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Operator: Good day, and thank you for standing by. Welcome to APA Corporation's Third Quarter Financial and Operational 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 your first speaker today, [ Stephane Aka ], Managing Director of Investor Relations. Please go ahead. Unknown Executive: Good morning, and thank you for joining us on APA Corporation's Third Quarter 2025 Financial and Operational Results Conference Call. We will begin the call with an overview by CEO, John Christmann. Ben Rodgers, CFO, will then provide further color on our results and outlook. Steve Riney, President; and Tracey Henderson, Executive Vice President of Exploration, are also on the call and available to answer questions. We will start with prepared remarks and allocate the remainder of time to Q&A. In conjunction with yesterday's press release, I hope you've had the opportunity to review our financial and operational supplement, which can be found on our Investor Relations website at investor.apacorp.com. Please note that we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website. Consistent with previous reporting practices, adjusted production numbers cited in today's call are adjusted to exclude noncontrolling interest in Egypt and Egypt tax barrels. I'd like to remind everyone that today's discussion will contain forward-looking estimates and assumptions based on our current views and reasonable expectations. However, a number of factors could cause actual results to differ materially from what we discuss on today's call. A full disclaimer is located with the supplemental information on our website. And with that, I will turn the call over to John. John Christmann: Good morning, and thank you for joining us. On today's call, I will review our third quarter results, outline our continued progress across key strategic initiatives and discuss our outlook for the fourth quarter and our preliminary plans for 2026. This year's macro environment has remained challenging, characterized by heightened volatility and uncertainty in commodity prices, largely driven by shifting trade policies and geopolitical tensions. While these external factors have created headwinds for the industry, they also underscore the progress that we've made at APA over the past 2 years. At the core of these efforts is a strong focus on lowering our controllable spend, which is delivering meaningful and sustainable improvements in our cost structure. Additionally, through disciplined capital allocation, a reshaped and more resilient portfolio and a sharper operational focus, we've built a stronger, more adaptable organization, one that can perform through cycles and respond quickly to changing market conditions. Our strategy is working, and the benefits are increasingly evident across both our operations and financial performance. With a stronger foundation in place, APA is well positioned to navigate any oil price environment for 2026. Turning to the third quarter. Results were once again very strong across the board. We have exceeded our production guidance in each of our operating areas, while capital investment and operating costs were below guidance. In the Permian, continued strong operational execution resulted in oil production above guidance, while capital investment and operating costs were in line with expectations. Moving to Egypt. In addition to the significant acreage award we previously discussed, we also received substantial payments during the third quarter, nearly eliminating our past due receivables. This progress reflects the strength of our partnership with the Egyptian government. Operationally, once again, gross BOEs grew sequentially in Egypt, underpinned by the ongoing success of our gas program. This reflects both strong well performance and continued optimization of infrastructure. On the oil side, our waterflood and recompletions programs are moderating our base decline and flattening our near-term gross oil production. In the North Sea, our continued focus on operating efficiency and cost management drove higher production and lower costs compared to our guidance. We remain focused on optimizing our late-life operations and are preparing to decommission our assets in a safe, efficient and environmentally responsible manner. Finally, in Suriname, progress at GranMorgu continues at pace and first oil remains on track for mid-2028. Moving to our outlook for the fourth quarter. In the Permian, following another strong quarter of operational execution, we are raising our guidance for oil production while maintaining our outlook for capital spend. On the gas side, with the recent dislocation in Waha pricing, we are adjusting our guidance to reflect temporary curtailments in the field. Although this slightly reduces our BOE volumes, the impact to free cash flow will be minimal. In Egypt, we are slightly increasing our fourth quarter production estimates in line with the ongoing momentum from our gas program. We are also drilling several high-potential exploration wells, including on our newly acquired acreage. The Western Desert presents a vast and highly prospective opportunity set. And although we are early in our gas exploration program, success here could be impactful for our portfolio. Turning now to our cost reduction initiatives. Our commitment to reducing every aspect of our controllable spend has been evident all year, and I want to recognize the diligence of our teams and the strong alignment among leaders across the organization. Through their collective efforts, we've made significant changes to our operations and driven meaningful improvements in both capital and operational efficiency. We are now on track to realize $300 million in savings this year and are also positioned to reach our run rate savings target of $350 million by the end of 2025, 2 full years ahead of the original goal of year-end 2027. Looking ahead, we see significant opportunity to build on this momentum, driving additional efficiency gains and further simplifying how we work. Through these efforts, we aim to deliver an additional $50 million to $100 million in combined run rate savings across G&A, capital and LOE by the end of next year. Moving to our preliminary plans for 2026. With the recent volatility in oil prices, we are evaluating multiple capital allocation scenarios with a focus on free cash flow generation. While we have significantly improved our cost structure and reduced breakevens across our asset base in the last 18 months, we believe a flexible approach to capital investment is warranted in the current price environment. In the Permian, at our current pace of 5 rigs, we expect to deliver consistent year-over-year oil production of approximately 120,000 barrels per day, with capital investment of around $1.3 billion. However, if oil prices move lower, we have the operational flexibility to moderate activity to reduce capital further with minimal expected impact on 2026 oil volumes. In Egypt, we plan to maintain consistent activity levels and capital spend with a similar allocation between oil and gas drilling as this year. This would allow us to grow gas volumes on a gross basis year-over-year, gross oil production will remain on a modest decline. We will continue to monitor commodity prices over the coming months, and we'll provide formal guidance for 2026 in February. In closing, our third quarter results underscored the strong operational performance and consistent execution across all operating areas. Through the rigorous focus of our teams, we are driving significant cost savings ahead of schedule and increasing our targets for the future. As we head into 2026, we will remain disciplined in our capital allocation and continue prioritizing free cash flow generation. With that, I will turn it over to Ben. Ben Rodgers: Thank you, John. For the third quarter, under generally accepted accounting principles, APA reported consolidated net income of $205 million or $0.57 per diluted common share. As usual, these results include items that are outside of core earnings, the most significant of which was $148 million unrealized loss on derivatives. Excluding this and other smaller items, adjusted net income for the third quarter was $332 million or $0.93 per share. LOE came in below guidance, largely due to ongoing cost savings, primarily in the North Sea. G&A was in line with guidance despite a larger-than-expected impact from mark-to-market adjustments related to stock compensation. On an underlying basis, G&A was approximately $15 million below guidance. We continue to progress multiple initiatives across all categories of G&A and expect this momentum to carry into 2026. Current income tax expense was lower than anticipated, primarily due to a change in our projected 2025 corporate alternative minimum tax. New guidelines issued by the U.S. Treasury late in the quarter clarified the treatment of net operating losses and depreciation deductions under the minimum tax framework. As a result, we now expect to owe little to no U.S. taxes in 2025 and 2026. Overall, this was an excellent quarter during which APA generated $339 million of free cash flow and returned $154 million to investors