, which we have seen in July. We now have stopped them. But overall, when you look in our plans, that has not changed. We plan for an average deposit growth of approximately 2%, and that is also very much coming by what our clients do, but also we definitely want to grow with our client base. And for the rest, I hand over to Carsten. Carsten Schmitt: Yes. Maybe to then also add to your question regarding the structural hedge position. We have an unchanged position regarding the replication portfolio coming from Q2 to Q3. And as you know from the slides, we have EUR 147 billion currently in this portfolio. Given the changed deposit structure that we're having now or size of the portfolio, we will, of course, look at potentially increasing this. So this is something we'll decide during Q4 and then update you on it. I would also like to remind you that we have in total EUR 200 billion plus in deposits that we can model and always sort of remain a distance to what we actually have in the model. So there is room to look at that, and we will do this during Q4. Then on your first question regarding loan growth on Corporate Clients and the margin development, I would like to pull this into two directions a bit. First and foremost, you've seen that we saw a healthy loan growth, especially on the International side. We grow the portfolio on that end, as mentioned, has good margins. The business is contributing. So we are actually seeing a healthy increase. And it is mainly coming, quite frankly, Kian, from our point of view, coming from the deep relationships we have with our customers and the international presence that we are offering with our outlets internationally. So that basically allows us to accompany them whenever there's financing needs coming up. And looking a bit more into the domestic part and the growth, especially when it comes to the public sector, to the municipalities, we interpret this as the first pickup of the infrastructure packages that also have been announced by the government. This business is a fantastic business when it comes to the risk position of the book. It, of course, also comes at slightly lower margins. But I would also like to say that in this space, municipalities -- or not necessarily only the municipalities, but also municipalities [ operates ] like suppliers, et cetera. And those usually from a margin perspective, go a bit more into the Mittelstand territory. So hence, growth in the book at good margins and rather accreting to the RWA efficiency of the book. Operator: The next question then comes from Borja Ramirez with Citi. Borja Ramirez Segura: I have two, these are on the NII. Firstly, I would like to ask on 2026, could you disclose the deposit beta that you are assuming? Because I think there was some comment on corporate deposit beta rising maybe because of higher -- of lower margins. But then also the retail deposit beta, I think maybe that's maybe improving as your attacker products are repriced at lower rates. So that would be my first question. And then my second question would be if you could kindly provide a bit more color on the moving parts in the 2026 NII. For example, I think there is -- I think you guided for EUR 300 million of benefit from the replication portfolio in 2026. In NII, I have slightly higher EUR 400 million because you [indiscernible] and also you increased the portfolio. So if you could kind of add more details there, please? Carsten Schmitt: Borja, thank you very much for the questions. Let me start with the first one on the deposit beta. Again, I would like to start with 2025. You've seen that we came sort of from a low level, which was steadily increasing over the year as expected. Q3 is now a bit higher coming in mostly because of the attacker products we had out in July. And as mentioned, we expect actually the private customer beta to come down again in Q4. So the main driver for the slightly higher beta that we expect for the end of the year comes from the Corporate Client business. All in, the beta, as mentioned earlier, will remain actually at a level of 40%, maybe 40.5% for the year as we expected. And running into '26, the beta from an expectation perspective will likely be driven by the Corporate Client side, where we see basically an unchanged beta landscape compared to Q4. You mentioned briefly sort of the impact from our attacker products on the personal customer side. I would like to make the point, the deposits that we actually got in beginning of July are term deposits. And while that always has a short-term impact on the beta, the longer-term benefit of actually having these deposits in the bank actually will be contributing in '26. Then the second question on the EUR 400 million increase of NII in '26. We will expect for '26 a pretty much unchanged at least ECB rate environment. So expect this to be flattish. The replication portfolio actually will be the driver with the investments and the position we have in the replication portfolio, we do see the stabilization effect. And as you've also seen in the last quarters, we continuously actually increase the average return out of that portfolio. So that will be the main driver. And then, of course, we will see growth effects and a slight negative coming from mBank given the Polish rate environment and expected a slightly higher beta next year. But that's the main drivers for the EUR 400 million so that we will see a positive development from EUR 8.2 billion, sorry, to EUR 8.4 billion next year. Operator: Okay. Then I think the next question comes from Tobias Lukesch, Kepler Cheuvreux. Tobias Lukesch: Also quickly touching on the NII again and the outlook for '26. You guided for this EUR 8.4 billion. I was just wondering what the net fair value expectation is in your old strategy at the CMD at EUR 0.5 billion, but you also had EUR 0.4 billion for '25, which is now still confirmed at EUR 0.3 billion. So I was just wondering if this still holds up and what your total view on this combined revenue contribution is. And secondly, basically on the cost side. So if I understand your guidance correctly now for '25, you have this EUR 200 million more in NII. At the same time, a EUR 70 million tax effect leaves us with EUR 140 million, which is more or less eaten up by higher costs. On the share price, I mean, one could hope it, but it's rather unrealistic to see the same compensation potentially for next year. So I was just wondering like what you see in terms of like this kind of cost development, how it will come back and how you will steer that basically into the future? Carsten Schmitt: Yes. Thank you very much, Tobias. Starting with the NII for '26, and you referred to specifically regarding the net fair value. So for '25, so for this year, we have a net fair value contribution, which is linked as we always refer to it to the NII to the degree of EUR 300 million. This is a change coming out of last year. So the reason why we listed this explicitly when going into the year and guiding for the NII was that in the rate declining environment, we wanted to also express it's not only the NII, but also partially contribution from derivatives that help us on the NII side. Now going into '26, we are guiding the NII for EUR 8.4 billion, but we expect a flat rate environment and hence, also no significant movements on the net fair value result stemming from the NII position. Hence, EUR 8.4 billion and at the moment, flat, so no additional contribution from the net fair value for '26. Then towards your second question regarding the cost side. I think you went through that quite nicely. We have some effects that you listed, which we also mentioned in the speeches regarding our '25 development. When we look at the operational, let's say, cost level and development that we're seeing in the bank, we're seeing a very disciplined way the bank is managing its costs at the moment. So looking into '26, we are basically very confident that we are running with the level that we have guided in the Capital Markets Day. As you know, we're steering for cost-income ratio. 56% is the target that we set for next year. And at this point, we hold clearly towards that 56%. Tobias Lukesch: If I may, again on this net fair value. I'm a little bit puzzled, to be honest, because with the CMD, you guided for EUR 8 billion NII in '26 and EUR 0.5 billion net fair value, which makes EUR 8.5 billion. If I understand you correctly, now you're guiding for a combined EUR 8.4 billion only for next year. And also again, on the '25, I don't get this unchanged EUR 0.3 billion net fair value result. I mean we're at a negative minus EUR 60 million, if I'm not wrong. And that would indicate a kind of EUR 350 million contribution in Q4. So how is that to read and to square? Carsten Schmitt: Yes. I think that's a super fair question. So first of all, Tobias, on '26, to be absolutely clear, we have EUR 8.4 billion expected NII and unchanged net fair value expectation of EUR 0.5 billion. So that stands. I was referring mainly to the net fair value we expect from the NII side. So for '26, no change in the net fair value guidance to be absolutely clear here. Then coming back to '25, the net fair value, in essence, is made up of multiple positions. One position is the net fair value, which we have from interest rate-related positions. That is the EUR 300 million that we mentioned. These are included as one portion of the net fair value, and they hold. We see them at the moment in the books. And given the current rate environment, we don't expect them to change towards the end. What's also included in net fair value is then the positions from our Capital Markets business, that is contributing to it. And the third position, which is contributing to net fair value is general valuation effects. And those have to be seen in combination with the other income. And if you combine those positions, so the net fair value that we have as a run rate at the moment, the other income and if you exclude from that the FX mortgage provisions which we hold for mBank, then you actually end up with a value around the EUR 250 million mark for '25. And hence, we stand with that guidance. Operator: The next question comes from Riccardo Rovere, Mediobanca. Riccardo Rovere: Again, on NII. If you look at the loan book, EUR 263 billion at the end of the 9 months is -- this is the average, is 2.5% higher than the average since the start of the year. And then in 2025 -- '26, you're going to have a support from the fiscal boost in Germany, 1.2% in GDP. This is real, then you add 2 percentage points from inflation. So the loan book will continue probably to grow in Germany. I don't know if it's 3.5% or something like that is reasonable or not. And then you have Poland, which is supposed to grow more than that, while your NII is supposed to grow 2%. So you are implicitly plugging in a fairly decent, I would guess, margin compression. While the rates are supposed to be stable, at least in Europe, but Europe is 70% to 75% of your business and Poland is 25%, 30%. So given that in 2025, your NII guidance went from 7.8% to 8%, then 8.2%. I'm just wondering whether the approach you have in the 9 months '25 when you set the 8.4% is with some caution, some prudence as you have constantly done throughout 2025. This is the first question. The second question I have is on the call money, core deposits in PSBC. As I understand, the promotional offer was in July, if I understood it correctly. So that means that the impact on NII should more or less be fully visible in this set of numbers. More than that, why are you gathering this -- why you're doing this promotional offer still? And then the other question I have is on the medium- to long-term funding, the amount has gone up dramatically over the past -- since the start of the year is almost, if I'm not mistaken, kind of EUR 20 billion or so, kind of EUR 18.5 billion in debt securities. It went from EUR 45 billion, something like that EUR 53 billion to more than EUR 70 billion. What is -- why has this gone up so much? And what is the spread that you get? Because the feeling I have is that then you invest in debt securities on the asset side. And I was curious to know what kind of debt securities this amount of money is invested in. That's just to have an idea. Bettina Orlopp: Yes. Thank you, Riccardo, for your questions. And specifically the first one, as you know, we like this wording of floor. And yes, we are always conservative, and you know that. So when it comes to next year, what are the driving factors? So first of all, we plan for another 8% loan growth in Corporate Clients. That's for sure, and that will be also supported by everything we see in the moment when it comes to the stimulus package. And I think we have proven nicely that we are able to organize that given the 13%, which we have shown year-to-date. However, what you need to keep in mind is two things. One is clearly Poland, which will also see nice growth on the loan side, but we will -- we expect a further decrease in interest rate levels there that will have a negative impact. And what Carsten said before on the deposit beta that you need to take the fourth quarter basically as something which will also drive then the full year 2026, and that will be a slightly higher deposit beta on [Technical Difficulty] which we have seen for this year. That is at least our assumption, and that is also the assumption which we have embedded in our plans back at the Capital Markets Day. If you look in this document, we always spoke about 41% for this year. Now it's 40% most likely, which would then go up to 44% until 2028. And that's just a reflection. It's lower than we thought, but there is still some increase in the deposit beta. When it comes to the -- so yes, you can say that the EUR 8.4 billion is clearly, again, a floor number and nothing else. And when it comes to the call money, we have that in July. We stopped the program actually after 3 weeks because we had so much inflow. But most of this money runs until January, February. And in the moment, we do only have our normal offers out there and nothing specific. And on funding, I hand over to Carsten. Carsten Schmitt: Yes. On the funding side, Riccardo, we had planned -- in terms of debt instruments, we had planned for around EUR 10 billion-plus for the full year, and we're currently standing at around EUR 11 billion in terms of funding. In terms of the spread across different instruments, we actually had a wide variety in the market this year from AT1 to AT2 issuances, et cetera. So basically, we had the full spread and made use of the market environment to do our regular sort of refunding activities. So actually, the funding plan is pretty much in line with our plan. We extended it a bit in Q4 effectively to make use of the current market environment. And also, I should say, looking a bit back into the first half of the year, we know that the markets are not always there when you want them to be there. So we basically looked a bit into stabilizing the funding position, but pretty much in line with the plan, maybe a bit on the upside. Also, given the current market environment and the spreads that we are seeing -- attractive spreads for the re-issuances, so generally, you can expect that we improved our funding cost position overall in the book throughout this year. And given that we hold the margins actually on the asset side steady, this will be contributing to our business plan. Riccardo Rovere: Very clear. Just maybe a quick follow-up. On the loan growth in PSBC Germany, the book is fairly stable at EUR 125 billion. Do you expect that the easing by the ECB is going to have an impact at some point in 2026 here? Bettina Orlopp: You mean on the private client side? Riccardo Rovere: Yes, exactly. On the retail side in Germany. Bettina Orlopp: Yes. I mean what we currently see is already much more activity again. So the mortgage activity has increased. Basically, it's back to the levels which we have seen pre-COVID. And there's just a time effect in there because people start a mortgage, but then until they really take the money, it takes a while because its most of the time, just paced in construction. So yes, we expect a loan growth for next year also on the PSBC side. Operator: The next question comes from Anke Reingen, RBC. Anke Reingen: There's two areas, please. The first is just coming back on the very strong corporate loan growth in Q3. Some of this seems to be a bit more short term in nature as in Working Capital and Trade Finance. And given Q4 is normally seasonally a bit weaker, I just wanted to confirm that you expect there shouldn't really be a reversal in Q4 from these levels. And then secondly, you talked at the beginning about your wealth management initiatives. And I just -- I'm sorry, I'm not -- can't really fully remember, but what you mentioned, is this incremental to your plan? And maybe can you just sort of give us an indication of how much it currently contributes to your revenues and what you sort of like size as an opportunity? Bettina Orlopp: First, we do not expect any reversal on the loan growth for the fourth quarter. And second, on wealth management, I mean, this is a core element of our Momentum strategy. So it's fully embedded in the plans. It's -- I mean, one of the factors which should drive our net commission income, the 8% or 7%, the 8%, which we have seen year-to-date, but also the 7% we expect for the years to come. And what we have now done is we basically intensified the coverage of clients. So there are more relationship managers to cover these groups of clients. We have wealth management centers. We also have new locations. We opened a number of new locations in Germany this year, and they will be a significant driver for the net commission income growth. We do not really say how much percentage-wise it is. Operator: The next question comes from Máté Nemes, UBS. Mate Nemes: I have two of them, please. The first one would be a follow-up on deposits, specifically the strong call money inflows. Can you talk about the retention rates that you've observed on such attacker products once the high interest period ends in the past 1 to 2 years? Would love to know what is your experience on that front, how sticky those new funds are? The second question would be on the risk result or risk costs and specifically your guidance. So in the first 9 months, you had EUR 515 million in risk results. And clearly, you revised your guidance down for the full year to below EUR 850 million. I'm just wondering what prevents you from being more specific on the full year risk results. It seems like there is an awful lot of room between the current result and the upper end of the guidance. Would you expect anything sort of inorganic in the fourth quarter, any model changes? Why not, let's say, a somewhat more precise lower guidance? Bettina Orlopp: Well, thank you. Yes, on the call money, the inflows and now you're asking what do we expect. I mean we can only speak for the past programs because the attacker products, which we have laid out in July are running, as I said, until January, February. So we will only see in the new year how sticky it is. You really have to differentiate between the two client groups, Commerzbank clients and comdirect clients. Commerzbank clients actually, whatever we get there is more sticky than on the comdirect side. And at the comdirect side, we also have more of these, I call them, interest rate hoppers. But still, we have been pleasantly surprised by the stickiness of how many clients still also keep their money with us. That is also due to the fact that most of the time, we also couple that with really client onboarding. We have a very attractive brokerage offering at the comdirect side, and that is clearly something which we combine also with new clients. So overall, so far, we have been rather pleasantly surprised on how much call money stays with us after the attacker products. But the risk result, I mean, totally clear, we see it the same. However, it's a long quarter, and this is why we, as always, stay a little bit cautious. We do not see anything specific. We do not expect anything specific, but it is a long quarter, which runs until February. So we're just leaving a space. There are not specific model changes planned or something like that. I mean there's always a time there are model updates, but nothing specific here. And that's also very confident. I mean, we wouldn't have changed it to below EUR 850 million if we would not believe that it comes lower than the EUR 850 million, which we originally laid out. But how much in total, we really will see in February when the quarter ends. So I think we are at the end of this call. Thank you very much for your questions. We are looking forward to further discussions with you and wish you now a great and sunny day. Thank you.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to ACADIA Pharmaceuticals' Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications at ACADIA. Please go ahead. Albert Kildani: Good afternoon, and thank you for joining us on today's call to discuss ACADIA's third quarter 2025 financial results. Joining me on the call today from ACADIA are Catherine Owen Adams, our Chief Executive Officer, who will provide some opening remarks; followed by Tom Garner, our Chief Commercial Officer, who will discuss our commercial brand, DAYBUE and NUPLAZID. Also joining us today is Elizabeth Thompson, PhD, Executive Vice President, Head of Research and Development, who will provide an update on our pipeline programs; and Mark Schneyer, our Chief Financial Officer, who will review the financial highlights. Catherine will then provide some closing thoughts before we open up the call to your questions. We are using supplemental slides, which are available on our website, Events & Presentations section. Before proceeding, I would like to remind you that during our call today, we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events, future results and financial guidance are based on current information, assumptions and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date, and we assume no obligation to update or revise these forward-looking statements as circumstances change, except as required by law. I'll now turn the call over to Catherine for opening remarks. Catherine Owen Adams: Thank you, Al. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report another strong quarter for ACADIA with solid execution across our commercial portfolio and continued momentum positions us well for a strong finish to 2025 as we lay the foundation for sustained growth into 2026 and beyond. We delivered total revenues of $278.6 million this quarter, up 11% from a year ago, reflecting the strength of our commercial portfolio. This performance underscores our ability to execute on multiple fronts while building for future growth. Starting with DAYBUE, we're very pleased with our progress. Following the expansion of our field force earlier this year, the benefits of which are now starting to materialize, I'm excited to share that we achieved our largest sequential increase in referrals since launch. This meaningful sequential growth reflects the impact of our expanded team into the community setting, giving us confidence that we will continue to see benefits from our broadened physician reach. During the third quarter, DAYBUE generated $101.1 million in net sales, including contributions from both U.S. sales and named patient supply programs outside the U.S. We shipped the highest number of DAYBUE bottles ever in a single quarter. In total, we shipped to over 1,000 unique patients globally, an exciting milestone for the company. Importantly, patient persistency remains stable, underscoring the sustained benefit DAYBUE delivers to patients and their families. Moving to NUPLAZID. We delivered an exceptional quarter with net sales of $177.5 million, marking our strongest sales quarter ever. The momentum we are now driving gives us tremendous confidence in NUPLAZID's potential to unlock higher growth in the coming years. To ensure we capture this opportunity, we're making strategic investments in a meaningful field force expansion. The impact of this field team expansion, combined with our direct-to-consumer campaigns creates a powerful combination that we believe will drive sustained growth and value maximization for NUPLAZID. We're looking to build on our commercial success by advancing our pipeline of novel product candidates, including the recent initiation of one Phase II and one Phase III trial. I'll now turn the call over to Tom to cover our commercial performance. Thomas Garner: Thank you, Catherine. I'll begin with DAYBUE, where we delivered another strong quarter of commercial execution. DAYBUE sales were $101.1 million in Q3, representing our highest revenue and total prescription volume in any quarter to date since launch. As Catherine noted, for the first time since approval, the number of unique patients receiving DAYBUE worldwide exceeded 1,000 in a single quarter for an actual count of 1,006. This achievement reflects not only our progress in the U.S. but also from patients now starting to access DAYBUE through our named patient supply programs internationally. We're seeing strong early indicators from our field force expansion. Referrals are leading the way with the highest quarter-over-quarter increase since DAYBUE's launch in 2023. This momentum is translating into other key performance indicators such as broadening prescriber reach with 956 physicians having now written at least one prescription for DAYBUE. Our sales teams are now gaining real traction with call volumes on our expanded target customer base increasing over 20% versus Q2, supported by a similar increase in the number of educational programs we delivered, both of which are important levers in helping to educate prescribers on the benefits that DAYBUE has to offer. Importantly, adoption is broadening beyond Centers of Excellence, or COEs, with community-based physicians accounting for 74% of new prescriptions in Q3. We're also seeing a meaningful uptick in scripts from nurse practitioners and physician assistants, reinforcing that our strategy to expand in-person efforts into the wider Rett treating community is working. These trends position us well to reach more Rett patients who could benefit from DAYBUE. Even with this progress, overall market penetration remains relatively low at about 40% in the U.S. and only 27% in the community setting where the majority of Rett patients are treated. This continues to represent a substantial growth opportunity for the brand. Looking at age demographics, penetration among patients under the age of 11 is over 60%, but amongst older patients is significantly lower despite growing real-world evidence of DAYBUE's positive impact in this group. As we expand our reach beyond COEs, we see this segment as a significant growth driver for 2026 and beyond. Long-term persistency remains a key strength for DAYBUE, reflecting its sustained clinical benefit and strong patient engagement. With another quarter of maturity in our data, persistency rates remain above 50% at 12 months and greater than 45% at 18 months. The strength of these metrics are important as they further reinforce not only our confidence in DAYBUE's therapeutic value but also our outlook for sustainable long-term growth in the U.S. Internationally, our named patient supply programs continue to gain traction. All 3 distribution partners are now actively shipping to patients in the EU, Israel, Middle East and Latin America. Looking ahead, we remain confident in DAYBUE's growth outlook, driven by sustained demand generation supported by our strategic field force investments, strong persistency metrics and expanding global access. These factors are critical because they are -- not only validate the long-term value of DAYBUE for patients but also create a durable foundation for revenue growth. While we began to see the initial positive impact from the field force expansion in Q3, we expect meaningful benefits to accelerate through Q4 and into 2026. In summary, DAYBUE is well positioned to capture significant market opportunities in the U.S. and internationally, reinforcing our commitment to delivering both patient impact and shareholder value. Now turning to NUPLAZID, where we delivered record performance with net sales of $177.5 million, representing 12% year-over-year growth, driven by 9% volume growth. This reflects strong underlying demand for NUPLAZID among patients with Parkinson's disease psychosis, or PDP, and the success of our commercial strategy, coupled with the unwavering focus of our customer-facing teams on executional excellence. Referrals were a key driver of this momentum, increasing 21% year-over-year. This growth signals increasing awareness and confidence among health care providers in identifying and treating Parkinson's-related hallucinations and delusions earlier in the course of the disease. New prescription volumes grew 23% in Q3 compared to the same quarter last year, representing the strongest year-over-year increase since 2019 and were up 9% sequentially. This inflection point demonstrates that our patient engagement campaigns and HCP outreach are translating into tangible prescribing behavior. It also underscores their belief in NUPLAZID's differentiated profile as the first and only FDA-approved therapy for PDP with a well-established safety and efficacy record. Taken together, we believe these trends are an important leading indicator of future prescribing behavior and reinforce the strength of NUPLAZID in meeting a critical unmet medical need. As a reminder, the U.S. PDP market represents a significant opportunity. There are approximately 1 million Parkinson's patients with an estimated 50% experiencing hallucinations and delusions at some point during the course of the disease. This translates into a substantial number of patients who could benefit from NUPLAZID, underscoring the long runway for growth. Looking ahead, we see significant opportunity to build on this momentum. Our reach and frequency model is driving broader prescribing patterns across a wide range of HCPs and our direct-to-consumer campaigns are raising awareness of PDP symptoms while highlighting NUPLAZID as the first and only approved treatment. To fully realize NUPLAZID's long-term potential and capitalize on the brand's strong momentum, we are making strategic investments, including a 30% increase in our customer-facing team starting in the first quarter of 2026. This expansion will allow us to reach newly activated physicians and improve pull-through. We are approaching this expansion thoughtfully to maximize near-term efficiency and long-term impact. Our various consumer initiatives are driving awareness and creating demand with our expanded field force ensuring we efficiently convert that demand into prescriptions. In summary, the NUPLAZID fundamentals are strong. The market opportunity is substantial, and we have a proven strategy designed to capture it. With a differentiated product profile, accelerating demand indicators and targeted investments in our commercial model, our ambition is not just to grow but to become standard of care for these patients. I'll now turn the call over to Liz. Elizabeth Thompson: Thank you, Tom. I'm pleased to share some updates on our pipeline, where we continue to make encouraging progress across multiple programs that hold meaningful potential for the future. We've achieved some important milestones recently, including the successful initiation of our Phase II study for ACP-204 in Lewy body dementia psychosis and the initiation of our Phase III study of trofinetide in Japan. Looking ahead, our next expected milestone is the initiation of a Phase II study for ACP-211 in the fourth quarter of this year. We are developing ACP-211 in major depressive disorder, a common condition with significant unmet need. Then in Q1 2026, we expect to initiate our first-in-human study of ACP-271 in healthy volunteers. To our knowledge, this will be the first time a GPR88 agonist enters the clinic, and it moves us along the path of development, targeting the indications of tardive dyskinesia and Huntington's disease. We also have important projected study readouts coming. We anticipate reporting results from 4 Phase II or Phase III studies between now and the end of 2027, underscoring both the breadth of our pipeline and the momentum behind our R&D strategy. Our next major readout is expected to be ACP-204 in Alzheimer's disease psychosis in mid-2026. We're particularly excited about this opportunity and what success could mean for the future trajectory of our company. The unmet need here is substantial. The market opportunity is large, and we have built this program based on a substantial body of learnings from pimavanserin at both the molecule and the trial level. Now switching gears to our international expansion efforts. First, I wanted to provide an update on the regulatory process in the EU for trofinetide. We've been informed by EMA that the earliest that a scientific advisory group could be held would be January. Given this, we now anticipate a CHMP opinion in the first quarter and the EC regulatory decision following the standard regulatory time line. Meanwhile, in Japan, we've successfully initiated our Phase III study, representing a key step towards potentially bringing trofinetide to patients in this important market. Now before I close, I wanted to take a moment to acknowledge and thank everyone involved in our COMPASS Prader-Willi syndrome study and the ACP-101 clinical development program. We are so grateful for the dedication and contributions of the patients, families, study site personnel and physicians who participated. While the outcome wasn't what we hoped for, we hope that learnings from the trial will benefit the Prader-Willi community, and we're actively sharing our insights while we work to add the findings to the scientific literature. Our pipeline continues to represent a powerful engine for future growth as we look to advance therapies for underserved neurological disorders and rare disease communities. We anticipate continued activity across our pipeline over the coming years with multiple programs progressing through key stages of development. As a reminder, across our 8 disclosed programs, we anticipate initiating 5 additional Phase II or Phase III studies between now and the end of 2026, demonstrating the depth and diversity of our development portfolio. And of course, we anticipate reporting 4 Phase II or Phase III study results in 2026 and 2027. And now I'll pass over to Mark for a review of our financials. Mark Schneyer: Thank you, Liz. Let me walk you through our third quarter financial results. We delivered an excellent quarter that underscores the robustness of our commercial portfolio, which enables us to generate strong revenue and cash flows while continuing to invest strategically in growth opportunities. The third quarter was strong across the board with $278.6 million in total revenues, up 11% year-over-year. DAYBUE achieved net sales of $101.1 million, up 11% year-over-year, all of which is attributable to volume growth. The gross-to-net adjustment for DAYBUE in the quarter was 22%. NUPLAZID delivered net sales of $177.5 million, up 12% year-over-year, with 9% of that growth attributable to volume. The gross-to-net adjustment for NUPLAZID was 25%. Turning to operating expenses. R&D expenses were $87.8 million in the third quarter, up from $66.6 million in the third quarter of 2024, with the increase primarily attributable to higher clinical trial expenses from our ACP-204 LBDP and ACP-101 programs and personnel expenses, partially offset by lower clinical spend from programs that have completed. SG&A expenses for the third quarter were $133.4 million, essentially flat with the prior year. Turning to the balance sheet. We ended the quarter with $847 million in cash compared with $762 million at the end of the second quarter. Looking ahead to our full year 2025 guidance. We're making targeted updates that reflect our strong performance and outlook. For NUPLAZID, we're raising the lower end of our guidance range and increasing at the high end to $685 million to $695 million, up from $665 million to $690 million, reflecting the momentum we're seeing in the business. For DAYBUE, we're modifying to include contribution from our named patient supply programs and narrowing our prior guidance range and now expect $385 million to $400 million compared with prior guidance of $380 million to $405 million for U.S. only. Regarding operating expenses, we now expect R&D expenses of $335 million to $345 million compared with prior guidance of $330 million to $350 million. For SG&A expenses, we now expect $540 million to $555 million compared with prior guidance of $535 million to $565 million. Our financial strength positions us exceptionally well to finish 2025 strong while making the investments necessary to drive sustained growth in 2026 and beyond. I'll now turn the call back to Catherine for closing remarks. Catherine Owen Adams: Thank you, Mark. As we wrap up today's call, I wanted to emphasize our commitment to finishing 2025, getting over $1 billion in total revenues, positioning ACADIA for continued growth in 2026 and beyond. We continue to be confident in the stability and growth trajectory driven by our new sales team for DAYBUE, reflected by the over 1,000 patients globally who are now on treatment. We're focused on unlocking NUPLAZID's full potential with our strategic field force expansion and proven patient engagement campaigns. And we now have the elements in place to further accelerate that growth. We are dedicated to advancing our robust pipeline, as Liz has described, and look forward to the 4 major readouts expected in 2026 and 2027. We also continue to focus on expanding our portfolio through business development with our strong balance sheet providing flexibility to pursue partnerships and acquisitions. Ultimately, our mission drives everything we do, to turn scientific promise into meaningful innovation that makes a difference for underserved neurological and rare disease communities around the world. We are here to be their difference. I'm excited about what lies ahead for ACADIA, and I'm confident that our strategic investments and unwavering focus on our patients will deliver value for all of our stakeholders. And with that, I'll turn the call back to the operator for questions. Operator: [Operator Instructions] That first question comes from the line of Ritu Baral with TD Cowen. Ritu Baral: I wanted to ask about the expanded NUPLAZID client-facing force. Catherine, how is that organized? Is it along the lines of focus on the newly activated prescribers? How should we think about it in terms of community versus long-term care facilities, which is a way that historically ACADIA has broken up the population for NUPLAZID? And which of those 2 has the most likelihood for continued growth as you see the market right now? Catherine Owen Adams: Thanks, Ritu. Appreciate the question. I'm going to ask Tom to explain. He's been leading this charge for us. So Tom? Thomas Garner: Thank you for the -- thanks for the question. So as we think about the expansion that, as we mentioned, we plan on executing in Q1 of next year, there's a few different factors, I would say, are playing into our thinking. So as you think about kind of the new writer base, if we look at kind of dynamics during Q3, we actually saw that in terms of our overall prescription volume, 26% actually came from new writers. So I think this really talks to the way that our campaigns are working, the execution of the field force. And it's been that kind of underlying dynamic that we've actually seen throughout the year but actually accelerated in Q3 that's really given us the confidence to pull forward this investment into Q1 of next year. In relation to your question regarding community versus LTC, actually, we're seeing growth across all channels. We're seeing growth both in the community setting and in the LTC setting as well. And there are various channels that we see the NUPLAZID scripts being pulled through. So in essence, we're investing in both. If you're looking at it from an absolute kind of percentage terms, we're actually investing slightly more on a percentage basis in the community, but at the same time, we are going to be modestly increasing our LTC team just given the dynamics that we're seeing in that space as well. So long story short, we're investing in both and at the same time, making sure that wherever we see a NUPLAZID script, we're able to pull that through as optimally as possible. Operator: Your next question comes from the line of Yigal Nochomovitz with Citigroup. Yigal Nochomovitz: I have one on ACP-204. With the top line data for Phase II coming out middle of next year, I'd be curious if you could comment briefly on what you would see as a clinically meaningful score on the SAPS-H+D score and also, if you could just discuss related to that why that particular scale is a good one to use in this context. Catherine Owen Adams: Thanks, Yigal. Liz is leading that for us, so I'm going to ask her to comment on the scales and the confidence around both [indiscernible]... Elizabeth Thompson: Yes, absolutely. Thank you. So I'll go in reverse order, I suppose, and start with SAPS-H+D and why we landed there for Alzheimer's disease. So SAPS-H+D is actually an end point that we do have some experience with in our prior pimavanserin trials. It was involved in the pivotal study for PDP, and it was also part of the relapse criteria in HARMONY. And so overall, we feel like we have a good understanding of that end point and its responsiveness. It is well set to measure the domains that we think are important in this patient population. And it's one of several end points that are in the literature that are supported as being relevant for this patient population. We are measuring other things as well. So that is how we landed on this as the primary end point for the Phase II portion of this study. In terms of how we're looking at this, I'll -- first, I'll note the powering piece, and then I'll talk a little bit about what we're looking for in this trial. In terms of how we size the trial, we actually did this on effect size, and so we're looking for roughly a moderate effect size, a 0.4 effect size on SAPS-H+D. But really, what we're looking for in the Phase II is to continue to understand how we progress towards our overall target product profile for 204, and that certainly has an efficacy component to it, but it also is about making sure that this is appropriate for use in this patient population. I think there are a number of important unmet needs here, sparing cognition, avoiding daytime sleepiness or sedation, avoiding increasing risk of falls or fractures, avoidance of motor adverse effects. So there's a number of things we're going to be looking for that we feel good about based on what we know about 204's profile, but we're sort of holistically going to be looking at the profile of the drug in this trial. Operator: Your next question comes from the line of Tess Romero with JPMorgan. Tessa Romero: So for DAYBUE, you cited the highest quarter-over-quarter referral growth since launch this quarter. Double clicking, how do you think new patient starts will look sequentially here over the next few quarters in light of the growth you are seeing? And second one is just a quick housekeeping. When do you think you will finish enrollment in the Phase II trial in ADP? Catherine Owen Adams: Thanks, Tess. I'll ask Tom to kick off about the referral dynamics we're seeing and we saw in the quarter and then Liz to talk about 204. Thomas Garner: Yes. So thank you for the question. In terms of DAYBUE and referral dynamics, we're really encouraged by what we saw. In Q3, we saw actually our highest rate of referrals since essentially launch. And if you look over the last 12 months, we're really growing at a pretty decent rate now, which is very encouraging. In terms of pull-through, just given