through dividends and share buybacks. During the quarter, net debt was reduced by approximately $430 million through a combination of free cash flow generation and payments from Egypt. This balance sheet progress has enabled us to realize net financing cost savings, excluding gains on the extinguishment of debt of $75 million so far in 2025 when compared to the same period in 2024. We ended the quarter with $475 million in cash, providing financial flexibility as we enter 2026. This gives us the ability to opportunistically repurchase debt, address upcoming maturities and thoughtfully manage the timing and execution of our decommissioning and asset retirement obligations. Turning now to our cost reduction initiatives. John already covered our progress to date and outlined the targets we've set for 2026. So I'll focus on the key movements in our 2025 guidance for controllable spend items relative to the $300 million of savings we expect to achieve this year. While these savings are reflected in our guidance for LOE and G&A, there are a few offsetting effects within capital. Since issuing our initial 2025 capital guidance in February, our teams have identified and implemented an additional $210 million in cost reduction opportunities, primarily in the Permian. Over the same time frame, our capital budget has been reduced by $150 million. This results in a $60 million difference between the change in our full year capital guidance and the change in capital cost savings since the beginning of the year. The largest portion of this variance is attributable to capital investments and LOE reduction initiatives. As highlighted last quarter, we identified several high-impact projects aimed at sustainably lowering future Permian operating costs, such as building saltwater disposal systems, consolidating field compression and other facility optimization projects. Capital is being directed toward these efforts, which are expected to generate strong returns with short payback periods and position us for structural operating cost improvements in 2026 and beyond. Another component of this difference is activity related, which primarily relates to the completion of 2 DUCs at Alpine High this quarter. Shifting to our oil and gas trading portfolio, which has been a meaningful and relatively steady contributor to free cash flow generation this year. Based on current strip pricing, we expect $630 million in pretax income from our trading activities for 2025. To enhance cash flow certainty heading into next year, we have added to our 2026 hedge positions. Currently, about 1/3 of next year's gas transport position is hedged, locking in roughly $140 million of cash flow. Turning to our asset retirement and decommissioning obligations. Our goal is to reduce these liabilities through a prudent approach that balances operational efficiency with financial discipline. As an example, during the third quarter, we identified a well at one of the fields in the Gulf of America that required decommissioning. Rather than mobilizing a vessel for a single well and returning later to complete the remaining work, we chose to decommission the entire field of 5 wells in a single campaign. This enabled us to capture meaningful operational efficiencies and reduce the total cost that would have been incurred over time. We have identified similar opportunities to execute during the fourth quarter, which led us to increase our full year 2025 ARO and decommissioning spend guidance by $20 million. Going forward, we will continue to pursue similar initiatives, proactively managing these liabilities in a way that is both operationally efficient and financially sound. For 2026, we expect our combined ARO and decommissioning spend to increase, reflecting a decline in spending in the Gulf of America, offset by higher planned activity in the North Sea. As a reminder, APA receives a 40% tax benefit on all decommissioning spend incurred in the North Sea. Therefore, on an after-tax basis, our total spend will increase year-over-year by roughly $55 million. In closing, as we enter 2026, our priorities remain centered on disciplined capital allocation, further cost reductions and continuing to strengthen the balance sheet. Our development capital, inclusive of approximately $250 million for Suriname development is expected to be 10% lower than 2025, reflecting improved capital efficiency across our portfolio. This preliminary plan positions APA to sustain Permian oil production, deliver continued gas growth in Egypt and advance the world-class opportunity we're developing in Suriname Block 58. Together with our ongoing focus on reducing controllable spend, these actions further strengthen our foundation for durable free cash flow generation and long-term value creation. With that, I will turn the call back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: So the capital guide is, I think, puts you below street for next year. But I'm curious, John, if you could offer a little bit of color on the flexibility you suggested. I mean we'll see if oil -- where oil ends up, but what's the nature of the flexibility you have? Because I think a few years ago, when oil prices collapsed, you allowed your Permian production to decline. It sounds like that's not the case this time. So is that a DUC manipulation? Is it drilling but not completing? Or can you walk us through where the flexibility is against what looks like a kind of sub-$2.2 billion CapEx number now for next year? John Christmann: Yes. Great question, Doug. I'll just start out with just in general, our mindset going into '26 is focused on capital discipline. So -- and as you point out, we've got flexibility if oil prices move lower. Today, we envision a plan that's going to maintain Permian oil at about 120,000 while we're growing our BOEs in Egypt, driven by gas and still funding our Suriname and other exploration as well as our decom and our ARO. Development CapEx is down 10%. It's mainly in Egypt with CapEx -- or mainly in the U.S. Permian with CapEx in Egypt being flat. So I think the other factor is we're going to continue to focus on the cost savings. Clearly, if things soften, as we've mentioned, there is room. We could always decide to drop more rigs in Permian or Egypt if need be. But I think we're in a good place with a pretty good range and a pretty good cushion right now on oil price. So -- but there is flexibility. Douglas George Blyth Leggate: Okay. I appreciate that. My follow-up is actually on Egypt. I mean, obviously, you continue -- it's almost like a beat and raise on your gas guidance. But there is some -- I guess there's been some discussions from certainly questions we've been getting about the legacy accelerated cost recovery from when you re-signed the contract. And what happens to -- how big a delta that could be on cash flow in 2026 as those legacy costs roll over? So I don't know if there's any way, Ben, to -- I know it's complicated. There are a lot of moving parts, but is there any way to kind of summarize what the potential delta could be on that in the context of your rising gas production? Ben Rodgers: Sure. So when we modernized the contract about 4 years ago, we negotiated a recovery of a backlog of costs, and that was around $900 million. So per quarter, we've had the benefit of about $45 million. When that rolls off after the first quarter of next year, that $45 million, let me break it down, is the total number. We don't lose all of that, though, because of the way the PSC works. We only lose about 70% of it with the other 30% being picked up on the profit oil side. So that $45 million is actually on a 3/3 basis closer to about $30 million. So net to our 2/3 interest, the cash flow impact on a quarterly basis is about $20 million. So for next year, again, since we still have it through the first quarter, so for 3 quarters next year, it's roughly $60 million in Egypt. But we think with -- there's a number of different factors that we're working on to offset that, whether it's continued capital efficiencies in Egypt because we have seen those this year. A lot of the discussion this year has been on the Permian, but Egypt has made great strides on the capital front. So there's potential for that to continue next year on the cost side for both capital and LOE. We've got expected continued success and performance on the gas side. And then other oil projects, too. We shouldn't look past what we've been able to do in the second half of this year on the oil program and the potential for some of that to carry next year. So a number of different factors, Doug, I think, are going to offset that $60 million -- had the potential to offset that $60 million free cash flow impact in Egypt. John Christmann: Yes. And the only thing I'd add, Doug, if you step back and think about it, removing that backlog now is a good thing financially. We've got our past dues down, lowest they've been. It really underscores the investment environment we have in Egypt, just how good things are because we've been able to capture basically the PDRs and the backlog now and shows the success in the modernization process. Douglas George Blyth Leggate: And the balance sheet has seen the benefit of that, guys. Operator: Your next question comes from the line of John Freeman with Raymond James. John Freeman: I was just following up on Doug's question on 2026 capital. I appreciate all the color you all are providing on the call. It seems like the other kind of lever you all got depending on commodity prices on the budget would be the exploration capital. And unless I missed it, I didn't hear any sort of commentary on that. Just how we should think about that relative to the $65 million you're spending this year? John Christmann: Yes, John, I think going in, just by nature of the way the program is setting up, '26 is going to be a pretty light year exploration-wise for us. We could get into building some ice roads in Alaska late next winter as you prep for what would be really more in '27 as well as timing of the Suriname potential exploration wells that could pop into late next year. But in general, '26 is likely going to be a fairly light year exploration-wise for us. John Freeman: Got it. And then my other question, obviously, you all continue to increase the realized and projected savings and also an accelerated time line. And when I just look at how much progress you all made from the update with 2Q results, I'm just looking for any more that you all could sort of give specifics on just to see that big of an improvement, both on the realized savings as well as the sort of run rate targets for that much to happen since 2Q. Just any specifics you all can point to, to drive that? John Christmann: Yes. I'll just say if you step back from where we were in February and you look at the progress, 2 places, right? G&A, we've been able to do more than we thought. Obviously, that's something we directly control. But the other place has been the capital side, and that's been driven mainly by Permian. So to think where we are, we started out in February, thinking we'd realized in calendar year '25, $60 million. And to now know we're at $300 million. And obviously, we set out a 3-year target of the $350 million by the end of '27 to get there by the end of '25. Very, very proud of the entire organization because we've just been razor-focused on what do we do on the cost side, and you're seeing that show up. But I'll let Ben provide a little bit of color. We've added by year-end '26 now another $50 million to $100 million to that. But I'll let Ben jump in and give some more color. Ben Rodgers: Sure. So John, when you think about the -- what we've done this year, as you can see, huge strides made on the capital front, followed by G&A. That's in both what we're capturing this year as well as in that $350 million run rate. Most of that is in capital and in G&A with some expected in the run rate on LOE. For that incremental $50 million to $100 million, it -- actually, the bulk of that is going to come from G&A and LOE. I think capital is going to contribute some. But because capital contributed to so much in 2025, as you look to that $50 million to $100 million incremental by the end of next year, a lot of that's going to come on G&A initiatives as well as on the LOE front. Operator: Your next question comes from the line of Scott Hanold with RBC Capital Markets. Scott Hanold: I'm interested in Egypt gas. Obviously, it's going well for you all. And I think you're running, if I'm not mistaken, around 8 rigs on the gas side. And just -- with respect to the new terms that you have on the gas pricing, is there any unconstrained level on gas growth? And could you give us some sense of where you think gas production could go here over the next, say, year or 2? John Christmann: Yes, Scott, I mean, if you step back and look where we are, we're actually running 12 rigs in Egypt and 3 of them right now are on gas, so -- instead of 8. So just 1/4 of the program. But if you look at where we are and you go back, I mean, we signed this contract a year ago. And so to look at the progress and just see where we are, we've exceeded all of our internal expectations, and it's been really the success of the program, the delivery of the wells. And most importantly, the ability to get things tied in and not back out some lower pressure gas. So the team has done a phenomenal job. We're going to continue on this trend well into next year. Longer term, it's going to be dictated by the success of the exploration program, and that's something we really -- we've been exploring for oil in the Western Desert for 3 decades. We've now been exploring for gas for really 1 year and kind of just getting started on the exploration side. So a lot of that's going to hinge on our exploration program. But we've got good momentum. We're going to grow year-over-year on gas. And we do have processing capacity that we might need to pipe into depending on where we have success. But we're really just getting started, and we're excited long term about the gas potential. Scott Hanold: Yes. But specifically, I think your agreement on the pricing is basically everything over above a predetermined PDP. And I'm just kind of curious, is there any upper limit to that? Or is it all premium priced over and above that going forward? John Christmann: Everything that we bring on new gas gets new gas price. And so I mean, even if we were just to hold gas flat, our gas price is going to grow as that the old PDP decline curve kicks in. So we're sitting in a good place price-wise. And quite frankly, we're excited about the inventory, but we just need to drill some exploration wells. Scott Hanold: Got it. And then if I could turn to a question on the Permian. I think you all are working on a potential inventory update assessment, hopefully, by early next year. Can you give us a sense of like what are you thinking as well about some of the deeper potential? There's been a number of like Barnett and Woodford being targeted by some of your peers in the Midland. Is there a good amount of overlap with that with you all? John Christmann: Yes. I mean if you step back, I mean, we were drilling Barnett and Woodford wells back as early as 2016, 2017, right? So I mean, we've got a good view on that. There is overlap into our positions. The plan at this point, as we've said, when we've done an updated characterization and Steve can add some color on all the nuances as we -- it becomes a very iterative process. But I mean, we are planning to come back to the market first quarter of '26 with an update. But today, we strongly believe in terms of core development opportunity and development inventory, consistent with what we're drilling today and into the next several years, we can do that well into the early 2030s. Ben Rodgers: Yes. With the significant capital efficiency gains that we've been able to capture this year in the Permian. That's obviously having an iterative effect, as John would say, on the quantum of inventory, and it's really requiring us to go back and -- we came into the year kind of rethinking a bit about our spacing and frac size philosophy. And with the efficiency gains that just causes us to rethink all of that all over again. And so we're coming through every bit of our inventory. So it's not just a case of looking at what's in addition to what we already know. We're also going back and relooking and reexamining everything that we had in inventory to begin with and also all of the Callon acreage as well and other acreage that we've acquired over the years. So every single undrilled landing zone and even new potential landing zones are being reviewed pretty extensively because of the significant efficiency gains. The lower you can drill and complete a well cost-wise, the more resource you can access. And that's a really important aspect of the quantum of inventory. So there's a huge amount of work going on around that. Operator: Your next question comes from the line of Michael Scialla with Stephens. Michael Scialla: John, it sounds like you're fairly cautious on the oil macro like a lot of your peers. I want to get your thoughts on the dynamics there. And you mentioned you're hedging more gas. I just want to get your updated thoughts on potentially hedging oil. John Christmann: Yes. I just think, Mike, going in with all the progress we've made on the cost structure and clearly, we've got a WTI price that's been sitting around $60, it's prudent to be cautious. And so we're going into '26 with a disciplined mindset. And like always, we've set ourselves up with the improvements in the controllable spend and the cost structure and the balance sheet, we're in a really, really good place. And the last thing you want to be trying to do is accelerate inventory into an oil market like we sit in today. So in terms of the hedging, not really hedging gas, Ben can jump in at some of the transport and locking in some of those gains there, but I'll let Ben make a few comments on the gas transport hedges. Ben Rodgers: Sure. Yes. So we -- just like we did this year, looking to lock in cash flow associated with the Waha to Houston Ship Channel and Waha to NYMEX, Henry Hub differential, carried that through into next year. As you know, there's a contango curve on the NYMEX side, but still a pretty wide differential between both Ship Channel and Henry Hub and Waha. And so locking that in gives us surety of cash. We've