standard dynamics that you would expect, it does take some time for a referral to then become an actual new-to-brand prescription. Given the dynamics that we saw during Q3 and the acceleration that we saw, we would anticipate that we'll continue to see growth in actual active patient counts through Q4 into 2026 and beyond. Catherine Owen Adams: Liz, do you want to touch on 204? Elizabeth Thompson: Right. Sorry, 204. So again, just reiterating the [ predicting ] midyear for top line results here. We're really keeping a careful eye on enrollment for the right patient populations. I don't have an exact date of final enrollment here, but we anticipate that, that would be occurring sort of in the Q2-ish time frame to enable that midyear. Operator: Your next question comes from the line of Brian Abrahams with RBC Capital Markets. Brian Abrahams: Congrats on the quarter. Maybe another question on 204. Can you talk a little bit about maybe the overall study conduct, how you're feeling about that? And are there any -- I guess, any -- have there been any -- or will there be any looks at the blinded safety data that might inform the potential around having the QTc prolongation advantage or anything you could learn about things like risk of falls or some of the other aspects of the profile that you talked about that could give you kind of an early read into that? Catherine Owen Adams: So first, overall, pleased with how the study is progressing thus far in terms of behavior of sites, investigators, the patient population that we're getting in there. We are laser focused on making sure that we are getting the right patients in here, trying to -- not trying to, we are verifying them with biomarkers to make sure that this is a biologically confirmed Alzheimer's diagnosis, which we think is going to be important. From a blinded safety perspective, I'd say a couple of things. We do have a DSM-V that looks after this on an ongoing basis. So we would get any indication of anything that is concerning from that perspective, and thus far, they've been supportive of continuing the study on as planned. And we do monitor on an ongoing basis from just sort of medical monitoring perspective. That said, I don't like to comment on data from ongoing blinded trials because you never really know how that's going to sort out across arms. Operator: Your next question comes from Ash Verma with UBS. So Youn Shim: This is So Youn on for Ash. Just wanted to get back to the risk-adjusted peak sales guide that you have provided at your R&D Day. What is your latest thought on the $2.5 billion and $12 billion peak sales you provided on risk-adjusted and nominal basis? Catherine Owen Adams: It's a little bit difficult to hear, but I think what you asked was how our -- how we're commenting on our peak potential that we talked about at R&D Day and our expectations for the commercial portfolio within that same discussion. So let me talk about the overall aspirations for ACADIA. R&D Day, we shared that we aspire to achieve a $12 billion top line should all of our pipeline programs hit during the next 2 to 3 years. And as you know, unfortunately, our 101 program did not hit, and so we would take about $800 million to $1 billion from that top line expectation. So we would now, if we were speaking about the same thing, aspire to achieve the $11 billion total peak sales of our currently shared portfolio within that same group of compounds. In terms of our commercial aspirations, we shared the $1.5 billion to $2 billion for our commercial brands, NUPLAZID and DAYBUE, and we are still absolutely committed to deliver on that and look forward next year to share a little bit more clarity about both of those brands and our expectations for each of them so that you can understand where we see both of those in the next 2 to 3 years. Operator: Your next question comes from the line of Sam Beck with Deutsche Bank. Samuel Beck: This Sam on for David Hoang. Just a quick one from us on NUPLAZID. If you could just provide a little bit more detail on any drivers you're seeing behind the higher average net selling price in the quarter, that would be great. Catherine Owen Adams: Yes, I'll ask Mark to take the net selling price question around NUPLAZID. Mark Schneyer: Yes. I think at this point, I think when you take all the puts and takes that go into pricing and the fact that the majority or the supermajority of sales for NUPLAZID are for Medicare-based patients, kind of our year-over-year pricing is about the rate of inflation. That's been our expectation the whole year, except for the kind of onetime pricing benefit in the first quarter, and that's really what we saw in this quarter. Operator: Next from the line of Evan Seigerman with BMO Capital Markets. Malcolm Hoffman: Malcolm Hoffman on for Evan. For DAYBUE, with the CHMP opinion expected in the first quarter next year, how can you make sure scripts kind of get off the ground quickly after what could be a positive opinion there? Catherine Owen Adams: I'll let Tom take that. He's leading our European team. We're all getting ready for that right now. So Tom, why don't you share our plan? Thomas Garner: Absolutely. So thank you for the question, Malcolm. So as you'd imagine, there's a significant amount of energy being put behind our launch readiness planning in Europe. We're going to be following kind of the standard track that you see for any approval in Europe, so we will be out the gate first in Germany. And I can tell you, we're already gearing up to make sure that the team is ready to go there. So we already have a small group of key account managers. We have a handful of folks working on the medical side of the organization, and they've been very actively engaged already with prescribers -- well, actually with Rett treaters from across the universe. I mean, as you would imagine, each of the European markets looks very different to the U.S., but we are making sure that we have the right infrastructure in place, the right focus in place. And I'm pleased to announce that actually in this quarter, we opened our compassionate use program in Germany and have already had a number of requests from German HCPs to enroll their Rett patients in that program, which we think is a very nice kind of early indicator of enthusiasm to use the product. And obviously, we'll be making sure that, that experience is positive as we build out towards the launch. Catherine Owen Adams: Do you want to share a little bit more about the other countries who have also opened their program in the last quarter? Thomas Garner: Sure. So also pleased to announce that we have just opened programs in Italy and France. Again, we're pursuing wherever the regulatory and legal frameworks allow us to do so in early engagement programs. And as we mentioned on the call, we also have our ongoing rest of world patient access programs as well, which, again, encouragingly, we continue to see ad hoc requests in an unsolicited fashion coming through to the [indiscernible]. Operator: Your next question comes from the line of Sean Laaman with Morgan Stanley. Sean Laaman: I have a question on the 30% increased investment to NUPLAZID. I guess, could you describe in percentage terms of how many new prescribers you might be reaching with that investment? And what's the headroom there before you get near saturation? And if you can provide any guide on quantifying what the cost of that investment is, that would be really useful. Catherine Owen Adams: Yes. I'm going to let Tom talk about the increase, and we'll go from there. Thomas Garner: So as I mentioned a few minutes ago, we actually saw a very nice uptick during the quarter in terms of new prescriptions increasing through actually new writers, which was over 25% in the quarter. As we look ahead to kind of opportunities for growth and as we've really kind of done a deep dive on what that assessment looks like and where we see the opportunity, we see a ton of opportunity across a wider group of customers that we've been actually calling on to date. Just for reference, historically speaking, we've generally called on neurologists. We've called on some movement disorder specialists and some psychiatrists. But as we look at that 26% who are new to writing prescriptions for NUPLAZID, a ton of those are now coming from primary care. They're often nurse practitioners or advanced practitioners that are now writing NUPLAZID. And in reality, we want to ensure that wherever that prescription is written, whether it be for a patient in the community or in the LTC setting that we're really highlighting the benefit that NUPLAZID can offer. And just as a reminder, in terms of headroom, our share in terms of NBRx remains in the mid-20% range. So if you just think about the upside opportunity that we have, given the size of the overall PDP population in the U.S., there is still significant headroom for growth. And that's what we're aiming to tap into in 2026. Catherine Owen Adams: And I'll let Mark share a little bit more about how we plan to make that investment. Mark Schneyer: Yes. I think in terms of people, it's about 50 customer-facing reps. I think you can certainly use standard benchmarks for what that cost is. We don't dive into the exact cost at this level of detail but consider 50 reps plus some home office support and other things that go around that for the kind of overall investment. And we'll just share this kind of within our guidance for SG&A expenses next year. Operator: Your next question comes from the line of Tazeen Ahmad with Bank of America. Tazeen Ahmad: I maybe just wanted to ask about why you think now is the right time to add to the field force for NUPLAZID. And how are you deciding like what is the right size? Is this a final change or final increase that you think you need to make? Or are there certain targets that you might be monitoring? And if so, can you kind of share a little bit about how you are thinking about needing more or less people as this launch matures? Catherine Owen Adams: Yes, Tazeen, let me start, and then I'll let Tom dive into a little bit more of the details. I think as I came onboard last year in September, the team had just started their DTC communications, both the unbranded and the branded. And we weren't sure how impactful that was going to be. We knew it probably would have some traction. But again, we haven't really been in the DTC space for a while since pre-COVID, and we wanted to understand the impact of that type of DTC investment. We've now got a year under our belt, and we can see and you can see in the numbers real traction in terms of carers and their families being made aware of what the symptoms of Parkinson's disease can be beyond motor and then those sort of awareness levels now translating into moving into the physician office and physicians now also with our increasing real-world evidence and data generation around NUPLAZID being confident in prescribing it for the right patient to treat their hallucinations and delusions. So all of those metrics have come together. And with the important IP win that we had for NUPLAZID, allowing us to continue to feel confident about our IP runway in the U.S., we felt it was time to reassess the opportunity for NUPLAZID. Tom has been leading that reassessment. And from that, he has made the decision, and we have as a management team, that it's right to invest now. And so maybe, Tom, you can talk a little bit more about some of those investment decisions. Thomas Garner: Yes. I mean, I think, Catherine captured it really well. I mean it's really been a story of momentum this year for NUPLAZID, and Q3, in particular, has really seen this kind of step change in how we're seeing referrals across the board. And I think given that momentum, that gave us the opportunity and the lens to really have another look at what our customer model look like, especially as you think about the world where we're seeing a number of new prescribers outside of our core kind of target base really beginning to latch on to the benefit that NUPLAZID can offer and really engaging with this community in terms of where they're engaging with health care professionals, which, as a reminder, it can be quite challenging to get time with a neurologist or with a PDP specialist. And we think that with this expanded reach, we'll be able to actually help these patients really understand the benefit that they can afford and see with NUPLAZID beyond what we're doing today. So it's about really capitalizing on momentum and then ensuring that we have the right structure in place for both today and tomorrow, to your question, that we believe will put us in a really very strong position to maximize the opportunity ahead. Catherine Owen Adams: And just a final thought. We've been very focused at ACADIA on ensuring that we are building a company that's built on a foundation of analytics and insights and data. And within the new expansion, it's being fueled by analytics, data and insights, and we'll be using both that and AI on top of it to ensure that we really efficiently now find our patients and target them and so I think the combination of the new data being sort of driven by a focus on analytics technology. We have a new CIDO in place to help us drive that, and so I feel very confident that it will not only be an efficient focus but also a very effective one. Operator: The next question comes from the line of Jack Allen with Baird. Jack Allen: Congrats to the team on the progress made over the course of the quarter. I wanted to ask on the European opportunity for DAYBUE. I just want to [indiscernible]... Catherine Owen Adams: Jack, you just cut out at the end. I heard reimbursement in Europe. Could you just maybe just repeat the question for us? Jack Allen: Yes, sorry about that. I hope you have me better now. Yes, I wanted to ask about reimbursement in Europe. I know there were -- in Canada over the summer and wondered what your thoughts are and your early conversations are around payers in Europe ahead of a potential European launch for DAYBUE. Catherine Owen Adams: Thanks, Jack. So yes, we are obviously in the middle of discussions and thinking right now around reimbursement in Europe. And you're right, we did have a disappointing decision in Canada. Tom, do you want to share a little bit more about how we're thinking about reimbursement in terms of the sequential approach to that in Europe? Thomas Garner: Absolutely. So as I mentioned a few minutes ago, our plan would be that we launch first in Germany. And as a reminder, in Germany, as we launch, we have 6 months of repricing, which we will obviously think very carefully about what that looks like, especially just given some of the other dynamics that we continue to monitor across the board, such as MFN. But I think given the engagement that we've already started with payers and clinicians, we remain pretty confident actually that our European clinicians and the broader environment are seeing the benefit that DAYBUE can offer. And I think as we continue to generate new real-world evidence in the U.S., we're going to ensure that we leverage that as we go into discussions with European payers and beyond as well to really ensure that the value of DAYBUE is fully understood and realized across the markets where we're launching. So more to come. But again, I think we're excited about the opportunity in Europe and look forward to putting DAYBUE into the hands of many more patients who clearly deserve this treatment. Operator: Your next question comes from the line of Paul Matteis with Stifel. Julian Hung: This is Julian on for Paul. I guess just on ACP-204, I was wondering if you guys could clarify the exposure response relationship you've sort of seen from pimavanserin and the work you've done on ACP-204. You often allude to like your learnings that you've had from development as well -- from an execution perspective as well as from a scientific and biological perspective and why you believe greater potency with ACP-204 will translate to greater clinical benefit. Catherine Owen Adams: Liz? Elizabeth Thompson: All right. I'll try and get all the things that were in there. So starting with the exposure response. So both in the Alzheimer's disease population as well as in Lewy body, we do have some information from pimavanserin suggesting that with higher levels of exposure, you are able to get to higher levels of improvement on the clinical end points and that the median exposure that we're able to achieve with pimavanserin leaves some of that efficacy on the table. So it's sort of midway through that exposure response downward curve. And the reason for that, of course, is that, unfortunately, with pimavanserin, there was a tendency towards QT prolongation, which limited the ability that we could dose range. So we were not able to push the average patient up to the near maximal efficacy that you could get with a higher exposure level. With 204, we don't have that problem. So thus far, our nonclinical and our clinical data are supportive of the fact that there is not a signal of QT prolongation here. And overall, our experience has been such that it is supportive of moving to our current clinical doses, which we're looking at in our Alzheimer's and Lewy body programs, where the lower dose is roughly equivalent to the exposure with the marketed dose of NUPLAZID and the higher dose is roughly twice that. So those are the pieces that give us some optimism that we have the possibility of exploring higher levels of efficacy. But even if we are not able to actually achieve higher levels of efficacy with the higher doses, we do think that there are some program learnings that we're able to apply here. Certainly, in both cases, we have programs that are focused specifically on the disease under study. The pimavanserin data in Lewy body is promising, but it's a limited number of patients. And the Alzheimer's program had a single dedicated study and then a subgroup in an overall study. So here, we're going to be able to bring to bear much more robust data evaluating both of these disease states. So those are the things that we take together to give us some real enthusiasm about 204, which, again, we see as potentially having the possibility of really changing the trajectory of this company. Operator: Your next question comes from the line of Marc Goodman with Leerink Partners. Basma Radwan Ibrahim: This is Basma on for Marc. We have a question on DAYBUE. You mentioned that the penetration is lower in the patients older than 11 years old. Do you believe that this lower penetration is driven by the higher discontinuation in this age -- in this older age group? The reason why we're asking this question is we would expect that the improvement in communication skills and other effects may be minimal in the older patients and maybe that's a lack of effect to drive greater discontinuations. And also, could you clarify whether the age of Rett patients, in general, seeking treatment is skewed to the younger age group or it's basically uniform across the different age? Catherine Owen Adams: Thank you. I think there's some important opportunities there to clarify what the data actually says about DAYBUE efficacy across the age groups and to share a little bit more about what we're seeing in the field. So Tom, do you want to answer it? And if, Liz, you've got any efficacy points to add on top, that would be good. Thomas Garner: Absolutely. So thank you for the question. So I mean, going back to the original premise. Do we think that the reason that we are slightly lower penetrated in patients greater than 11 years and older is due to discontinuations? I don't think that that's the case. I mean, essentially, what we have to remember is the vast majority of patients who have been kind of treated so far, again, if we look at penetration by age are those in the 2 to 4 age bracket. Newly diagnosed patients, they're easy to identify, and they generally fall under the focus of the center of excellence. And I think that that's a group that we've been able to penetrate very early on. If you look at the last quarter, interestingly, 65% of our patients were actually older than the age of 11, so it's a group of patients that we believe that we can really begin to penetrate further still. And especially with our LOTUS real-world evidence generation, which, as a reminder, has patients as old as 60 included in it, we do continue to see a group of -- well, we continue to see patients seeing benefit irrespective of age. And this has been part of the strategy as we've extended our reach beyond centers of excellence because many of these patients who are slightly older, unfortunately, they sit within the community setting. They may not be under the care of a COE, and they may not even be aware of DAYBUE. In fact, we just heard about a patient story yesterday for a patient in Kansas, who was receiving Rett -- sorry, DAYBUE for the first time but before they came into the center have never even been made aware of DAYBUE. So I think it really does talk to the fact that we have more work to be done, both in terms of educating the community about what Rett is and what to look for and at the same time, ensuring that they understand the benefit that DAYBUE can offer to these patients irrespective of their age. Catherine Owen Adams: Liz, do you want to enhance a little bit on that? Or is there anything you want to add about the data that we've shared? Elizabeth Thompson: Sure. I mean -- so I agree with everything that Tom said there. I think that going back even to the original clinical trial, there is supportive data suggesting that there's efficacy in patients above 11 as well as below 11, though it is a somewhat smaller proportion of our overall patient population. But exactly, as Tom said, we've also been tracking these patients in LOTUS as well and see evidence of improvement in those patients as well. So I think that it is an increasing body of evidence that supports the fact that DAYBUE does bring benefit to patients in line with the indication, which is not restricted in terms of the age. Catherine Owen Adams: Yes, I think that's the key. We see DAYBUE efficacy across age ranges, and we want to ensure that neurologists and treating physicians are educated about the data and don't have preconceived notions about specific efficacy in specific age groups. And that's a big focus of Tom and Allyson and the team as we move into next year to really ensure that, that data is shared specifically to encourage the physicians that aren't so well versed in Rett to really look at the data and think about it for all patients, not just younger patients. So with that, it's a good question, isn't it? Operator: Your next question comes from the line of Ami Fadia with Needham & Company. Poorna Kannan: This is Poorna on for Ami. Congratulations on the quarter. My first question is we've seen some IRA impact feedback coming for therapies such as AUSTEDO. Is there any read-through for NUPLAZID based on this? Is this more positive than you expected? And my second question is, how is ACP-211 differentiated from SPRAVATO and the emerging psychedelic class in depression? Catherine Owen Adams: I'm going to ask Mark to answer the IRA question first, and then I'll ask Liz to talk about the differentiation of ACP-211. Mark Schneyer: I think on the IRA, there's not a great comp yet for NUPLAZID as NUPLAZID is the first and only approved therapy for its indication, and so it doesn't have competition with other branded agents as well as we haven't seen a comp like that go through the IRA negotiation. So simply speaking, I think we'll see how this evolves as and if NUPLAZID goes through negotiations or others in a more comparable situation, and that may or may not have read-through for what a NUPLAZID negotiation may look like. Elizabeth Thompson: As far as -- switching gears quite a lot to 211 as far as 211 is concerned. So we've designed 211 as an oral therapy, and what we're hoping for here is the potential for ketamine-like efficacy or SPRAVATO-like efficacy with a very different patient experience in terms of the degree of required in-office monitoring. And the data that we have so far supports that, both in terms of animal models that suggest efficacy as well as lacking sedative impacts or dissociation. And in healthy volunteers in our Phase I study, we've demonstrated the ability to reach high doses with no sedation and minimal dissociation. We think if this reads through in our upcoming clinical trials, we are looking to start this Phase II in 211 before the end of this year. And we designed this, of course, to look at efficacy but also very importantly, to rule out unacceptable levels of sedation and dissociation. So we think that there is a potential for a really appealing product here. Operator: Your next question comes from the line of Salveen Richter with Goldman Sachs. Salveen Richter: On the LBD psychosis study, can you just help us understand the rationale for enrichment of the Phase II with the additional patient groups, including LBDP and the PDP population instead of just focused on Lewy body dementia psychosis specifically? Elizabeth Thompson: So Lewy body dementia psychosis is sort of an umbrella term that actually encapsulates dementia with Lewy bodies as well as Parkinson's disease dementia psychosis. And so what we're looking to do in our Lewy body program is actually ensure that we're looking at roughly equivalent numbers of both of those 2 patient populations to understand any similarities and differences in terms of how they behave. This will help us in terms of designing what future studies could look like. When we look at the population in the pimavanserin data set that is specifically that Lewy body dementia psychosis, the numbers are relatively small, but it is very promising data, and that's part of what had us move this program forward and part of what makes us enthused about it. Operator: Your last question comes from the line of Sumant Kulkarni with Canaccord Genuity. Sumant Kulkarni: You're investing more on NUPLAZID, and there have been some questions already about that. But we're finally seeing some excitement in the Parkinson's market. Then, AbbVie recently announced the sales force expansion on the strength they're seeing for VYALEV and the potential approval for tavapadon. So how do you think this additional focus on the Parkinson's market from a relatively large player might influence the market or diagnosis rates for psychosis associated with Parkinson's? Catherine Owen Adams: So I'll start and then maybe give a perspective from Tom. I think -- so let's just start by reminding everybody that NUPLAZID is the only branded product approved for Parkinson's disease psychosis. But as we see more activity in an overall Parkinson's market, I think what history would tell us is that once more -- once larger companies are in the market talking about Parkinson's disease more fulsomely with more people, there does tend to be an increase in terms of awareness of different elements of the disease. And as Tom has already alluded to, 50% of patients suffer from psychosis or suffer from the hallucinations and delusions of Parkinson's at some point during their journey. And so it wouldn't be unsurprising to sort of see that rate increase. What we do know right now is that there's a relatively low-level awareness amongst families and caregivers of those symptoms, which is why we've been putting effort behind the unbranded campaign. And that would still have to be true because those sort of non-motor-related symptoms generally go undiscussed and unfocused on by the physicians and their families. And what we have understood is that we need to continue to talk about them to ensure that those questions are raised. As we continue to educate physicians with our expansion, Tom, I think we probably hope to see that the physicians are starting to learn more about it themselves. But I don't think without us, it's going to be sort of a natural place for them to go with other companies. What would you say on that? Thomas Garner: No. I mean one thing I would say, I mean, I think it's well recognized that Parkinson's in general is one of the fastest-growing neurological disease types in the United States. As a reminder, there's estimated to be about 1 million patients with Parkinson's in the U.S. And as we kind of then take a step down into those patients who are actually diagnosed with hallucinations, delusions, it's somewhere between 40% and 50% of that population at any given time. By our estimate, there's about 130,000 of those patients who are actually diagnosed an atypical and psychotic during the course of the disease. That's not to say there's more work to be done here because I think if you look at most patients as they go through their Parkinson's journey, to begin with, they are fully focused on the movement elements of the disease. And unfortunately, not everybody is educated on hallucinations, delusions that can commonly concur. And I think one of the key calls to action that we're trying to drive at the moment that if a patient, even if early in their disease course, is experiencing hallucinations or delusions, that, that is a trigger point to start treatment. That's a trigger point to make sure that they're engaging with an HCP, whether it be a neuro or it be their primary care physician to make sure that they're having that dialogue to ensure that appropriate action can be taken. We believe that that's where, quite honestly, NUPLAZID can play a really critical role just given its profile, given its safety profile and given the growing body of evidence that Catherine mentioned earlier on. So I think taken together, clearly more upside, and I think that that's one of the reasons that we have decided that now is the time to really up-invest in our customer-facing approach to NUPLAZID as we look forward. Catherine Owen Adams: Now is the time, is a great way, I think, to end that question. Thanks very much. Operator: Since there are no further questions, I'll pass it along to Mrs. Owen Adams to proceed to closing remarks. Catherine Owen Adams: Thanks, everybody, for your questions. We're really excited about what lies ahead for ACADIA, and we look forward to our next call. Operator: Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect.
Edna Koh: Okay. Good morning, everyone, and welcome to DBS' third quarter financial results briefing. This morning, we announced third quarter profit before tax up 1% to a record $3.48 billion and ROE of 17.1%. 9-month total income and profit before tax reached new highs. As per our norm, our CEO, Tan Su Shan; and CFO, Chng Sok Hui, will start by sharing more about the quarter. Both will be speaking to slides, which you will see on screen. The slides can also be found on our Investor Relations website. And thereafter, we will take media questions. So without further ado, Sok Hui. Sok Hui Chng: Thanks, Edna, and good morning, everyone. I'll start with Slide 2. We delivered a strong set of results in the third quarter. Pretax profit rose 1% year-on-year to a record $3.48 billion with ROE at 17.1% and ROTE at 18.9%. Total income grew 3% to a new high of $5.93 billion. Group net interest income was little changed as strong deposit growth and proactive balance sheet hedging mitigated the impact of lower rates. Fee income and treasury customer sales reached new highs, led by wealth management, while markets trading income increased on lower funding costs and a more conducive trading environment. For the 9 months, pretax profit rose 3% to a record $10.3 billion as total income increased 5% to $17.6 billion from growth across both the commercial book and markets trading. Net profit was 1% lower at $8.68 billion due to minimum tax of 15% that has come into effect. Asset quality remained resilient. The NPL ratio was stable at 1.0% while specific allowances were 15 basis points of loans for the quarter and 13 basis points for the 9 months. Allowance coverage was 139% and 229% after considering collateral. Capital remained strong. The CET1 ratio was 16.9% on a transitional basis and 15.1% on a fully phased-in basis. The Board declared a total dividend of $0.75 per share for the third quarter, comprising a $0.60 ordinary dividend and a $0.15 capital return dividend. Slide 3, third quarter year-on-year performance. Compared to a year ago, third quarter pretax profit was 1% or $42 million higher, while net profit declined 2% or $73 million to $2.95 billion due to higher tax expenses from the global minimum tax. Commercial book net interest income fell 6% or $238 million to $3.56 billion as the impact of lower rates was partially mitigated by balance sheet hedging and strong deposit growth. The group's net interest income of $3.58 billion was little changed. Fee income rose 22% or $248 million to a record $1.36 billion, led by wealth management, while other noninterest income increased 12% or $61 million to $578 million as treasury customer sales reached a new high. Markets trading income rose 33% or $108 million to $439 million due mainly to higher equity derivative activity. Expenses increased 6% or $144 million to $2.39 billion, led by higher staff costs as bonus accruals grew in tandem with a stronger performance. The cost-to-income ratio was 40% and profit before allowances was 1% or $35 million higher at $3.54 billion. Total allowances fell 5% or $6 million to $124 million. Specific allowances remained low at $169 million or 15 basis points of loans. $45 million of general allowances were written back mainly due to a large repayment. Slide 4, third quarter-on-quarter performance. Compared to the previous quarter, net profit was 5% or $130 million higher. Commercial book net interest income fell 2% or $67 million as net interest margin declined 9 basis points to 1.96% from lower Sora. Group net interest income was 2% or $70 million lower. Fee income rose 16% or $190 million, led by wealth management. Other noninterest income grew 11% or $56 million, driven by higher treasury customer sales. Markets trading income was 5% or $21 million higher. Expenses increased 5% or $123 million from higher bonus accruals. The cost-to-income ratio was stable. Total allowances were 7% or $9 million lower. Slide 5, 9-month performance. For the 9 months, total income and pretax profit reached new highs. Total income rose 5% or $777 million and pretax profit increased 3% or $260 million to $17.6 billion and $10.3 billion, respectively. Net profit was 1% or $111 million lower at $8.68 billion due to higher tax expenses. Commercial book net interest income declined 3% or $310 million to $10.9 billion due to a 27 basis point compression in commercial book net interest margin. Group net interest income rose 2% or $211 million to $10.9 billion as the impact of lower interest rates was more than offset by balance sheet hedging and strong deposit growth. Fee income grew 19% or $599 million to a record $3.80 billion as wealth management and loan-related fees reached new highs. Other noninterest income of $1.65 billion was only 2% or $32 million higher due to nonrecurring items in the previous year. Excluding these items, treasury customer sales grew 14% to a new high. Markets trading income of $1.22 billion rose 60% or $456 million, marking the second highest level on record. The growth was due mainly to higher interest rate and equity derivative activities. Expenses increased 6% or $377 million to $6.88 billion with a cost-to-income ratio stable at 39%. Profit before allowances grew 4% or $400 million to a record $10.7 billion. Specific allowances remained low at $439 million or 13 basis points of loans, while general allowances of $143 million were taken. Slide 6, net interest income. Group net interest income for the third quarter of $3.58 billion was 2% lower from the previous quarter and little changed from a year ago. Lower interest rates impacted net interest margin, which declined 9 basis points quarter-on-quarter and 15 basis points year-on-year to 1.96%. We continue to mitigate the impact of lower rates through two factors. The first is proactive balance sheet hedging, which has reduced our net interest income sensitivity and cushioned the impact of lower interest rates. Second is strong deposit growth, which was $19 billion during the quarter and $50 billion from a year ago. The growth in deposits exceeded loan growth, and the surplus was deployed into liquid assets. This deployment was accretive to net interest income and return on equity, though it modestly reduced net interest margin. For the 9 months, group net interest income rose 2% to $10.9 billion despite a 9 basis point compression in net interest margins to 2.04%. The resilience in net interest income reflects the combined effects of balance sheet growth and of hedging. Slide 7, deposits. During the quarter, the strong momentum in deposit inflow was sustained with total deposits rising 3% or $19 billion in constant currency terms to $596 billion. The growth was led by CASA inflow of $17 billion, most of which was in Sing dollars. The CASA ratio rose to 53%. Over the 9 months, deposits grew 9% or $48 billion, with more than half of the increase from CASA. Liquidity remained healthy. The group's liquidity coverage ratio was 149%. And net stable funding ratio was 114%, both comfortably above regulatory requirements. Slide 8, loans. During the quarter, gross loans was little changed in constant currency terms at $443 billion. Increases in trade and wealth management loans were partially offset by a decline in non-trade corporate loans from higher repayments. As deposit growth outstripped loan growth, surplus deposits were deployed to liquid assets. This deployment was accretive to net interest income and ROE while it modestly reduced net interest margin. Over the 9 months, loans rose 3% or $14 billion led by broad-based growth in nontrade corporate loans. Slide 9, fee income. Compared to a year ago, third quarter gross fee income rose to a record $1.58 billion. The increase was broad-based and led by wealth management, which grew 31% to a new high of $796 million from growth in investment products and bancassurance. Loan-related fees were up 25% to $183 million from increased yield activity. Transaction services and investment banking fees were also higher. Compared to the previous quarter, gross fee income rose 13% led by wealth management. For the 9 months, gross fee income reached a record $4.48 billion, led by new highs in wealth management and loan-related fees. Slide 10. Slide 10 shows the wealth segment -- wealth management segment income. The third quarter wealth management segment income grew 13% year-on-year to $1.54 billion. The growth was driven by a 32% increase in noninterest income, which more than offset a decline in net interest income from lower rates. For the 9 months, wealth management segment income grew 10% to a record $4.38 billion due to a 28% rise in noninterest income. Assets under management grew 18% year-on-year in constant currency terms to a new high of $474 billion. The percentage of AUM in investments also reached a new high of 58%. Net new money inflow was $4 billion. Slide 11, customer-driven noninterest income. We have introduced a new slide to provide a clearer view of noninterest income, which is driven by customer activity. This comprises two components in the commercial, both net fee income and treasury customer sales. For the fee and treasury customer sales fall under different lines of the P&L financial statements due to accounting treatment, they should be viewed equally as they are both driven by consumer and corporate customers demand for financial products. For the third quarter, customer-driven noninterest income grew 22%. Net fee income rose 22% to $1.36 billion while treasury customer sales rose a similar 21% to $581 million, both were at new highs and led by strong wealth management activity. For the 9 months, customer-driven noninterest income rose 17%, driven by record net fee income and treasury customer sales. Slide 12, expenses. 9-month expenses rose 6% from a year ago to $6.88 billion due to higher staff cost from salary increments and bonus accruals. The cost-to-income ratio was stable at 39%. Third quarter expenses were 6% higher than a year ago at $2.39 billion, led by higher staff costs as bonus accruals rose in tandem with a stronger performance. Compared to the previous quarter, expenses grew 5%. The cost-to-income ratio was at 40%. Slide 13, nonperforming assets. Asset quality was resilient. Nonperforming assets declined 1% from the previous quarter to $4.63 billion. New NPA formation at $113 million for the quarter was below the recent quarterly average and was more than offset by repayments and write-offs. The NPL ratio was stable at 1.0%. For 9 months 2025, new NPAs were $449 million, significantly lower than the $739 million from the prior period. Slide 14, specific allowances. Third quarter specific allowances amounted to $170 million or 15 basis points of loans, stable from the previous quarter. For the 9 months specific allowances were $430 million or 13 basis points of loans. Slide 15, general allowances. As at end September, total allowance coverage stood at $6.43 billion, with $2.35 billion in specific allowance reserves and $4.07 billion in general allowance reserves. The general allowance reserves comprised 2 components: baseline GP and overlay GP. Baseline GP refers to the GP set aside for base scenarios. In addition to the base scenarios, we incorporate stress scenarios for macro uncertainty and sector-specific headwinds. As at 30th September 2025, the total GP stack of $4.1 billion comprise baseline GP of $1.6 billion and overlay GP of $2.5 billion. You may recall that we had increased GP overlay by $200 million during the first quarter this year to incorporate tariff uncertainty. Slide 16, capital. The reported CET1 ratio declined 0.1 percentage points from the previous quarter to 16.9%, driven by higher RWA and partially offset by profit accretion. On a fully phased-in basis, the pro forma ratio was stable at 15.1%. The leverage ratio was 6.2%, more than twice the regulatory minimum of 3%. Slide 17, dividend. The Board declared a total dividend of $0.75 per share for the third quarter, comprising an ordinary dividend of $0.60 and a capital return dividend of $0.15. Based on yesterday's closing share price and assuming that total dividends are held at $0.75 per quarter, the annualized dividend yield is 5.6%. Slide 18, summary. So in summary, we delivered a record third quarter and 9-month pretax profit with ROE above 17%. Total income was also at a new high as we sustained the strong momentum in wealth management and deposit growth while mitigating external rate pressures through proactive balance sheet hedging. As we enter the coming year, we'll continue to navigate the pressures of declining interest rates with nimble balance sheet management and our ability to capture structural opportunities across wealth management and institutional banking. So thank you for your attention. I'll now hand you to Su Shan. Tan Shan: Thanks, Sok Hui. So hello and good morning. As you have now seen our numbers and Sok Hui's comments, I will say that the Q3 was a solid quarter. I think the team delivered a solid quarter in spite of very strong interest rate headwinds, especially in Singapore. We had a record top line total income, record fee income, record treasury sales and record PBT. Of course, tax we had to pay the minimum tax. So that took off some of our net profit upside. And I guess from my slide, the -- both the fact that we had some nimble hedging, and we were able to capture some opportunities when the market became volatile, speaks to our resiliency, so was hedging as well as some fixed rate assets. And what was also pleasing was the fact that we saw huge amount of deposits coming back to us. A large chunk of that was also CASA. So at $19 billion quarter-on-quarter growth, a lot of that surplus deposits was deployed to HQLA. And in terms of the structural growth, I think we have both structural and cyclical growth. And both the structural and cyclical growth came into gear in Q3 because the capital markets were