only got 1/3 of it hedged right now. So should that continue to widen, we would make it on the unhedged volumes. But just getting that certainty of a certain amount of cash flow is -- we thought was prudent. We did it this year. And when you compare that to hedging on the oil side and either a flat to backwardated market, just felt like more prudent to capture cash flow for the corporation on the transport side versus on the crude side when we've got a lot more optionality in our portfolio to manage versus locking in any type of oil hedges. But should the opportunity come up on the oil side, we could do that just more opportunistic on the gas side. Michael Scialla: Makes sense. Appreciate that detail. I think you said last quarter, you breakeven now in the Delaware is kind of in the low 50s. Is that where you would kind of pull the trigger and pull back on Permian activity? What would that look like? Would you just build DUCs through that? Or would you actually drop rigs? John Christmann: I think a lot of it -- we've got a lot of flexibility, Mike. It will just depend on where we found ourselves, right? I mean if you look at Delaware breakevens, yes, low 50s, Midland is in the mid- to low 30s. So a lot of that would just hinge on where we found ourselves and what we thought made the most sense. But the key message there is lots of flexibility in terms of with the program. Michael Scialla: So you could actually potentially -- is there room for you to move rigs if prices did go there that you would move them over to the Midland and kind of pause on the... John Christmann: Move or drop if needed to be, right? Yes, move or drop. Operator: Your next question comes from the line of Charles Meade with Johnson Rice. Charles Meade: I want to go back to Egypt, if I may. The 2 million acres that you guys picked up most recently, I think I heard you say in your prepared comments, you're actually drilling some exploratory wells on that new position. But could you add to the picture about what's available on these 2 million acres? And I'm thinking how much of it do you have seismic over? How much of their other more simple things like how much do you have road access to midstream, that sort of thing. And all with an aim of when that's going to start to be able to work into your capital budget and delivering for you guys? John Christmann: No, it's a great question. I mean if you look back in the -- we've shown that 2 million acres sits kind of across a lot of the desert and it fits in nicely with our existing footprint. So we do have access to it. It can be tied into infrastructure for the most part. I would say there is both oil and gas prospectivity, and we're kind of already getting after that. So we're very excited about it. I think there's some low-hanging fruit on that acreage that we're getting after. A lot of it is just going to hinge on, Charles, what we find and where it is and then what do we need to do to tie it in. Some of it we might need to build some jumper lines or things to our facilities, but not all of it. A lot of it is pretty short arms reach away from our existing operations. So it fits nicely. I'd say it's highly prospective, and we're getting after it and look forward to updating in the future. Anything you want to add, Steve? Stephen Riney: Yes. I think we've actually published a map of that, of the old acreage with the new acreage on the same map with the infrastructure overlaying that. And I think if you -- I think that might have been in the second quarter supplement even. So if you take a look at that, you'll see that 2 things. Number one is that the acreage is actually -- it's not like one big chunk of acreage. It's spread out all over the place. And there's some acreage in there that I would say -- I would kind of classify that as just a simple step-out type of stuff relative to what we're doing on the acreage right next door. And then the -- and it ranges all the way to some chunks of acreage that is even new play concepts that we're looking at. And so the exploration that's going to go through all of that acreage is going to span the full span of this full range of types of exploration from kind of lower risk step out to kind of new concept play opening. The other thing is that you'll see that there's not much of a gap anywhere in that acreage from nearby infrastructure or nearby activity, except for very few places, there's current Apache activity going on near all of that acreage. Charles Meade: Got it. And then for the follow-up, still on Egypt gas. On Slide 3, you guys have a bullet point saying that with the new pricing arrangement that gas development is at parity with mid-cycle Brent. I wonder if you could just elaborate a little bit more on what the assumptions are there? I mean what mid-cycle Brent, what your assumption there is and also what the -- what parity means, whether that's IRR or what else goes into that statement? Stephen Riney: Yes. So what we have is an arrangement. We sell all of our -- the gas that we produced to Egypt, and we have a fixed price on this new tranche of gas. We have a fixed price on the old tranche of gas. We have a fixed higher price on the new tranches of gas. And the way that, that will work is that you end up getting a mix of different of price as you go forward as the PDP declines on the old price of gas and new volumes come on, you get a rising price as you go through time. Sorry, the mid-cycle -- so with that price, sorry, on the new volumes, with that new price, gas is effectively equivalent to a $75 to $80 Brent price on oil drilling in Permian -- I mean in Egypt. So you've got -- we can drill for gas that's equivalent at a fixed price that's equivalent to $75 to $80 Brent oil on acreage that would be right next door or nearby where we could drill oil wells. John Christmann: We included infrastructure. Stephen Riney: Yes. We included the potential for new infrastructure requirements in that analysis. Operator: Your next question comes from the line of David Deckelbaum with TD Cowen. David Deckelbaum: John or Ben, curious when you talk about the program for '26 and holding 120,000 barrels a day flat with 5 rigs. Are you still -- are you assuming any incremental benefits on D&C costs and ask that in the context of you guys have made some significant headway. Is there any reason why you can't have a D&C target sort of that rivals the best peers in the Delaware for next year? John Christmann: And I think we're making great progress. And if you look, part of the carry-through into '26 is the savings that we think are real in the progress we're making. So as Ben said, we're going to add another $50 million to $100 million of savings in '26. Some of that's going to be on capital. But I'll let Steve jump in a little bit in terms of the progress we're making on the capital side and where we think we sit. Stephen Riney: Yes. I would say, and I think we said this on the second quarter earnings call. In the Midland Basin, we feel like in many ways, we're getting to be pretty close to best-in-class on the drilling and completion side. In the Delaware Basin, we're probably around peer average. And so there's still room to go there. So just in terms of reconciling the 5 rigs holding volumes flat relative to 2025, 120,000 barrels of oil a day. There are some things that are benefiting us being able to go to 5 rigs. We're not saying that we've said in the past that 6 rigs will hold Permian relatively flat around 120,000. We're not saying that's 5 now. We still believe that's probably closer to 6 at this point in time. But there are some things that are benefiting us in 2026, where we've made some good strides recently around base uptime, base volume uptime kind of reducing the underlying decline rate a bit, which will help as we roll into 2026. There are some facilities where we're facility constrained now. So we brought on wells. The wells are actually constrained a bit in their producibility and that will resolve itself as we go into 2026. That helps a bit. There is a small reduction in DUC count. It's about 5. So we'll exit '26 right now based on current planning with about 5 less DUCs, fewer DUCs than we enter '26 with, not a significant amount, but just being transparent, there is a slight reduction in DUC count. And with all of that, our development capital in the Permian this year on a like-for-like basis, eliminating stuff that we've sold is about $1.45 billion. Next year, that will be $1.3 billion. The $1.45 billion actually includes about $200 million of savings that we've talked about that we actually captured in the current year in 2025. And so there's another $150 million of savings as we roll through 2026. That does -- it benefits from kind of the run rate of what we've done so far. It does have some additional savings planned in there as we go forward. Much of that would probably come in the Delaware Basin versus the Midland Basin, but we still believe there's room to run in the Midland Basin as well. And that does include running 5 rigs instead of -- and we're down to 5 rigs today, but we had been running 6 earlier. So that includes all of that. David Deckelbaum: I appreciate all the additional color, Steve. My follow-up is just on the North