very strong. So we saw strong momentum in wealth management fees, up 23% quarter-on-quarter, 31% year-on-year. These are very strong numbers. And whilst wealth management AUM remained very high, I think what was also pleasing is we are seeing the momentum also travel to the retail and retail wealth segment as well. We're trying to get more of that digital flows back and so we had a whole refresh of our digital wealth strategy, which is now yielding fruit. So that's also quite pleasing to see. The second market and cyclical opportunity is in capital markets in both ECM and DCM. So for DCM, as rates come down, corporates are coming back to the market and we are winning market share. I told our DCM team that I think we have a right to win in the global market. And so, to my surprise actually, starting from a very low base, we're now #6 in the Middle East. For example, in the MENA league table as of October 2025, we did 32 DCM issuances, including 13 public bond deals. And we're #1 in private placement league table for the key Middle East banks. So I think if we put our minds to it, we can execute. And I think both the capital markets, GCM, DCM, ECM pipeline looks good. The wealth pipeline looks good and the FICC pipeline looks good, right? So these are both cyclical and structural opportunities to capture more loan fees -- sorry, to capture more fees. The other momentum is in loan fees. You saw the loan fees up 20% year-on-year. That's also structural. Because as I alluded to the last 2 quarters, I think that speaks to IPG's focus on winning market share, wallet share and mind share and having expertise in the industries that we cover and we target. So both the loan-related fees and market trading as well was very strong, up 33% year-on-year. Very strong equity derivatives activities from clients, strong warehousing gains, good customer flows. Then I want to talk about additional assets. I alluded to this also in the last quarter where we talked about the whole digital asset ecosystem and how we had a head start and how we want to continue to drive this head start. And I think the GENIUS Act changed everything, as I said before. And we are still waiting to see how regulations turn out because different regulators have different priorities and different time lines and different ordinances. But we've gone ahead. I mean, for example, this quarter, we issued some structured notes. So we tokenized structured notes on the Ethereum blockchain. We've also announced that we are working with Franklin Templeton's BENJI fund to list that on our digital exchange. We're also working with Ripple to use -- to get Ripple -- to use Ripple currency, digital currency into -- in and out of the BENJI money market fund as well. So we're pretty active in the tokenized ecosystem. We've been tokenizing deposits for a while now, and that's also seeing a lot of customer interest. And we've also started to look at the potential for repo and collateralize use cases as well for tokenized money market funds. Asset quality, as Sok Hui alluded to, pretty resilient. NPL ratio at 1%. And again, I think this speaks to the discipline of the team. Many years back, before COVID, we started to watch-list industries or sectors that we felt were to come under scrutiny or under some pressure. That's worked out for us. So we have been quite early in monitoring clients that might get into problems. And in fact, if you see, we had quite a fair amount of loan repayments in Q3 this year. And surprisingly, that came out of Hong Kong, primarily in Hong Kong real estate. So I think we've been pretty disciplined in who we bank with. We've onboarded and banked really the big blue chip companies. Our LTVs against real estate is pretty conservative. And that's why I think our NPA formation remains at a multiyear low. Next slide, please. So I've been traveling quite a fair bit in Q3 for the IMF and IIF Board meetings in Washington, to the FII in Saudi, the Hong Kong MA, Monetary Authority Financial Leaders Conference this week and to visit my colleagues in IBLAC in China visiting regulators and colleagues in our core markets, Taiwan, China, I'll be in India next week, et cetera. And I will say that there's a lot of momentum in deal flow. There's a lot of momentum in the U.S., certainly in the whole tokenized, stablecoin, digital asset ecosystem. Outside the U.S., there's a lot of momentum in terms of trade -- potential trade flows, both because customers want to diversify their supply chain and also customers are looking for new markets to grow. So this shift in trade and investment flows is something that our team is very focused on, and we're looking at growing the pipeline, say, intra-regional trade between Asian countries, ASEAN countries, China to ASEAN countries, Singapore, China, et cetera. There's been a lot of two-way conversations and the upscaling of the China agreements that most countries in ASEAN have has also been put in place. China GCC trade also is projected to double to $1.9 trillion by 2025. So there's some good structural shifts in global macro flows, and we want to play into that. I talked about the capital markets revival. You all know about the long pipeline of deals in Hong Kong and China. We're trying to play to our strength there as well. Singapore also has a strong pipeline and the MAS' recent measures to rejuvenate the markets here, the equity market development program, seems to be working as well to create some liquidity and some momentum. I was struck also by the concentration of the market cap of the U.S. U.S. still is about 70% of global market cap valuation at $72 trillion, Hong Kong at $7 trillion, China at $13 trillion, Singapore at $0.6 trillion. I think there could be next year, let's see, maybe valuations will change. But the good news is, as I said, the pipeline for ECM remains very strong in our part of the world in Asia ex-Japan. Another theme I want to talk about was the internationalization of the RMB and also the revitalization of the Chinese market. You see that from the authorities talking about high-quality growth. You see also a lot of investments in AI and chips. The enterprise use of AI is formidable and their commitment to internationalizing the use of RMB for global trade, that figure has quadrupled over the last 3 years. That's also admirable. The Southbound Bond Connect is also busy. That's also quite good structural growth in wealth management onshore in China. So wealth, global net wealth reached $512 trillion in 2024. I think that's grown a lot this year because of the market moves and also some wealth creation at the high end. So we remain committed to our strong focus on wealth management. The teams that Tse Koon and his team hired over the last couple of years are starting to mature and yielding returns for us. Similarly, for IBG, the FICC focus, the institutional client focus is also yielding good returns. I've gone to see several global sovereign wealth funds with my team, pension funds with my team. And I think DBS has a role to play with these global II and FICC clients across various products from custody to FICC flows to digital flows to ECM, DCM block placements to repos, reverse repos, et cetera. So I think playing to our strengths in wealth and FICC is structural focus, I've said this time and time again, I feel like I'm a grandmother nagging, but I do believe that these two growth pillars will continue to yield returns in the next few years. And in terms of other big theme, of course, everyone is talking about AI, generative AI, agentic AI, when will agents start using -- when will customers start using their own agents to deal with bank agents, et cetera. Suffice to say, we've been at the forefront of this. We have been rolling out both horizontal and vertical use cases. Some working out quite well, some less well. But I think the momentum continues to be pretty strong. And we're working with various partners, both in the U.S. and elsewhere in Asia to accelerate the tech adoption. And what's pleasing to me is pretty much most of our staff have started to use it. They're saving time, they're taking a lot of productivity saves in the more mundane work, like writing credit memos, KYC, transaction screening. And our wealth managers are using it also to good stead in our wealth Copilot. Our tech guys are using it for coding, for developing. So I think there's good momentum there, and that will continue to evolve. Last but not least, I talked about the growing interest in tokenization of stablecoins. As you know, we had a head start in 2021. We will continue to support regulators in their quest to stay ahead of the trends. Right now, our key focus is on tokenizing deposits. For stablecoins, we will play where there is a play in different jurisdictions. But I think that regulations have to evolve there for us to have a clearer look. In the meantime, we believe that we can play a role, like more of a picks and shovels kind of role in the whole asset ecosystem, whether you want to tokenize your assets, you want to tokenize your deposits, you want to trade on our digital exchange, you want to custodize with us, you want to use it for payments, et cetera, we've learned how to do it end-to-end. So I think that's also a differentiator for us. So the right side is a short pitch of DBS as a differentiator bank, increasingly in a bifurcated volatile world with geopolitics being volatile. I think our clients are looking for a safe neutral bank for their long-term needs, right? And I think DBS plays to that. We've been recognized by Global Finance, it's Asia's safest bank now for 17 years running. And we're ranked #2 globally amongst the 50 top safest commercial banks. So I think being safe, being dependable plays to our strength, and I think we have a right to win more market share. As a diversifier bank, we are now seeing global ultra high net worth thinking they should have a bank in Europe or Switzerland, a bank in the U.S. and quite possibly a bank in Singapore and that bank should really be us. MNCs and FIs as well are looking for a diversifier bank for both the custody needs and their transaction needs, and I think that plays to our strength. As a disruptor bank being an innovative -- having an innovative head start, the fact that we can work with the likes of Franklin Templeton or Ant or JD or any of these big platform companies means we are a head start. We've been holding a lot of teach-ins for our clients. And as the world starts using more generative and agentic AI, we want to be at the forefront of that as well. As I said before, I think the fact that we've organized our data, the fact that we've organized our tech and the fact that we organized our people and processes quite a few years ago, thanks to Piyush and the team's foresight, I think we've created a digital and data moat to be able to embrace these big AI moves that are upon us. So last but not least, the digital and data capabilities I've talked about. We were just recognized the World's Best AI Bank at Global Finance Inaugural AI Awards this year. We've implemented over 1,500 AI models, 370 different use cases, and we hope to create an impact of $1 billion in AI this year. Okay. So next slide is the 2026 outlook. And we are looking for total income to hold steady to 2025 levels in spite of significant interest rates and FX headwinds. We're looking at Sora to hold at current levels of 1 -- well, to hold at the sort of the 1 month and 3-month MAS bill levels at about 1.25. That means there's a 60 basis point decline from this year's average. We're looking at three Fed rate cuts next year. And we are also looking -- well, we're also using for our forecast a stronger Sing. So there, you have significant interest rate headwinds and FX headwinds, which we want to make up for with volume growth and fee growth. So the commercial book noninterest income growth to be in the high single digits. And the reason for that is whilst we have great headwinds on the loan side, we also have tailwinds in terms of our cost of funds because of our floating liabilities as well, mostly in dollars. We are looking to continue to have mid-teens growth in wealth management and also in FICC and to maintain our cost income ratio at the low 40% range. And SP, we've assumed that it will normalize to 17 to 20 basis points. So far through cycle, this has worked and asset quality remains resilient. We're comfortable, but we're not complacent. We're still watching constantly to assessing our different exposures for impact from trade, geopolitics, real estate, et cetera. And so if the macro conditions stay resilient, we could actually also have some rooms for GP write-backs. And if conditions soften, we have quite a lot of buffer, as you heard from Sok Hui earlier on through our allowance reserve and our strong capital ratios. So we're looking for net profit to be slightly below 2025 levels or pretty flat. That's it from me. Thank you very much. Edna Koh: Thank you, Su Shan. We can now proceed to take questions from the media. [Operator Instructions] We have a question from Nai Lun from BT. Tan Nai Lun: This is Nai Lun from BT. I just want to check, right? Because I understand you have a $200 million GP already taken at the start of the year. But then are you foreseeing like you to take more of that, especially as you mentioned, you have some macroeconomic uncertainties or sector-specific headwinds? Sok Hui Chng: Yes. So let me clarify. I will say that actually our stack of total GP $4.1 billion comprise two components, right? The baseline GP and the overlay GP. And the overlay GP is quite substantial at $2.5 billion. If you look at our September last year, it will be about $2.3 billion because we did top up $200 million this year. In the second quarter, we said it's actually sufficient. So we are not topping up. So just to convey that we are actually very adequate in terms of our general provision levels. Tan Shan: I would say even more than adequate. Sok Hui Chng: Yes, more than adequate because we actually exceeded the MAS 1%. Edna Koh: Okay. A question from Goola. Goola Warden: Congratulations on the very good results in the current environment. Can I ask at least three questions. Okay. So the first one would be on the capital return and the share buyback? Because I think that Sok Hui has said that you are committed to paying $3 in total dividends for this year and next year and 2027, is it, could you just correct me on that if that's wrong? So -- and then there is -- there was a share buyback program and how much of that have you completed? Because it looks like a very low percentage based on -- I must have missed out, I look back, 10% to 12%, I'm not quite sure. So what -- I mean what happens if you don't complete it within the time frame? And what are the other avenues for management to return the earmarked amount to shareholders. That's one question. Should I carry on? Okay. Then you mentioned that your deposits -- because you've got more deposits than -- a lot more excess deposits will be deployed into HQLA, are these local government bonds, are these U.S. government bonds or are they corporate bonds? And what's the currency and duration like? I mean you don't have to say the company or the country, but just an idea of whether they're Sing dollars or non-Sing dollars. And the last question is funding related. But again, you have no AT1s anymore based on your current -- your third quarter. So what are your funding plans? AT1s, are they cheap now? Or is there any reason -- is there any regulatory reason why you don't have any? That's it. I think that's it. I mean two more general questions, but only when everyone else is answered. Tan Shan: Thanks, Goola. I'll take the first one, this is Su Shan and then Sok Hui will take the HQLA and AT1 question. So on the dividends, we've always said that our stock, we had $8 billion of excess stock of capital to return. We remain committed to returning that. $3 billion was allocated to share buybacks. We've done about 12% of that. And our philosophy is to buy it when the market is bad, right? So that's the philosophy. We don't want to chase it up. And the $5 billion is to be returned to shareholders through capital, the capital return dividends. So as you can see, we've got many different things in our toolbox to pay our shareholders back. You've got your normal dividend, of course. You've got step up dividend, then you've got the capital returns dividend and then you have the stock buyback and so based on that we intend to keep to that $8 billion commitment. Goola Warden: How much of that $8 billion has been returned? Sok Hui Chng: The share buyback, 12% would be $371 million. Tan Shan: Yes. And then the dividend return was $850 million. It's $0.15 per share per quarter, if you remember. Goola Warden: I mean, how much of the $8 billion is just... Tan Shan: So in total, we basically use 15% of the $8 billion. Goola Warden: Oh, okay. So there's a lot more. 1-5 percent. Tan Shan: No, but the $5 billion is committed, right, because it's $0.15 per quarter. So that $0.60 a year. So that's committed. So over 3 years, that will be all paid back. Goola Warden: Okay. And the 3 years is '24 -- '25, '26, '27, right? Tan Shan: Yes, correct. Sok Hui Chng: We started in '25 for the capital return dividend. Tan Shan: '25, '26, '27. So we will end by end '27. Sok Hui Chng: Correct. Maybe the only thing I would add is that we also communicated that we would be able to step up ordinary dividends $0.06 in the fourth quarter for 2025 year and then 2026 year. Goola Warden: By $0.06 is it on the... Sok Hui Chng: By $0.06 in the fourth quarter, which means the full year impact is $0.24. Goola Warden: And the full year impact will be next year, right? Sok Hui Chng: No, we'll step up end of this year. So you get it approved at the AGM in March 2026. And then it will actually flow through. So the full year impact is $0.24 for ordinary dividend. So what you see on the slide as $0.60 would then step up to $0.66 per quarter. And then you still have your $0.15 on the capital return dividend, which we have committed up to FY 2027. Goola Warden: HQLA and the AT1, yes. Sok Hui Chng: Okay. So your next question was about the HQLA. So you see on my slide, in the loan slide, you see that loan, actually, the growth rate was slower than the deposit growth. And for 9 months, our HQLA, which you can also see in the Pillar 3 disclosure is actually up $30 billion, and these are all in high-quality liquid assets. So they are in government securities, they are in U.S. government securities. These are the main items where we have seen the increase. So very, very safe assets. And then you had a question on the AT1 because the -- our CET1 is already at such a high level. Transitional basis, we're at 16.9%. So there's no point raising AT1. The CET1 currently doubles up. So for AT1, the spec is already quite a lot. So we don't intend to actually sort of pay up for AT1 until the need arises because you see on the slides as well. Goola Warden: Look, it's not a regulatory thing with the stuff that's going on with Credit Suisse and UBS and what Basel I doesn't want, right? Tan Shan: It's just AT1s because they don't have enough CET1s, right? Sok Hui Chng: So regulators set CET1 minimum, AT1 and Tier 1 and then total. So it's a stack. So if your CET1 is really well above the minimum, they can come towards Tier 1 capital. Goola Warden: Okay. Okay. That's all I have on that. I'm just wondering what's the difference between your structural tailwinds and your cyclical tailwinds. That's the other sort of general question. And the other one is you said that bancassurance was one of the reasons why you have a fee income. You've got a bancassurance agreement with Manulife. And I'm just wondering, that one is 15 years. How much longer does that have to run? And what is the state -- I mean is it performing to what Manulife wants? Tan Shan: Okay. So on your question around what are the difference between a structural and cyclical tailwinds. So cyclical tailwinds to me are what are cyclical. So when markets are strong, stock markets are up, money supply is up, et cetera, that's sort of cyclical. Structural is more long term. So where you have demographics, demographic reasons or structural reasons for the growth. So for me, the cyclical tailwinds was the markets were very strong, right? Q2, Q3, the markets were strong after Liberation Day, the rally was a lot higher than most people expected. The structural tailwinds I talked about was the fact that there is structural wealth creation. So the wealth management team remains structural growth for Asia and frankly, for the rest of the world, for the U.S., particularly. And then the structural growth in FICC, II, assets under management, quite a lot of these funds. There are clients, they've seen trillions of dollars in asset growth. So you've got these two growth pillars that are structural. On Manulife, I think we signed in 2015, it was 15 plus 1, so 16 years in total. Sok Hui Chng: So it was till 2023. Tan Shan: 2023. So the partnership has been growing really well. It's been fantastic actually. Tse Koon, you want to say anything? Shee Tse Koon: Yes, I think it's gone very well. So I mean, earlier on, when we talk about our wealth fees, right, the wealth fees growth has been a factor of both investments and insurance at the same time. Tan Shan: So there is a need for insurance like state planning, et cetera. And that is another structural theme, Goola, because you look at China, silver economy, Singapore, Hong Kong, all these people need to plan. And actually, that's our USP, right? We're good at onboarding these clients, discussing their long-term plans, putting it in a state planning, helping to plan for the next generation, for their own life, et cetera. And that creates a very sticky long-term relationship for your wealth clients. And Manulife has been a great partner in helping us to design suitable products for our customers, having a portfolio approach and thinking very long term. They're long-term investors in Asia, good credit rating, et cetera. So they've been a very good partner. Edna Koh: Next question from Bloomberg, Rthvika. Rthvika Suvarna: So I'm with Bloomberg. My name is Rthvika, and I had two questions for Su Shan. You've talked about wealth as a structural growth pillar with mid-teens growth targeted. Given recent high-profile wealth scandals in the region involving RMs and client fund misappropriations, what safeguards do you have in place? Are you seeing any reputational or compliance headwinds? And what do you think of extra regulatory scrutiny off the back of these scandals? How does this affect Singapore as a wealth hub? Tan Shan: Okay. I'll start and then Tse Koon is going to weigh in. So I think by the way, we have well presence in all our core markets. So it's not just Singapore, right? But of course, Singapore is a major financial hub for us and for many of our peers. And I will say that it's -- the bar has been set very, very high right now in Singapore and in all the major jurisdictions. The bars are set very high for KYC and AML, number one. Number two, there's been very rigorous source of wealth declarations and we all need to triangulate with proof of documents, et cetera. And there's no let up in these high standards. It still takes a fair amount of time to onboard a new client because of these. And transaction surveillance remains a key part of triangulating for bad money, right? Every bank sees what they see, right? So if you don't see the flows between the Middle East and the U.S., for example, and you will only see the flows from your bank to another party. And so when you have big scandals like this, it beholds multiple countries and jurisdictions to work together to be able to triangulate the global flows because otherwise, most banks will see their own bilateral flows, and they don't see the other flows. And you need to put the pieces of the jigsaws together to see that, oh, there is a trend or there's scams or there are all these patents. So I will say that it's these kind of global transaction surveillances remain a challenge. In Singapore, we set up with the regulator something called COSMIC, which has been a good platform on which we can look at sort of -- the banks can work together to weed out the bad actors. And I think that that's been working. It's just -- it's pretty new, but that's been working. But it takes multiple parties to work together to be able to catch these -- and catch them early. Shee Tse Koon: Can I just add to that. And I would say that Singapore is clearly a very, very strong wealth management hub, all right? And it has been growing very, very steadily over the last couple of years. If we look at the standards that we have, right, I would say that it's something that is aligned with those that are global wealth hubs, right? If you look at whether or not there are issues that have been -- that have risen, I'll say there's nowhere where you will never -- there will never be a zero kind of situation. The important thing is that there is robustness from which the typologies, new typologies that we see will lead us to continue to sharpen our capabilities. And we can see in Singapore, the big difference in Singapore is that when things happen, I think the industry comes together very, very quickly between regulators, law enforcement and the industry to just handle it. And I think that in itself speaks volumes of the strength of Singapore as a continued wealth hub. So I don't see any of these being a hindrance to Singapore becoming a world hub. In fact, this speaks to the very strength of Singapore being a wealth hub. Rthvika Suvarna: Are there any other broader risks that DBS is weighing out that could affect Singapore's reputation as a wealth hub globally? Shee Tse Koon: Sorry, I don't quite get that question. Rthvika Suvarna: Yes, like any other -- I mean any other like threats, I suppose, aside from the scandals? Shee Tse Koon: I'm not sure if you are specifically asking about DBS per se. Tan Shan: He's asking about Singapore. I will say I beg to defer. I think your question, you're asking if there's any risk, I would say that Singapore's status as a clean hub has been reinforced by the swift action taken by [Technical Difficulty], number one. The rule of law here is strong, right? We are open for -- Singapore as a hub is open for business. It's a diversifier hub, as I said to you earlier on, and it's a digital hub. And there's enough wealth practitioners here of high quality and standards. And I believe that the authorities are protecting the reputation and the standards here rigorously. The bar is high. I'll tell you the bar is high for KYC and sort of wealth verification. So I don't know where you're going with this question, but I will say that the fact that -- and we're very open, right? When the scammers are caught, it's open, it's all declined. So I will say that it should reinforce the seriousness that Singapore takes in keeping the standards high. Shee Tse Koon: I guess there are -- so I say risk, right? When we're talking about risk, I think the inherent risk is no different in the financial industry wherever you operate, right? The difference is we have robust standards, and we deal with it swiftly. If you're asking for further the risk of Singapore being a wealth hub, I think actually what we have done as a nation will enhance that. And in my interactions with clients, I think there continues to be a very, very strong interest. And as you can see, the performance of the wealth management business, I think that speaks volumes as to the robustness of the continued growth. And if you ask me whether there's a risk of us being a wealth hub, the answer is no. Edna Koh: We are now at 11:42. I think that might be all the time that we actually have because we have an analyst briefing at 11:45. So I think we will wrap things up here right now. Thank you, everyone, and we'll dial out here. Tan Shan: Thank you. Sok Hui Chng: Thank you. Edna Koh: Thank you.
Operator: Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Third Quarter 2025 Operating Results. [Operator Instructions] And for your information, this conference call is now being broadcasted live over the Internet. A webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website at www.cht.com.tw/ir under the IR Calendar section. And now I would like to turn it over to Ms. Angela Tsai, Vice President of Financial Department. Thank you. Ms. Tsai, please begin. Cho-Fen Tsai: Thank you. I'm Angela Tsai, Vice President of Finance at Chunghwa Telecom. Welcome to our third quarter 2025 results conference call. Joining me on the call today are Chunghwa's President, Rong-Shy Lin; and our Chief Financial Officer, Audrey Hsu. During today's call, management will begin with sharing our recent strategic achievements and provide an overview of our third quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers. Please turn to Slide 2 to review our disclaimers and forward-looking statement disclosures. Now without further delay, I will turn the call over to President. President Lin, please go ahead. Rong-Shy Lin: Thank you, Angela, and hello, everyone. Welcome to our third quarter 2025 results conference call. Extending the outperforming results of this first half, we continue to beat the financial guidance in the third quarter. Our revenue, operating income, net income and EPS all exceeded the upper end of our forecast. Third quarter revenue hit its highest level since 2017, reflecting the robust growth in our core business and extending ICT services. ICT revenue alone set a new third quarter record, the highest since 2021. As Taiwan's telecom market continued to develop healthy, we are confident in our full year financial results and supported by our leadership across all business segments. For our midterm to long-term development, we believe that group expansion of -- and AI-related initiatives are critical, and we have taken proactive steps. In this area, we are pleased to see our cybersecurity subsidiary, a Chunghwa Telecom Security, successfully complete its public listing in September with International Integrated Systems soon to follow in its upcoming IPO. Moreover, in October, we launched InventAI, a new subsidiary spun off from our research division, dedicated to monetizing AI innovation. Our AI capabilities have received significant recognition and honors. On the global stage, our first self-developed Vision-Language Model technology secured first place in the transportation category at the Global AI City Challenge, a prestigious international competition co-organized by NVIDIA and a leading university worldwide. This recognition was earned through our technology, superior accuracy and predictive capabilities in analyzing highly complex traffic scenario. In Taiwan, we hold the largest portfolio of AI-related patents in the industry, far ahead of our peers, serving as a solid base for future development. We are proud of these achievements and remain committed to maintaining our competitive advantages. Our technology expertise and resilient network have also created social value to benefit the public. In August, as Taiwan was suffering from catastrophic typhoon, we overcame challenges to deliver portable OneWeb equipment and restore communication in isolated area affected by the breakdown, demonstrating our commitment to social responsibility. Additionally, as we continue to invest in facilitating ESG practice, we completed the issuance of TWD 3.5 billion sustainability bond in the third quarter to promote biodiversity, EV initiatives and other environmental projects. This reflects our action to integrate ecological conservation, decarbonization and green finance to progress towards net zero. Now let's move on to the business overview of the third quarter of 2025. Please turn to Page 5 to review our success in Taiwan's mobile market. In the third quarter, we further strengthened our leadership position in Taiwan's mobile market. According to the data from our telecom regulator, our mobile revenue market share climbed to a new high of 40.8%, while our subscriber share among peers rose to 39.4%, representing an encouraging 1.6 percentage point year-over-year increase, mainly driven by continued growth in the postpaid subscribers. We are pleased with this solid growth momentum. Our 5G performance was equally impressive. Based on regulators' data, our 5G subscriber market share rose to 38.8%, maintaining our industry-leading position. The 5G penetration rate among our smartphone users further increased to 44.7% by the end of the third quarter, while the average monthly fee uplift from 5G migration remained robust at approximately 40%. With the combined strength of our expanding subscriber base and growing 5G adoption, our mobile service revenue growth outpaced the industry achieving a solid 3.3% year-over-year increase. Postpaid ARPU also grew 1.8% year-over-year. We expect this positive trajectory to continue, supported by Taiwan's favorable mobile market landscape. Let's move on to Slide 6 for our outperforming fixed broadband business update. In the third quarter, our fixed broadband revenue grew by 3.2% year-over-year, driven by continued high-speed migration and the success of our high net 30th anniversary promotion package alongside our existing bundle plan that combine MOD WiFi and streaming services. We are pleased to report that the number of subscribers choosing speed of 300 megabits per second and above increased by about 14% year-over-year, while those opting for 500 megabits per second and above recorded a double-digit growth and the 1 gigabit per second and above achieved multiple for expansion. This higher speed migration contributed to strong ARPU performance. In the third quarter, our fixed broadband ARPU rose 3% year-over-year, representing an increase of TWD 23 per month, an encouraging sign of ongoing value expansion. Slide 7 provides a deep overview of highlights from our consumer application services. In the third quarter, our multi-play package integrating our mobile fixed broadband and WiFi services achieved impressive year-over-year growth of 22%, marking 15 consecutive quarters of expansion. In terms of our video services, subscription fluctuated in line with major sports broadcast declined year-over-year during the quarter, mainly due to the relative high base from -- base from last year Olympic Games broadcast is this event-driven variation. Our video subscription and ARPU sustained its expected upward trend. Noteworthy, we are proud of to highlight the success of drama investments in the third quarter. For example, The Outlaw Doctor won Best Asia content in Global OTT Award in Busan and [indiscernible] at the 30th Golden Bell Awards in Taiwan with multiple nominations and awards. With those wins, we will continue our content investment strategy to strengthen value for our subscribers. Meanwhile, our consumer cybersecurity services recorded a 17% year-over-year growth with a steady number of blocked malicious link per user more than doubling compared to the same period. Slide 8 illustrates the key highlights in our enterprise ICT business. We are pleased with 14% year-over-year increase of our group ICT revenue in the third quarter, fueled by the emerging service expansion. Recurring ICT revenue also grew by 19%, supported by our continued commitment to public cloud in the entity supply contracts in the government sector, which effectively contributed to the steady growth in the cloud service recurring revenue. Regarding core service pillars, IDC cloud and cybersecurity remain key ICT revenue growth drivers, posting year-over-year growth of 34%, 24% and 19%, respectively. driven by the strong demand from the financial and government-related sector. In addition, Big Data services surged by 130% year-over-year, largely attributable to the National Taxation System project. Among the newly secured projects during this quarter, we are glad to report the acquisition of our largest ever network infrastructure project, both by scale and the contract value from a leading life insurance company in Taiwan. This project is expected to generate both onetime and recurring revenue. We also won a landmark project from Taipower to assist in building its large-scale AMI big data analytics platform for smart grid management. Lastly, leveraging our deep expertise in smart transportation, we secured a project to assist Taiwan Railway to develop a smart real-time fleet management solution powered by the digital twin and 5G technologies, simulating training -- train control cabin dashboards, enabling railway operation hub center to proactively identify failing equipment and monitor dispatching vehicles, further enhancing operational efficiency and reducing maintenance costs. Slide 9 illustrated the performance of our international subsidiary. In the third quarter, our U.S. subsidiary delivered outstanding results by achieving 70% year-over-year revenue growth, primarily fueled by AIDC construction project of a Taiwan-based high-tech company in Texas. Together with the efforts of our Japan subsidiary, we anticipate securing additional related projects, strengthen our role in the global AI supply chain. Meanwhile, our Southeast Asia markets continue to thrive with our Singapore and Vietnam subsidiaries actively deliver plant construction services that are expected to contribute to future revenue. Excitingly, this quarter, we successfully introduced our proprietary solution to global markets. First, through close group collaboration, we introduced cybersecurity services from our newly leased subsidiary, Chunghwa Telecom Security, to overseas clients in Southeast Asia and Japan. Furthermore, we launched our Smart Poles solution in Thailand, fully powered by our proprietary operation platform and integrated AI and IoT solution. The solution delivers services, including adaptive lighting control, localized digital synergy in Thai and traffic flow analytics. We placed particular emphasis on our AI capabilities, which enable seamless replication of our success to other markets in different language. In addition, by supporting our aligned nations, in developing smart cities, we have leveraged our 5G private network and ICT capabilities to generate overseas smart city revenue from Paraguay and Eswatini. Last but not least, we are pleased to see the submarine cable SJC2 has commenced operation and is contributing revenue, while another cable Apricot is expected to follow in the fourth quarter. Now let's move on to Page 11 for the financial performance of our 3 business groups. In the third quarter, thanks to steady growth in mobile and fixed broadband service plus the higher sales driven by the iPhone demand, our CGB delivered a solid year-over-year increase of 2.2% in revenue. Additionally, last year's elevated expense related to the content broadcasting rights contributed to the relative increase of 11.4% year-over-year in CGB's income before tax, broadly supporting the group outperformance. Our EBG also performed well with strong ICT performance as revenue increased 7.4% year-over-year, while income before tax decreased owing to the reduced fixed voice revenue during this quarter as well as a decrease in sales margin related to a long-term enterprise customer engagement. As for IBG, revenue declined by 1.9% and income before tax dropped by 19.7%, primarily due to softened demand for voice services. However, we saw a robust growth in IBG, ICT and mobile services, which rose 14% and 19% year-over-year, respectively, supported by clients' global expansion and increased roaming revenue. Now I would like to hand the call over to Audrey for financial updates. Wen-Hsin Hsu: Thank you, President. Good afternoon. Please turn with me to Slide 12, income statement highlights, where I will cover our performance for the third quarter and first 9 months of 2025. The third quarter demonstrates strong execution and profitability. First, let's look at the top line. Revenue reached TWD 57.92 billion. This achieved a significant milestone of the highest third quarter revenue level in 9 years. This represents a solid 4.2% increase compared to the same period last year. This growth was primarily fueled by the successful expansion of our ICT business and also robust sales growth, while our core telecom service maintained positive momentum. Our strong operating performance is clearly reflected in our bottom line. Income from operations rose by 6.4% and net income increased 4.8% year-over-year. This performance was supported by steady growth across our mobile service and fixed broadband business, alongside the expansion of a high-value service, including Internet data center, IDC and cloud service. As a result of this performance, earnings per share increased from TWD 1.16 to TWD 1.22. This reflects consistent profitability and marks the highest third quarter EPS in 8 years. This operational efficiency also resulted in a strong quarter for EBITDA, which recorded a 4% gain, reaching TWD 22.11 billion for the quarter. The EBITDA margin of 38.17% was virtually in line with the 38.23% recorded in quarter 3 last year. This demonstrates sustained cash generation. So now moving now to our year-to-date performance through the first 9 months. Please focus on column 5 through 7 for the results. So revenue grew by 3.5% year-over-year, supported by strong momentum in our ICT portfolio and the sales contribution from our subsidiary, Chunghwa Precision Test Tech. Reflecting its top line strength, income from operations and net income rose 5.5% and 4.2%, respectively, primarily fueled by the continued expansion of ICT and cloud service, supported by sustained positive momentum from our core telecom business. Year-to-date EPS stands at TWD 3.79 compared to TWD 3.64 last year. Furthermore, EBITDA increased 3.6% to strong TWD 67.22 billion. The EBITDA margin stood at 39.43%, broadly consistent with prior year period. So in summary, the results highlighted the dual strength of our stable core telecom foundation and our successful pivot into high-growth ICT service. Now let's turn to Slide 13 for balance sheet highlights. We will review our financial position as of September 30, 2025, relative to year-end 2024. Our balance sheet continues to reflect our strong commitment to capital discipline and financial flexibility. Total assets decreased by 4%, a reduction primarily stemming from the utilization of cash and other current monetary assets to meet a debt maturity obligation during the period. In addition, property, plant and equipment declined by 2.1% as depreciation exceeded net additions, reflecting our continued focus on asset efficiency. Moving to the liability side. Total obligation decreased significantly by 10%. This net reduction resulted from the repayment of a maturing debt obligation and the subsequent partial refinancing through the issuance of our first ever sustainability bond that incorporates biodiversity feature. This reflects our commitment to ESG-based financing. As a result of this deleveraging, our reported debt ratio stood at a healthy 23.91%, showing a slight decrease compared to year-end 2024. Regarding liquidity, our current ratio remains stable and above 100%, highlighting healthy short-term financial flexibility. Meanwhile, our net debt-to-EBITDA ratio stood at an exceptionally low 4.5%. This reflects our highly deleveraged position and capacity to sustain our ongoing investment strategy within a balanced capital structure. Let's move to Slide 14, cash flow summary. We will review our year-to-year performance through the first 9 months of 2025. Cash flow from operating activities decreased by 8.6% year-over-year. This was driven primarily by the timing of the settlements, specifically increased payment for accounts payable and highly accounts receivable as of September 30. Capital expenditures rose 8% year-over-year, partly reflecting the timing of 5G, 4G deployment. This year's project were front-loaded in the early months, whereas last year's occurred later in the period. Some of this year's payment also relate to projects booked last year, so the increase mainly reflects timing rather than high investment activity. On