Sea. I think you guys highlighted the tax benefits, in particular, in '26. I guess as you -- are you accelerating the ARO activity in the North Sea? And what are the, I guess, results or consequences as you see on the production side of that asset over the next couple of years? Ben Rodgers: Yes. So on the production side, just like we mentioned earlier this year with little to no investment in the asset, which was expected after all the different changes through the government there, we'll expect production to continue to decline from '25 into '26. I think we'd said 15% to 20%. And so that's probably a reasonable assumption from a production standpoint. But on the tax side, a lot of that's price dependent depending on if there's taxable income in the U.K., but there will be tax savings because of the increase in the ARO spend that we have next year, again, because the government pays 40% of that ARO. And so we've talked about that before in terms of the increasing profile when we announced COP last year. And so that will increase next year. But again, the cash flow impact of all ARO and decom spend year-over-year after-tax cash flow impact is only $55 million. So very manageable when you look at the total corporate profile from everything else that we have going on there. So all in all, there's -- the taxable net income from the U.K. is price dependent, but there's going to be savings from ARO spend. Stephen Riney: Yes. And we are -- just to be really clear, we are not accelerating activity in 2026. We've had this plan for quite some time. It's primarily a well abandonment program at Beryl Bravo and initiating a subsea well abandonment program as well that will run for several years. So not an acceleration of any activity. Operator: Your next question comes from the line of Betty Jiang with Barclays. Wei Jiang: I want to ask about non-D&C CapEx. Ben, you talked about repurposing some of the CapEx savings this year into infrastructure investment and LOE reduction initiatives. Are there other opportunities along that line? And how should we be thinking about the benefit of these investments? Ben Rodgers: Sure. So for this year, I mentioned in my prepared remarks, the $60 million difference between captured savings and our capital guidance. Roughly 1/3 of that was investment in these LOE projects that we started this year. We do expect that to continue into next year as we identified different opportunities. And again, most of it's around facilities and compression and other items that I've mentioned before. And we will continue to invest capital into those projects that will have ongoing LOE savings. So it's not a big capital number when you think of -- Steve mentioned the $1.45 billion for Permian this year and the $1.3 billion next year. If you're talking $20 million on that $1.3 billion base, it's not a big piece, but it does help us on LOE. I will say that the teams are working across all different aspects within LOE, not just trying to find ways to lower it through capital investment, but through really all different areas that make up our operating expenses there in the field. And that's not also just in the Permian. Clearly, we've done it this year in the North Sea and in Egypt as well. So there's not going to outline a per barrel metric for that for the savings, but do expect savings, and they'll be staggered throughout '26 and into '27 as well. Stephen Riney: Yes. If I could just add a bit to that. Obviously, on LOE for 2025, we didn't capture the savings that we had hoped to capture this year at the corporate level. But there's some real success underneath that, that I think is worth mentioning. Most of the struggle has actually been in the Permian, and that's where most of the investment that Ben is talking about around consolidating compression and rationalizing that and around produced water disposal wells and things like that. That's going to be targeting LOE primarily, not entirely, but primarily in the Permian Basin. And those are investments that we're going to be beginning this year. There will be more in next year, and you'll see the benefit of those probably showing up in the second half of next year. But I did want to highlight, in particular, the North Sea, significant progress in reducing offshore operating costs this year, and that's kind of hidden in what's going on in LOE and some very good progress in Egypt as well without any meaningful amount of capital spend. Wei Jiang: Got it. No, that's really helpful color. My follow-up is on -- back on the ARO. Is -- so the net $50 million delta would imply roughly the headline ARO is up close to $100 million. It does seem a bit higher than where we were thinking for 2026. So can you just speak to how we're tracking on ARO spend just over the next several years? Should we be holding at that level in North Sea beyond 2026? Ben Rodgers: Yes. So for -- we'll probably wait, Betty, for a multiyear outlook and do that at some point next year, most likely in the first quarter if we do a portfolio update. We've talked about the ramp of the ARO, particularly in the North Sea. And so -- and we also talked about this year that the Gulf of America was going to be higher than prior years and also higher than what we expect moving forward. So the moving pieces for next year is that you see Gulf of America come down pretty significantly back to the kind of $100 million, $120 million range, which is typical for the legacy assets that -- the non-op assets that we own as well as the old Fieldwood assets. So that normalizes, and I would expect that to stay pretty steady even after '26. And then for the shape of the North Sea, it really -- I'll just go back to what Steve said originally when we outlined that. Starting in '25, it was pretty de minimis. It was about $30 million this year. But that grows about $600 million of our after-tax ARO is between now and 2030. And then the other $600 million is between 2031 and ramps down to 2038. So we'll provide more details potentially about what '27 and '28 are, but that increase next year, you're right. So about -- in the high 100s this year. So it would be kind of in the mid- to high 200s next year, but it just shouldn't go without saying that the after-tax impact to us is only $55 million. Stephen Riney: Yes. I just -- and Ben commented on some -- an outline of the shape of ARO spend in the North Sea that I talked about on an earlier earnings call. That outlined that shape of spend starting in 2026 and going into the 2030s, that shape has not changed. It's still basically the same. It grows to 2030 peaks around there and then starts declining. Mostly well abandonment in the first half of that and facility platform and subsea infrastructure in the back half, mostly. Wei Jiang: Got it. Just -- and just to confirm, that $55 million already includes the normalization of the lower Gulf of Goa decommissioning spend? Stephen Riney: That's correct. Operator: Your next question comes from the line of Paul Cheng with Scotiabank. Paul Cheng: Ben, you said the cash tax -- U.S. cash tax will be 0 for this year and next year. Do you have any rough idea then how that look like in 2027 to 2030? Ben Rodgers: Yes. Right now, Paul, our focus has been for this year and next year. We've made significant progress on the tax front and have seen some significant savings. I think with -- when you get past 2026 because a lot of the changes this year and next year that we saw we outlined this quarter were specific to the corporate alternative minimum tax guidelines that came out and less so with the OBBB impact that we outlined in August. As we get into '27 and '28, there's still some guidelines that we'll need for the interpretation of the OBBB. But again, the intention of that was that we get the full benefit of IDCs and bonus depreciation. And so it should take U.S. taxes pretty close to 0. There's still some work that we're going into that with our tax team, but that's the full intention of the legislation and where we think it could lead past '26. So we think that there's continued benefits, but what we've outlined are the benefits for just this year and next year. Paul Cheng: Okay. Great. And maybe this is for John. For Alaska, you're saying that next year is going to be pretty minimum spending. So how should we look at the program and you have the Sockeye discovery and you guys seems like you have very big -- maybe pretty optimistic on that. So what's the game plan that how should we look at over the next 2 or 3 years? And when that we will see maybe a little bit more data out or the -- more news about what the development may look like if that's one. John Christmann: Yes. No, it's a good question. And what we said, Paul, was we're in the process right now literally of reprocessing multiple surveys to come back with what is the next steps in terms of appraisal at Sockeye and exploration. So right now, we're doing technical work. The teams are working away, and we're reprocessing the seismic. We've got 2 really nice discoveries, and we're kind of stitching together a lot of the seismic surveys so we can come back with the next steps. So we'll come back at some point. But right now, we just said actually next year, there won't be any winter