an accrual base, CapEx has actually trended lower and full year mobile investment is expected to remain below 2024 level, consistent with our disciplined approach to capital management. As a result of these factors, free cash flow declined by 16.5% to TWD 28.19 billion year-over-year. This result is in line with expectations, given the short-term increase in working capital and the timing of our CapEx investment. We continue to maintain a strong cash position and stable operating inflows to support both business growth and shareholder return. Moving to Slide 15, performance highlights and guidance. I will summarize our key achievements for the period. In quarter 3 2025, the strength of our execution drove significant acceleration. We achieved record-setting Q3 revenue and EPS, while our key profitability metrics from income from operations, net income and EBITDA all performed strongly and met or exceeded our internal margin targets. For the full 9-month period, the cumulative results validate our strategy, all major metrics, including revenue, income from operations, net income, EPS and EBITDA performed above or on target for our full year guidance. The success was powered by the sustained profitability of our ICT service and the reliability of our core telecom business. Crucially, revenue growth outpaced operating expense, reflecting excellent operating leverage and efficiency. So this concludes our review of the financial performance for the third quarter and the first 9 months of 2025. We are now happy to open the door for your questions. Operator: [Operator Instructions] Cho-Fen Tsai: okay. We got one question from the dashboard. The question is that what is the driver of our international projects business? Okay. For international business, just as we mentioned that in the international markets, besides that, Chunghwa can play a role in the global AI supply chain. So actually, we see great potential of opportunities in the market of United States. So now our subsidiary in the United States are doing the project in Texas in those states that a lot of Taiwan high-tech company relocate there to do some plant construction and most of them are -- play a very important role for the AI supply chain globally. And in the Japan market, we also see similar opportunities in Japan, right? And in addition to that, we also try to introduce our self-development solutions to the global market. So for this quarter, our subsidiary, the CHT Security, their cybersecurity services, we successfully introduced the services to Southeast Asian markets and in Japan, okay, with the collaboration of our subsidiaries in Singapore and in Japan. For the Southeast Asia company, we also see the opportunities from the high-tech companies. That's the main driver of the business growth in Southeast Asia company. And we also try to introduce the smart city-related projects there. So in the third quarter, we see that we successfully introduced our Smart Pole project there. Although we want to notice that the Smart Pole is mainly developed and we introduced our in-house solutions, and we also collaborate with the partners to make it successful in Thailand. Operator: [Operator Instructions] There seems to be no further questions at this moment. I will turn it over to President Lin. Please go ahead. Rong-Shy Lin: Okay, everyone. Thank you very much for your participation. See you. Bye-bye. Operator: Yes. Thank you, President Lin. And ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit CHT IR website at www.cht.com.tw/ir under the IR Calendar section. You may now disconnect. Thank you again, and goodbye.
Operator: Good morning, ladies and gentlemen, and welcome to Veolia 9 Months Key Figures Conference Call and Webcast with Estelle Brachlianoff, CEO; and Emmanuelle Menning, CFO. [Operator Instructions] This call is being recorded today, November 6, 2025. I would now like to turn the conference over to Estelle Brachlianoff. Please go ahead. Estelle Brachlianoff: Good morning, everyone, and thank you for joining us for this conference call to present Veolia's 9 months key figures, and I'm accompanied by Emmanuelle Menning, our CFO. I'm on Slide 4 for all the key takeaways. Our 9-month results are once again very good with strong underlying business trends and a favorable momentum going into the end of the year. Our 9 months performance in EBITDA terms was particularly strong internationally, where the group generates 80% of its revenue as well as for our Boosters, as I will explain in a few minutes. In a rather challenging environment, this sustained performance quarter-after-quarter is really a testimony to the choices we've made in GreenUp as well as the strength of our business model of resilience and growth. Veolia can rely on a successful combination of Stronghold and Booster activities added to a diversified portfolio, both by geography and customer as well as a continued attention to performance. Moreover, we're constantly looking to create value by pruning our portfolio and have completed EUR 2.3 billion of M&A since the beginning of the year in our Boosters, Water Technology and Hazardous Waste in particular, and outside Europe, following, as you know, the disposal of nonstrategic assets last year. I can, therefore, fully and strongly confirm our guidance for the year, and we should have a very strong Q4. I'm now on Page 5, where you see that our 9-month key figures are once again very strong. Revenue reached EUR 32 billion, up plus 3.2% excluding energy prices, which are essentially pass-through for us, as you know. EBITDA increased by a substantial plus 5.4% on a like-for-like basis, fully in line with our 5% to 6% guidance and shows a margin improvement of 50 basis points. This is thanks to our strong international performance as well as our recurring efficiency gains complemented by the last synergies coming from the Suez acquisition more than 3 years ago. Current EBIT was up plus 7.9%, demonstrating strong operating leverage. Net financial debt remains well under control at EUR 19.9 billion, even after EUR 2.3 billion of net financial acquisition closed in the 9 months. We are perfectly on our trajectory to less than 3x at year-end with the usual seasonality. Our solid 9-month performance and expectations for Q4 enables us to fully confirm our guidance. In this uncertain time, Veolia's results are sustainably progressing quarter-after-quarter as we have demonstrated over the last few years. And why is that so? I would like to highlight key features on Slide 6. And I will insist on our international exposure with 80% of our revenues growing faster than the rest of the group and with very good EBITDA performance as well. Even in France, which accounts for 20% only, our results are not sensitive to the political context. And this is structural as we hold no national contracts and no public money is involved. Moreover, ForEx does not impact our businesses or margin as we just saw in the last 9 months with plus 50 basis point margin. We do not have ForEx transaction exposure, only translation. In a way, no business impact. We are a multi-local group with very limited international trade. On Page 7, you see in figures our performance outside Europe, which really stands out and explains a great deal of our resilience and growth in the last 9 months. Indeed, our Rest of the world businesses are more profitable with an EBITDA margin already at 17% versus 15% on average for the group, and they are faster growing. In growth term, you can see the detailed performance in the 9 months, which has been enhanced in Q3 compared to the first half, plus 6.2% in North America, fueled by an accelerated growth of Hazardous Waste, plus 9%. In Africa and Middle East, plus 10.5%; in Latin America, plus 9.4% and plus 5% in Asia. As you know, our value creation and EPS growth come from 3 pillars: top line growth, performance and capital allocation. And I'm going to go through them one by one as always, to illustrate how they have each contributed to our performance in the 9 months, starting with growth of our Stronghold activities on Slide 8. We've registered a very solid revenue growth of our Strongholds. Let's start with Water operations. Revenue increased by plus 3.9%. We continue to benefit from good indexations and have achieved successful tariff renegotiation in Spain as well as rate cases approvals in our U.S. regulated operations, which protects our future earnings. We just opened our first upgrade control center in North America to foster operational excellence and leveraging data. Solid Waste revenue grew by plus 0.9% or 1.5% excluding energy prices despite sluggish macro. As we have detailed in our deep dive last June, we managed to largely disconnect our waste activities for macro, thanks to a varied portfolio of customers, good pricing and quality of service, and we favor bottom line over revenue as well. Revenue from District Heating Networks increased by plus 2.7%, excluding energy price, thanks to sustained heat tariff as well as some network expansion and a favorable weather impact in H1. Q3 is not a very significant quarter for this activity. On Slide 9, one good example of the dynamism for Water operation in Q3 is certainly the signing of its first hybrid municipal and industrial desalination in Chile in Valparaíso. As you know from our Oman event on desalination a few months ago, Veolia is the world leader in desalination technologies with 18% of the world's desalination facilities having been designed and built with Veolia, and we have big ambitions. I'm very proud of this win in Valparaíso after a very intensive competitive process as we will be able to provide the highest technical, environmental and social standards to Aguas Pacifico. Let's move to our Boosters performance on Slide 10, which have performed well. The EBITDA performance is even remarkable, confirming my choices in GreenUp. Water Technology to start with, as you know, is a mix of various business models as we detailed in our deep dive last year. As you may remember, 70% of our Water Tech activities are deemed recurring, corresponding to products, mobile units or chemicals. And I'm very happy to see this base having achieved a very good Q3 with 6.8% growth and 4.8% since the beginning of the year, testimony to our technologies and commercial power. On the other hand, projects were impacted in the quarter by the timing milestone delivery and a strong comparison base last year. Quarters are always very different in this activity, and I expect a normalized Q4. Overall, and combining those different business lines, Water Tech has been up only 2%, but EBITDA progressed with 10% organically, which is excellent. Hazardous Waste revenue increased by plus 5.5%, including tuck-ins and 4.4% organically. I would like to highlight, in particular, the very strong growth in the U.S., up plus 9% year-to-date and despite planned shutdown of [indiscernible] early in the year. We have started our new operation in Saudi in the Dubai complex, and only China is lagging behind in terms of price, but we start to see some rebound in volumes. In terms of EBITDA, 9 months performance was excellent with above 10% organic growth. In Bioenergy, revenue was up plus 21.3% excluding energy price and including our new targeted acquisition. If I go to organic growth, it was still plus 8.2%, which is very good. Some illustration of the high-tech part of Veolia on Slide 11. You can see on this slide 2 good examples of the dynamism for our Boosters in Q3. First, in Water Tech, after years in the making and technical design, we were awarded a $500 million project in Saudi Arabia for the Saudi Aramco Total Energy Consortium called SATORP. We will design, build and operate a new massive plant. We're talking 8.10 million cubic meters per annum, treating the super complex affluent of this petrochemical complex. We combine here our unique set of Water Technologies and Hazardous Waste know-how, not only to offer a solution to remove pollutants, but also to recycle water in this arid region. I'm also very proud to have signed a partnership with TotalEnergies to combine our expertise and technologies to develop innovative solutions for industries, methane measure and capture, low-carbon energy for desalination facilities, strategic metal recovery from waste, et cetera. Now let's dive into our second lever of value creation after growth, which is performance and efficiency. I'm now on Slide 13, which shows our 9 months performance. In terms of our yearly efficiency plan, we achieved EUR 295 million in gains, in line with our annual target of EUR 350 million. As you know, this is a recurring lever embedded in our operations and therefore, one we can count on for years to come, not to say forever. Efficiency gains of Veolia are not discretionary cost-cutting programs, of which you could question the continuity, but they come rather from a very diversified series of initiatives in our thousands of plant, which explains the recurring element of it. Worth noting, we have already registered EUR 5 million of additional synergies coming from the combination of our 2 business units in Water Technologies after the CDPQ minority buyout closed on June 30. In terms of cost synergies derived from the Suez merger, we have achieved EUR 73 million in 9 months for a cumulative total of EUR 508 million since day 1. This is in line with our objective of EUR 530 million by year-end, which, as you know, we've raised a year ago. I'm now on Slide 14, which details the third pillar of value creation, capital allocation and portfolio pruning. You will see a powerful 9 months in that respect with EUR 2.3 billion of acquisition completed almost entirely in Water Tech and Hazardous Waste and outside Europe. This is fully consistent with our GreenUp priorities. I must say the year-to-date enhanced growth outside Europe and plus 10% EBITDA increase in those 2 Boosters confirm that these are good investments to sustain future earnings growth. Detailing those investments first in Water Technologies with CDPQ's 30% stake for EUR 1.5 billion, which you know is an operation which will be accretive and ROCE enhancing, thanks to EUR 90 million cost synergy by 2027. In Hazardous Waste, we've signed 6 bolt-on acquisitions for a combined EV of EUR 400 million and good multiples, notably in the U.S. and Japan. Of course, we maintain our strict balance sheet discipline and our leverage will remain below 3x at year-end, allowing the group to retain strategic flexibility. Our strong 9-month results, of course, allow me to fully confirm our guidance for 2025, which is reminded on Slide 14. I wish to invite you as well to join us in Poland later in the month, where it will give some color about our district heating and decarbonizing energy activities. Finally, and as a conclusion, I wanted to remind you of our long-term guidance, fueled by our 3 levers of value creation and GreenUp priorities. It includes current net income growth of 10% per year on average over the period with dividend growing in line with current EPS and ROCE above 9% in 2027. As you remember from our yearly presentation, we decided to launch a share buyback plan from '25 to '27, size to neutralize the impact of the employee shareholding program. So that going forward, current EPS will grow in line with current net income growth. I now hand over to Emmanuelle, who will detail our 9 months key figures. Emmanuelle, the floor is yours. Emmanuelle Menning: Thank you, Estelle, and good morning, everyone. Veolia's results at the end of September are very solid with strong underlying business trends and a very favorable momentum, which I would like to detail. Indeed, if we look at our EBITDA performance, we see tailwinds. First, in our international operations, notably outside Europe, where the group generates 80% of its revenue with circa double-digit EBITDA growth and second, for our Boosters with EBITDA increased by more than 10% in the 9 months. In Q4, we expect this trend to continue, and we also expect improved performance in France as we will reap the benefits of our action plan, notably in French waste. Nine months results are fully in line with our annual guidance and are also a testimony to the strength of our business model of resilience and growth with a successful combination of Stronghold and Booster activities and a diversified international portfolio. With EUR 32 billion in revenue, we experienced a solid growth of 3.2%. The operating leverage as the good delivery of efficiencies and synergies were excellent. A solid organic EBITDA growth of 5.4% at EUR 5,080 million and a current EBIT growth of 7.9%. Net financial debt reached EUR 19.9 billion at the end of September, up from December '24 due to the seasonality of working capital variation and M&A activity, down compared to the end of June '25 due to the temporary favorable impact of the hybrid bond debt issuance of EUR 850 million, which will be reversed at the end of the year. We expect the leverage ratio to be below 3x at year-end after full seasonal working capital reversal in Q4. You can also see on the slide the detailed ForEx impact, which increased in Q3 due to the weakening of the U.S. and Australian dollars as well as the Argentinian and Chilean pesos. A few things are important regarding the ForEx impact for Veolia. First, our revenue is only about 40% generated in euro. But as a multi-local group with very limited international trade, ForEx does not impact our businesses or margin. Our revenues and costs are always in the same currencies in each of our countries. The increase in currency impact in '25 reflects the improved performance of our international activities. Our guidance at EBITDA level is at constant scope and ForEx. Finally, as you saw in previous year, the ForEx impact at EBITDA level is very much offset down the line to current net income. ForEx impact was minus EUR 68 million at EBITDA level and minus EUR 44 million at current EBIT level at the end of September. Using the ForEx exchange rate at the end of September '25, the full year impact at EBITDA would be around EUR 130 million minus, but it varies every day. Our full year guidance, which is at constant scope and ForEx is fully confirmed at EBITDA and current net income level. Moving to Slide 18, you can see the revenue evolution by geography. The main feature in Q3 was the enhancement of our growth outside Europe. I will detail it in a few minutes. I will start with Water Technologies. As Estelle recalls, 70% of our Water Tech activities are recurring corresponding to products, mobile units and chemicals. While 30% is volatile, these are the projects. In Q3, project revenue was impacted by the timing milestone delivery and a strong comparison base last year, while the 3 other business lines grew double digit. Excluding project, Q3 Water Tech revenue was up 6.8% in Q3 and 4.8% in the 9 months. This was reflected in the EBITDA level. Water Technology EBITDA increased by 10% in the 9 months, benefiting also from the efficiency and synergy delivery. As Estelle mentioned, we have already generated EUR 5 million of additional synergies coming from the buyout of WTS minority interest in Q2. Rest of the world performed very well in Q3. With revenue growth accelerating from 3.7% in H1 to plus 6.6% in Q3, driven by all geographies. Europe grew by 4.1% in the 9 months, fueled by resilient waste activity, a solid Q3 in water operation and excellent performance in Southern Europe, notably in Spain, up by 7%. Finally, France and Hazardous Waste Europe benefited from good hazardous waste performance, partially offset by low growth in solid waste and good water activity. Now let's take a look at our performance by business. Let's start with Water, representing 40% of our revenues and 50% of the group EBITDA. Water revenue was up 3.4%, fueled by the strong water operation, up 3.9%, while Water Technology was up by 2%. Water Operations benefited from good indexation with continued price increases in Europe and in the U.S., while indexation was back to 0 in France due to lower electricity prices. Volumes were on a very good trend, up close to 3% in Europe. As I just explained, the underlying growth of Water Technology, excluding the timing project delivery remained quite strong. Moving to Waste, representing 35% of our revenues. Waste activities grew by 1.8%, a steady pace despite an [ helpful ] margin. Waste growth was very comparable in Q3 to previous quarters. Starting with solid waste. It's a very local, systematically adapted to the reality of the geography with a well-balanced customer portfolio across countries, and it has been demonstrating its resilience through the quarters. In terms of volumes and commercial developments, performance was mixed, resilient volumes in the U.K. and in Germany. U.K. incineration activity was impacted by planned outages, but still down in France, although better in Q3. Activity continued to progress in the Rest of the world, notably in Latin America and in Hong Kong. Hazardous Waste grew by plus 4.4% in the 9 months, plus 5.5%, including tuck-ins, thanks to continued good pricing and plant performance with EBITDA up by more than 10% year-to-date, which is outstanding. Growth accelerated in the U.S., plus 9% in Q3, fueled by excellent incineration volumes and pricing, a slower quarter in Europe due to facility outages and lower recycled oil prices. Finally, moving on to energy, and I am on Slide 21. As you know, energy revenue is sensitive to energy prices, which were down as expected again in '25, but to a lesser extent than last year. The prices were on average almost stable compared to last year and electricity prices were down as expected. Excluding the energy price impact, growth was quite good, plus 4.5%, thanks to good volumes, helped by a colder winter and fueled by a strong activity in the booster energy efficiency and flexibility, up 8.3% with strong momentum in Belgium, Southern Europe and in the Middle East. The revenue bridge on Slide 22 explains the driver of our growth in the 9 months. Scope was negative at the end of September and reached minus EUR 327 million, mainly due to the impact of last year disposal, but as expected, was neutral in Q3. The impact will turn positive in Q4 as 2024 divestiture were all closed in Q3 last year. Negative ForEx impact increased in Q3, as I mentioned earlier. The impact of energy prices was as expected, divided by 2 compared to last year at minus EUR 501 million. Recycled prices were neutral. The weather effect amounts to plus EUR 169 million due to a colder winter at the beginning of the year in Europe. The contribution of commerce and volumes were comparable to last year, plus 1.3%, driven by sales momentum and resilient volumes. Finally, price effects were as expected, lower than in 2024 due to lower inflation and contributes plus 1.4% to top line growth. On Page 23, you have the EBITDA bridge detailing our organic growth of 5.4%, in line with the annual guidance between 5% and 6%. Scope was negative at the end of September and reached minus EUR 56 million. Negative ForEx impact increased in Q3 versus Q2, as mentioned earlier. The impact of energy was minus EUR 39 million, less than last year as expected, while recycled prices were slightly up plus EUR 13 million unchanged in Q3. The commerce/volumes/works effect was positive at plus EUR 77 million, in line with revenue impact. Pricing and efficiency gains of EUR 295 million generated plus 2.3% in additional EBITDA, hence, a very good retention rate of 38%. Worth noting, we have already registered in Q3 EUR 5 million of additional synergies coming from the combination of our 2 business units in Water Technology after the CDPQ minority buyout close on June 30. The synergies amount to EUR 73 million, notably in the Water Technology activities in the U.S. and in Hazardous Waste, leading to a cumulated amount of EUR 508 million, perfectly in line with our cumulated objective of EUR 530 million. The symbolic threshold of EUR 500 million has been exceeded. Going down to current EBIT, this slide illustrates perfectly the operating leverage of our business model, 3.2% revenue growth, 5.4% EBITDA growth and 7.9% EBIT increase. Current EBIT grew to EUR 2.7 billion at a faster pace than EBITDA. Renewal expenses of EUR 231 million were comparable to '24. Amortization and OFA were slightly lower than last year due to perimeter and slightly up at constant scope and ForEx. Industrial capital gains, provision and other were down due to the high provision reversal in '24 with the ending of operational risk. Joint ventures are slightly decreasing. Before concluding, I remind you on this slide of our share buyback program, which has been launched to offset the dilution of the employee shareholding program. Our strong 9 months results allow me to fully confirm our guidance for 2025, continued solid organic growth of revenue, excluding energy prices. For EBITDA, organic growth between 5% and 6% more than EUR 350 million of efficiency gains, more than EUR 530 million of cumulated synergy at the end of 2025, current net income up 9% at constant ForEx, leverage ratio below 3x. And as usual, our dividend will grow in line with our EPS. Thank you for your attention. Estelle Brachlianoff: Thank you, Emmanuelle. And now we are ready to answer your questions. Operator: [Operator Instructions] And your first question comes from the line with Bartek Kubicki with Bernstein. Bartlomiej Kubicki: If I may ask maybe 3 very short questions. First of all, on your FX, you gave a little bit of a guidance, what could be the FX impact on EBITDA in 2025, assuming the currency rates stay where they were at the 30th of September. I just wonder what would be the impact on net income? Because in FY '24 in the first half, the impact on net income was 0. But in the past, it used to be negative, when the impact on EBITDA was negative. So I wonder what is your view on this one at the end of FY '25? Second of all, if we -- about your share buybacks, I think there was a proposal to increase a taxation on share buybacks in France, an idea. And I wonder if this was applying to share buybacks on employee shares. What would you do if you had to pay additional taxes on share buybacks in France? Just a hypothetical example. And the last point would be on your Hazardous Waste margins because I guess, with 4.4% revenues increase and 10% EBITDA increase, we are looking at margin expansion. I just wonder whether this is a structural trend and you will see a margin expansion going forward from today's levels? Or do you think you have already reached levels which you find optimal in terms of EBITDA margins in Hazardous Waste? Estelle Brachlianoff: Thank you for your 3 questions. I will start and Emmanuelle will be able to comment further, of course. Regarding guidance on ForEx, on net result, just a few elements on that. First, I can fully confirm our guidance for the year, so which means 5% to 6% EBITDA at constant ForEx. And it's fair to say you've understood from the tone of this presentation this morning that I expect to be on the upper range of this range. Two, I can fully confirm as well the net result, which is 9% growth this year. I think this is a super important element. And as you know, I just wanted to highlight a few things on ForEx. ForEx for us is very different from in many different companies, I guess, because in a way, it has no impact on our business neither positive nor negative in a way. That's exactly why we guide at constant ForEx. It's because it's exactly what we have a look at. It's the direct consequence, of course, of our being super international with 80% of international business, plus it has no impact on margin as we've demonstrated in the 9 months with a plus 50 basis points. As Emmanuelle said, we are a multi-local company. So we have no transaction impact of ForEx. It's really like we are paid in dollars, we pay our cost in dollars and same applies to euros and so on and so forth. Just want to highlight that before Emmanuelle comments on the specifics of your question. Emmanuelle Menning: Yes, you're absolutely right, Estelle. Regarding ForEx, it's the direct translation of our being 80% international and 40% outside Europe, which is growing faster. I will not come back on the fact that we are only translation impact and no transaction impact. We expect, as I mentioned, the impact at the end of 2025 at EBIT level to be around EUR 130 million -- EBITDA, taking into account the 9 months results and the closing rate at the end of September. Estelle Brachlianoff: Although it's fair to say it varies every day, as we've seen with the political situation in the U.S. meant suddenly, the dollars went up again. So I'm not so sure we expect if we were to do that calculation with the same range as end of September, which would be now the fair comment, right? Emmanuelle Menning: Absolutely. And we haven't changed our range. You know that ForEx impact at current net income level is largely attenuated. Usually, EUR 100 million at EBITDA level translates into EUR 20 million at C&I level. Estelle Brachlianoff: Your second question on share buyback, even in the -- I mean, as you have said and implied, the fiscal debate is not over yet in France like far from. Even if we were in the -- what was imagined in the last few weeks were to be voted, which is, I must say, unlikely for the majority of it, but nevertheless, even if the share buyback that we have launched would not be concerned. Actually, there is an exception in this fiscal turmoil, which is share buyback associated with employee shareholders. So we would not be impacted in any way, shape or form even if that were to be voted. And just to rehighlight that French political situation does not have any impact on our results at Veolia, not only because we're only 20% in France, but even in France, we are very local as opposed to national. We don't have national contracts. We don't have like debt -- public debt is not involved. We are really multi-local as well. Just want to highlight that again. In terms of your third question on Hazardous Waste, the margin expansion is structural. And we've highlighted that in the deep dive we've done last June. I think it was with a big ambition, in Hazardous Waste to raise the margin, the EBIT and the ROCE by plus 50% by the end of the plan, thanks to the progressive opening of the various facilities we have. We are on the way of building, which are good profitable margins apart from the ramping up of those, which could be temporary for a few months, just like not fully yet delivering the full speed. Yes, I don't expect any specific thing. It's really structural. It's a mix of like availability of our plants, plus pricing, good pricing plus good volume and increase in the industrial base in some key sectors such as micro e. This is what is structurally behind this increase in margin. Just to give you a specific figure, which was highlighted by Emmanuelle, but I want to emphasize again on. In the U.S.A. alone in Hazardous Waste, we've grown our revenue plus, plus 9% in Q3, which is even at a higher rate than the first half. So it's really sustained we don't see anything but a sustained, if not even better Q3 than the first half. So that's why I'm very confident for a very good Q4 for Veolia and a very good year. That's why I mentioned the upper end for EBITDA at constant ForEx. Operator: And your next question comes from the line of Arthur Sitbon with Bernstein (sic) [ Morgan Stanley ]. Arthur Sitbon: Can you hear me? Estelle Brachlianoff: Yes. Arthur Sitbon: It's Arthur Sitbon from Morgan Stanley. So the first one is actually on your EBIT. I've noticed that your industrial capital gains, I mean, the line of capital gains net of impairments, et cetera, is significantly lower than last year, which I suspect suggests the quality of your EBIT -- the underlying quality of your earnings in 9 months is relatively good. I was wondering, is it just a timing effect and we're going to end the year with a similar level of capital gains than last year? Or should we expect basically you to deliver on your net income guidance with a bit less gains than last year, which could be a message on the underlying quality of earnings? That's the first question. The second question, you talked already a little bit about taxes in France. I -- and as you mentioned, we don't know what will be implemented at the end of the day. But I just wanted you, if possible, to give us some information on that potential tax that would change the way -- essentially, that amendment that would change the way the corporate tax is calculated in France and will align it on your share of revenues generated in France, not PBT. I was wondering if there is a significant discrepancy between your exposure at revenue level and PBT level in France? And if you could help us understand a bit that. Estelle Brachlianoff: So capital gains and the quality of earnings, Emmanuelle. Emmanuelle Menning: Yes. Thank you, Arthur, for your comments on the quality of results, which is really good at the end of the 9 months and that we are confirming. And to be short on your question, we confirm that at the end of the year, the amount will be decreasing compared to last year, confirming the quality of our results. In terms of your second question on tax in France, the short answer is we don't expect any negative impact nor positive on the potential corporate tax that you mentioned because there is an addendum, which makes it that we would not be concerned. And we could go through the list of the various tax which we imagine in France. And for some, the answer would be, again, in conditional terms, no impact. For others, it may be EUR 5 million, EUR 10 million max. So we're really talking about things which are absolutely not significant at Veolia's group level. And as I remind you, France is 20% of our revenue, but less of our earnings. So there is no big impact of all this in our group's results. Operator: And the next question comes from the line of Olly Jeffery with Deutsche Bank. Olly Jeffery: So 2 questions for me, more kind of general beyond the results today. So the first one is just on the efficiency program that you guys have and have every year. Is there some part of the efficiency program that happens every year that you might be able to consider to be almost efficiency that could be considered as underlying growth that might be, for example, you're sharing in the benefits of efficiency targets on specific contracts. I know often this is seen a straight out cost cutting, but is there some elements of cost cutting, which actually perhaps people view as that, but you might consider internally as being more genuine growth. I'd just be interested to hear your views on that. And then secondly, there's been discussions from some investors recently about the opportunity you might have with regard to data centers, water cooling, et cetera, in the U.S. Is that something that you see as a potential growth opportunity out this decade? And if so, what are the areas where that you feel that you can operate within that and potentially might be able to see the most growth? Estelle Brachlianoff: Thank you. Do you want to take the first question, Emmanuelle, on efficiency? Emmanuelle Menning: With pleasure. So regarding efficiency program, you're absolutely right, Olly. It's fueling our underlying growth, and it will continue to fuel our underlying growth. Very happy about what we have been able to achieve in terms of efficiency for the 9 months. The element which is important also and that you have in mind is that in Q4, it will be also pushed by the results that will come, especially in France as we will reap the benefits of all the measures that we have implemented in the 9 months. So very sustainable trend completely linked with our businesses and which will fuel the underlying growth. Estelle Brachlianoff: So basically, you can count on them forever with Veolia. For the reason I mentioned in my speech, which is it's not a big cost cutting as in one-off laying off people typically. We're talking about thousands of plants, each of them having a constant way of having a look at how they could be more performing and efficient, which is very different. Therefore, you can count on them forever. In terms of data center, you're exactly right. We are building an offer on data center, which I think is very, very promising. We already have quite a few contracts actually across the globe in Europe as well as in the U.S. so far and in Australia as well, it's fair to say. And it's a way to have Veolia combining the data center needs and boom with still the access to resource and sustainable element of it. Meaning what we offer is not only reduce carbon footprint by recouping the heat as well as being even water positive as in replenishing resource. As you know, data centers consume a lot of water to be cooled down. And we have implemented a few offers there with a few customers already, and we aim at doing more of that. So yes, you're right, growth opportunity for Veolia certainly. And I count on it to fuel not only the GreenUp plan, but the next few years with a lot of assets is going to be here, I think, for a very long time. Operator: And the next question comes from the line of Juan Rodriguez with Kepler Cheuvreux. Juan Rodriguez: I have one, if I may. It's kind of a follow-up. If I'm correct, you signaled that you expect to be on the upper part of the guidance for the year. Can you please give us more clarity, as we currently see, you're in the middle part of the range? So you expect probably a strong Q4 with cost efficiencies, volume recovery? Is it both? And can you give us a first look of what has been the operational performance so far in the quarter were already at the beginning of November? Estelle Brachlianoff: Emmanuelle? Emmanuelle Menning: Yes, with pleasure. So as mentioned by Estelle, we expect a very strong Q4 and to be at the upper range. Regarding revenue, we expect -- we have some moving parts regarding, of course, the weather, but we expect a growth which is similar to what we have seen in the 9 months. And regarding EBITDA, it will be, of course, pushed by the generation of synergy from Water Tech, the performance that we will have in France, recovery -- thanks to the action plan which has been launched, which are the 2 main reasons. And as you may have seen, the October in terms of heating generation has been positive. So that's the main reason for us to be very optimistic regarding Q4. Estelle Brachlianoff: And as we -- I will comment on the Q3 was more on the plus side and then minus side in terms of trend compared to H1 as well. Everything we've seen internationally in the U.S. has this way, just to give a few examples, and we have figures in the slides, but Q3 was more on the up than the down compared to H1. So we are into a very good momentum into Q4. Operator: And the next question comes from the line of [ Mark Abe ] with Citi. Unknown Analyst: The first one I've got is on the Water Tech business. I think at the first half, you gave a number of EUR 2 billion of bookings. Can we get an updated figure of backlog at 9 months as of now? And also remind me how that converts -- how that backlog converts into revenue? And if there's any sort of large projects with definitive timing that we can think about? And then just a second one quickly on the recyclate pricing. I think at 9 months, you've seen it relatively flat, slightly positive. We saw in the U.S. Waste Management profit war, they're seeing low lower recyclate pricing. Can you just talk to if there's any kind of read across or impact for Veolia there, please? Estelle Brachlianoff: Okay. So on Water Tech, we always hesitate to give always the backlog because backlog is only on the project bit of our activity, which is roughly 30% of it. And the backlog was not very relevant in Q3, but we expect quite a few bookings in Q4. So we'll give you the over end. So it doesn't translate directly because of the proportion of projects versus more recurring things. So roughly -- and you can have a look at our deep dive on Water Tech, where we explained the full detail of that. Basically, we have 30%, which is project based, which is very linked with backlog, say, and 70%, which is more recurring. We're talking here about products, typically membrane. We're talking about services, mobile unit. We're talking about chemical products as well. And this 70%, which is more relevant to be compared quarter-on-quarter, has grown by 6.8% in Q3, year-to-date, plus 4.8%. So we are very happy about this bit. And you have the ups and downs of the project, which is that plus a very high comparison base of last year. So we expect quite a few bookings in Q4, and it starts well, it's fair to say. In terms of the recyclate pricing, I will have Emmanuelle answering, but no read across from American dry waste company. We are not in dry waste in the U.S. We are not concerned by recycling prices, which is a quite different logic from the European one, it's fair to say. But on recyclate price trends, Emmanuelle? Emmanuelle Menning: Yes. On recyclate price, you have seen the impact at the end of the 9 months, which is plus EUR 13 million at EBITDA level, we don't expect a significant impact at the end of the full year. You know that we have implemented with Estelle a huge transformation and deep transformation of our Waste business, meaning that everywhere we can, we are in a back-to-back construct. So if you want a figure for the end of the year, it's non-material. So we had a little bit of plus at 1 month, a little bit of minus the month following. So nothing very specific. And in other geographies which are concerned mainly on dry waste, we're talking Germany, France, U.K., Australia. With that, you have an 80-20 type of flow for our business. Operator: And the next question comes from the line of Philippe Ourpatian with ODDO BHF. Philippe Ourpatian: I have just one simple question is concerning your free cash flow. I mean there is no mention about where you were at the end of 9 months this year. And as you confirm, I would say, a very strong Q4 and your net debt-to-EBITDA below 3. I do suppose that the reversal on Q4 will be maybe stronger than expected. Could you just give some figure concerning the end of 9 months in order to help us to better understand how it will move concerning the working capital and some other, I would say, items, which could be your CapEx and some cash in coming from, I don't know where. But please just -- that's going to be very helpful. Emmanuelle Menning: Bonjour, Philippe. With pleasure to speak on free cash flow. You're absolutely right. The amount of free cash flow at the end of the 9 months is quite similar to what we had last year. We had a strong Q3. You remember that in Q1, we had some few timing effect and specific effects linked to Flint cash-out, scope entries and adjusting scheme Water France royalty payments. And we fully confirm that we expect the usual reversal in Q4. You know that we are very committed to free cash flow generation, which is fueling our growth and to pay our dividend. We have -- we are mobilizing the organization to invoice faster, to collect faster. We have a few projects regarding [ ERP and ER ] also to have optimized processes. So fully confirming for the year-end, the usual guidance and the debt below 3x. We'll have the reversal in Q4 with strong EBITDA growth fueled by our international activities, French recovery and the Boosters, discipline on CapEx and working capital reversal. Estelle Brachlianoff: So the usual seasonality. Operator: And I'm showing no further questions at this time. I would like to turn it back to Estelle Brachlianoff for closing remarks. Estelle Brachlianoff: Thank you very much. You understood. We are very confident, very happy about the 9-month result, very, very confident for the rest of the year and very happy that the priority we've been given in GreenUp as even being more technological oriented, more international are bearing fruits in our results as they support the growth of our earnings and will so in the next few years. Thank you very much. Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.