drilling this year. Obviously, we'd be getting ready for that now, but it will likely be next winter, which is why late next year, we're likely to be building some ice roads as we bring a rig back. But we'll update you once we've kind of worked through what are the next steps in terms of appraisal and exploration, but we are excited about Alaska. Operator: Your next question comes from the line of Leo Mariani with ROTH. Leo Mariani: Just on the exploration front, it sounds like not a lot of capital next year. Can you give us kind of an update on Uruguay? And then also just curious on the decision to bring some DUCs on in Alpine High and what seems like a bit of a challenged to Waha market here of late. John Christmann: Yes. So just 2 things, Leo. Number one, in Uruguay, we actually have a data room open. We've been showing that externally. There's been a lot of industry interest in our Uruguay program. And so we'll have an update at some point, but don't have anything to announce today on that. And then the 2 completions, the 2 DUCs we completed at Alpine were purely acreage retention. There were wells we drilled. We needed to go ahead and complete those. We've actually got a better Waha price now. So the economics look really good. But it's about preserving optionality and holding acreage in the future. Ben Rodgers: Yes. Just as you look at the timing, Leo, real quick, the timing of when we bring those DUCs on, you get that flush production December, January, February, Waha is well above $2. And so the timing feels right to bring them on. But again, the main reason for doing that to what John said is to retain some acreage there. So it just seemed -- you get the flush production, the economics line up and you get to retain the acreage for optionality. Leo Mariani: Okay. And just on the capital for '26, I just wanted to kind of square everything in the circle here. So it sounds like development CapEx down 10% year-over-year, exploration CapEx down a little bit. ARO spend, you talked about up kind of $55 million after tax. Is there anything else like infrastructure or anything like that, that might kind of be a final moving part? And just any kind of thoughts on changes for that next year? Ben Rodgers: That really captures the big items. So -- because any infrastructure spend would be captured in the development capital. So that really captures all of it. The only other piece is the marketing book right now is kind of in the low to mid-400s as we look at next year at strip. So another very solid year from our marketing book. Again, that's both transport as well as LNG. But other than that, I think we've captured most of the big items. Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to John Christmann for closing remarks. John Christmann: Thank you. Our strong results year-to-date have been underpinned by remarkable performance across our entire business. This underscores confidence in our plan and creates positive momentum going into 2026. The capture of meaningful cost savings has improved our free cash flow profile, enhanced our investment opportunities and added inventory to our portfolio. Our efforts to rigorously improve our cost structure will continue, and we are now targeting an additional $50 million to $100 million in run rate savings by the end of 2026. We continue to benefit from our diversified portfolio with a step change in capital efficiency in the Permian, strong momentum with Egypt gas and the GranMorgu project in Suriname progressing on schedule. Lastly, we remain very optimistic on the impact our exploration portfolio can have on our future. With that, I will turn the call back over to the operator, and thank you very much for joining us today. Operator: Yes. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Good morning. Welcome to Mineros Financial and Operating Results for the Third Quarter of 2025. My name is Juan Camilo and I am the Investor Relations -- Original language will be Spanish. However, if you wish to listen to English, please follow these steps. First, the box that says English. Then to avoid listening to both languages at the same time, identify the box that says media players and click on mute. [Foreign Language] Please remember that this call may include forward-looking information. Actual results may vary due to inherent risks in mining. Several financial metrics -- are Section 10 our MD&A available David Londono, CEO; David Splett, CFO -- and enter finance CEO; Santiago Cardona is a President Colombia. And so Gavilanes, is [Foreign Language] Unknown Executive: Gold production stands at 163,000 ounces for the first 9 months of the year. This represents a 2.5% increase compared with the 159,000 ounces reported for the same period in 2024. We had a record net income, which reached 50 million for the third quarter and accumulated net income year-to-date of $136 million. We generated positive free cash flow of $62 million in the third quarter and a total of $106 million in net free cash flow for the first 9 of 2025. We concluded to the share buyback program that was approved earlier this year by the shareholders' general assembly and subsequently by the Board of Directors. The company repurchased a total of 3.9 million shares at a price of COP 12,000. This operation finished in -- on September 12. Finally, we acquired 80% of La Pepa project from Pan American Silver Corporation. This transaction of $40 million grants us 100% ownership of this gold exploration asset in Chile, providing us full control over its future development plan. As we will detail next, our excellent operating performance directly translates into strong financial results. These achievements reflect our discipline in operational efficiency, the strength of our assets and our ability to consistently and safely generate value. We maintain a very optimistic outlook for the company and remain committed to sustaining this trajectory of growth and success. I will now hand the call over to David, who will discuss the financial performance for the quarter. David Splett: Thank you, David. Good morning. Let us begin with the income statement for the quarter. As a reminder, all figures are expressed in millions of dollars. In the third quarter of 2025, the company achieved significant revenue growth of 39%, reaching a record figure of $196 million. The main driver of this result was a 40% increase in the average realized gold price. Consistent gold production in Colombia and Nicaragua, coupled with our strict cost discipline were fundamental to these results. Our gross profit saw an increase of 49%, reaching a record figure of $82 million and net income stood at $54 million, representing 90% growth. This implies a significant advance versus the $29 million reported in the third quarter of 2024. In terms of liquidity, net free cash flow was approximately $63 million. This result is calculated after covering the payment of $7.5 million in dividends, $7 million in sustaining capital expenditures and $0.4 million in interest payments. The cost of sales increased by 33%, primarily because the higher gold prices are reflected in the greater cost of purchasing ore from artisanal cooperatives in addition to an increase in depreciation and amortization. On this slide, we present a summary of our financial results through the end of September 30, 2025. The company's revenue grew by 39%, totaling $538 million. This sudden increase was primarily driven by a 40% increase in the average realized gold price, coupled with 2.5% growth in gold ounces sold. We achieved significant profitability expansion. The gross profit and adjusted EBITDA registered increases of 70% and 59%, respectively, reaching $221 million and $244 million. Net income experienced 114% growth during the first 9 months of the year, increasing from $63.4 million in the same period of 2024 to a record figure of $136 million at the close of September 2025. The cost of sales increased by 23% during the first 9 months of the year. This is primarily attributed to the higher cost of purchasing material from artisanal miners cooperatives due to the increased gold price in addition to higher taxes and royalties. Let us now look at the adjusted EBITDA. This key indicator reached a record figure of $90.3 million at the end of the quarter, representing an increase of 44% compared to the $62.9 million registered in the Q3 from 2024. This expansion is directly attributable to a strong revenue growth, primarily driven by the favorable increase in gold prices. Finally, let's review the cash position. Net cash flows from operating activities generated $204 million from the sale of gold, silver and electricity. This was after payments to suppliers totaling $103 million, employee salaries and benefits payments for $15 million and tax payments amounting $11 million. Cash flow utilized in investing activities was allocated to purchases of property, plant and equipment totaling $16 million and strategic investments in intangible assets and exploration projects of $45 million. Regarding the cash used in financing activities, the main components were dividend payments of $7 million and the amortization of financial obligations totaling $9 million. Our current credit and loans balance stood at $17.6 million, while the cash and cash equivalents balance was $102.2 million, a highly significant figure despite the capital expenditures incurred during the quarter, including the La Pepa acquisition. With this review, I will now turn the floor over to David and this finalizes our operational indicators, who will present the operational indicators. David Londono: Thank you so much, David. Let us now discuss our operating indicators. This chart summarizes our operating performance over the last 5 quarters. As you can observe, the total production for the third quarter remained stable and consistent compared to previous periods. This is a direct reflection of our strong discipline and operational execution across all our assets. As clearly visible on the green line, the average realized gold price per ounce in the third quarter of 2025 reached $3,464, which represents a significant 40% increase compared to the same period last year. We emphasize that our margins continue to show a positive trend. And here, we can see graphically how the gap between our average realized selling price and our costs continues to widen, indicating continuous margin improvement. On the cost front, we registered an increase of 38% in cash cost and 34% in AISC, which stood in $1,704 and $1,982 per ounce, respectively. This increase is primarily explained by the rise in the cost of sales, largely associated with the purchase of ore from artisanal mining in Nicaragua, as David mentioned that before. I will now turn the floor over to Santiago Cardona, our Vice President of Colombia, who will present the results and details of our Alluvial operation. Following that, we will continue with in Inivaldo Diaz, who recently assumed the Vice Presidency of Nicaragua and who will offer us a comprehensive overview of Hemco operation. Santiago Cardona Munera: Thank you, David. In Colombia, we achieved a production of 23,000 ounces during the third quarter, which represents a 16% increase compared to the same period in 2024. This growth was primarily driven by lower dilution and the optimization of overburden removal and the hydraulic level control of the pit. The AISC per ounce of gold sold increased by 13%, reaching $1,573 per ounce. This is primarily due to the increase in gold prices, which directly impact the cost of operating contracts in our formalization contracts, more taxes and royalties related to this price. Also the increase associated with the year-over-year change. Additionally, during the quarter, we saw the commissioning of the Aurora plant contributing to our growth strategy and technological renewal aimed at optimizing recovery in our operations. Finally, our occupational health and safety indicators continue to report very low values, highlighting our safety performance. This is the result of our robust and effective prevention culture and demonstrate that safety is a core value and a pillar of our operational excellence. With this, I conclude the presentation of our operations in Colombia, and I will now turn the floor over to Inivaldo Diaz, Vice President of Nicaragua. Inivaldo Diaz: Thank you, Santiago. In Nicaragua, Q3 production remained stable, registering 32,000 ounces. This figure is 5.4% below the production from the third quarter of 2024. This variation is primarily due to a 9.5% decrease in tonnes milled, though it was partially offset by a 4.6% increase in the process grades. Of the 32,000 ounces produced, 83% originated from the artisanal production. Consequently, 58% of the total cost for the third quarter is directly associated with this artisanal output. The AISC recorded a 52% increase. 80% of the increase of the AISC is due to higher purchases from artisanal mining, 26% above compared to the same quarter from last year, which is explained by the prioritization given to artisanal mining over the industrial mining. The feed blend shifted from a 55% artisanal, 45% industrial mix in the Q3 of 2024 to a 20% artisanal, 30% industrial mix in the Q3 of 2025. Adding to the higher purchasing volume is the price effect, which is 40% higher in Q3 2025 versus the same period in 2024, leading to a greater volume of purchases in 26% and 40% higher price. Finally, in July, the decision was made to begin stockpiling high-grade ore purchased from artisanal mining for a special processing at the Vesmisa plant. This required upgrades, including replacement of the corn crusher, major repairs to the agitation tanks and other circuit adjustments. The plant was shut down for nearly 1 month, affecting quarterly operational costs and production. By September, we began achieving the anticipated results. The ore inventory generated at the stockpiling pads amounted to 5,604 ounces, of which 4,527 ounces are from the artisanal mining and 1,077 ounces are from industrial mining. The benefit of this initiative to batch process the high-grade material is the increase of metallurgical recovery by enhancing the residence time and reducing the gold content in the leach tails. With this, I conclude the results for Nicaragua, and I turn the floor back to David. David Londono: Thank you very much, Inivaldo. Let us now discuss our opportunities and outlook. I want to start by highlighting the solid progress in near-mine exploration, which is crucial for the future sustainability of our operations. During the third quarter of 2025, we completed a total of 9,806 meters of diamond drilling. This brings our year-to-date cumulative total to 29,252 meters, maintaining an excellent pace of exploration. Moving to the Porvenir project, we continue working to advance on the following key stages. We are proceeding with the update of the pre-feasibility study with -- that will be finished by the end of the fourth quarter. Operating and capital costs within the project's financial model are currently being updated. In parallel, we are in the process of reaching an agreement with the community and authorities to define an environmental compensation plan. This is a fundamental step for the submission of the environmental management plan for the process plant. The greenfield exploration campaign focused on new discoveries began drilling in July 2025. And currently, we have 3 drill rigs operating on site. We have completed 6,688 drilled meters during the year. Finally, regarding the La Pepa project, as we mentioned earlier, we have completed the acquisition of 100% of the project. We are currently focusing our team's efforts on advancing the exploration plans, which we expect to commence next year. 2025 has represented a key period of strategic consolidation for Mineros, characterized by a substantial transformation and the establishment of unprecedented financial milestones. These achievements reaffirm the robustness of our strategy and our unwavering commitment to generating sustainable value for our stakeholders. From a financial perspective, management has demonstrated operational excellence. Productive discipline has ensured a stable and safe operation, driving the achievement of record revenue at the corporate level. This operational efficiency has directly translated into a significant increase in profitability materialized as a record EBITDA, record net income and an outstanding generation of free cash flow. We have maintained a stable dividend program, and we have observed the market validating our execution, which has resulted in a very positive share performance during the year. On the corporate front, we have worked to secure the foundation for future growth. We have successfully completed the redefinition of the corporate strategy, providing a clear framework for the next phase of growth. We executed the share buyback program, thereby returning additional capital to shareholders and significant operational progress has been achieved, highlighted by the commissioning of our Aurora plant. Our geographic expansion strategy is consolidating with the total acquisition of the La Pepa project, integrating a new high potential jurisdiction into our operations. Finally, we continue to invest in our exploration pipeline with important advancements in greenfield exploration and in the development of the Porvenir project, ensuring long-term sustainability of our operations. This concludes our presentation. We would like now to open the floor for questions. Operator: [Operator Instructions] First one comes from Luca Skarbahal. And he asks, why is it possible to have a debt in the company if the most attractive part of the company is a very healthy balance. David Londono: So the opportunity of financing was open, and we decided to try the market for that. We have to have enough cash flow when an opportunity comes. And that opportunity is now. Unfortunately, when we were going to get the market or go to the market, the conditions were not favorable. We obviously have a plan to grow as a company, and we have this journey to grow at 300,000 ounces per year and even more in the next 3 years related to the investment with Porvenir and Alluvial as well, and Hemco as well. And we are going to invest $200 million or $300 million related to this plan for growth organically -- for growing organically. And also, we want to maintain maximum liquidity if there is a chance to buy an asset or to buy a mine or something that is attractive, but we still need to identify that opportunity. Operator: Next question comes from Mr. Simon Londonio. Unknown Analyst: Congratulations for the results. Would you consider the possibility of starting a new buyback program? David Londono: Thank you so much for your question. That's a decision made by the assembly. We are open for this decision from the assembly. And also, there's another perspective from the previous point. We want to grow this company in the gold production. And it is feasible that this growth has more value for the shareholders even more than the dividend. So our preference is to maintain the dividend in about $30 million per year and maximize the growth plan of production. Operator: We have 2 more questions from Mr. Justin Chan. Justin Chan: Could you please inform us the schedule for the final decision about Porvenir. If the pre-feasibility study is presented in the next year, will you have a definite study before approving the pre-project or the feasibility project is enough so the assembly approves that project. David Londono: Thank you, Justin. I would like to start first by saying that we are finishing the pre-feasibility study. We will finish that in December at the end of the fourth quarter. And this will give us the possibility to perform a feasibility study that is going to be quite fast because this pre-feasibility study is the second time it is performed. It has more details. It is almost a feasibility study. We only have to work on a detailed engineering so we can make that decision. I think that those -- that's going -- we're going to make the decision at the -- in the middle of next year. We are applying all. Operator: The next question from Mr. Justin Chan. They ask about this talk of capital. The working capital and the fiscal capital have a significant impact in the fourth quarter. Do you prevent that there is any temporary factor that will affect the cash flow? Or will it be maintained based on the AISC. David Londono: I'm going to respond. We do not do not experience important changes in our balance sheet or in our cash flow answer. There is something that we need to deep dive in this part. The taxes of the company are paid during the whole year as down payments or advanced payments. And when we have this payment related to taxes after liquidations. Operator: Next question from Mr. Lucas Carbajal. With the commissioning of the Aurora plant, how much are you expecting to increase the production? David Londono: I'm going to start responding to this question, and then Santiago will respond, the Colombian VP. I think the commissioning of the Aurora plant is a total success, and it will improve production and the performance in Colombia. So it depends on our mining plans and the management that we will have, but this plant will cover 5,000 cubic meters -- additional cubic meters per day. A production that we are adjusting as a project and that we expect to have this year between 1,000 and 1,500 additional ounces. And next year, we will explain you the plan for the mining process next year. We will inform that. Operator: Next question from Ben Pirie. Ben Pirie: Congratulations for this great quarter. I am highly excited for Q4 as the gold price has risen even further. Can you guide any sort of budget for the La Pepa in 2026 for the exploration program? David Londono: Thank you so much. First in Spanish, I'm going to speak. So La Pepa, we have planned to start the exploration. In this moment, we are working to get the staff that is going to work in La Pepa and we would start exploration next year when all the consultants and all the people are in the site. I think we're going to spend -- we will have an additional budget of $5 million. Operator: Next question from Mr. Juan Soto. Unknown Analyst: What is the forecast of production that you have for 2026. David Londono: Thank you so much, Juan, for that question. In this moment, we are finalizing the budget, and we are internally reviewing how this is going to be. But I think we will see a slight increase in production in both operations. It could be 2% or 3%. Operator: This is from Alejandro Correa. What's the forecast of the company with the gold prices in 2026. What is the contribution in monetary resources are you expecting from Project La Pepa in Chile? And when would you start the exploration phase. David Londono: So the forecast, we don't work with the forecast of the gold prices. We control the costs, but not the price. We assume that for the next year's production, the price should be -- we have this forecast of -- with 15 different banks and the forecast related to 2026, it's in the range of $4,000 per ounce but we are going to use this last forecast from 2025 that could be ready by December. We are going to use that forecast. And in terms of the second part of the question about the La Pepa project in Chile, what is it that we expect. We expect to start exploration and all the studies next year. I think exploitation that will be planned for between 5 and 7 years, while we do all the exploration, we have to do the pre-feasibility study, the feasibility study and that will take a long time and obviously, acquiring or getting all the permits that we need. So we are just starting to do this work. Operator: Next question from Alfonso Maris. Unknown Analyst: What happened with the silver production. David Londono: In terms of silver, that is due to the adjustments that we had in the Vesmisa plant, that was the adaptation to process the high-grade minerals or ore. We processed less tonnes because we are working under dispatch processing modality because hybrids increased substantially during this quarter. So this led us to process less tonnes and focus in the recovery of gold, and we run the test of recovery and the amount of silver has also decreased. Operator: Next question from Mr. Exon. Unknown Analyst: We know that you are in pursue for inorganic opportunities across different geographies. I would be grateful if you could give us more color on which countries or jurisdiction you favor over others. David Londono: Thank you for this question. We will always see opportunities in different geographies. Obviously, we prefer to be in the same time zone. But if we see opportunities that are smart opportunities for us, we will study them. Operator: Next question from Mr. Maria. Unknown Analyst: Congratulations for the results. The valuation that the shareholders have received is quite high. What's the reason of the reduction of production and how is Guillermina doing? Inivaldo Diaz: The answer is the same that I've replied before. This thing about the Guillermina plant that we are using for processing the high-grade ore and that reduced the production tonnes. And in terms -- in relation to Guillermina, we continue with the exploration plan. We are doing the drilling, and we are expecting to receive the results, but it's promising. We expect that, that brings more resources to the operation. Operator: Next question. This is from Simon Londonio. Unknown Analyst: Could you please update the guidance in relation to the ounces production and CapEx, considering the -- and CapEx, considering the new projects. David Londono: Thank you for that question. The guidance does not change in this moment. And for 2026, we see the guidance in the Q1 in January, and we will have this guidance for production, exploration and CapEx. Operator: We see this from Pablo Castro. Unknown Analyst: We see an increment in the brownfield exploration. Is this a change in the strategy under the new administration? Do you see any potential in the current mines for this increment in the exploitation. David Londono: Yes, indeed. Thank you for that. We have to increase the brownfield exploration. And the reason for this is that we want to replace the year's production in both jurisdictions. For us, this is very important to have this certainty about the budget that we are making. So this is a change in the strategy, increase those expenses in exploration because in the end, this gives a lot of profitability. We have always said that Nicaragua has a very good perspective. It's an area with a good perspective, and we expect to have very good results with increase in the exploration. And in Colombia, this has been very consistent and the fact of increasing the exploration. So we are sure about what we are going to produce in the next 5 years. Operator: We have another question. Why the underground production of gold has really been -- has decreased in 44% and what's -- what are the future plans for the underground sector. David Londono: In Hemco, our bottleneck is the capacity for processing. We currently see an increase in the contribution of the artisanal miners that because of their activity, it had -- their grade doubles what we obtain in the industrial mines in our mines. So seeing the plan and the sequences adapted, and we give preference to the ore from the artisanal mining above or on top of our own mining. So we are increasing the processing capacity in our plants. That's part of our growth plan in our capacities. Operator: We have a question from Christian Marasco. Unknown Analyst: Congratulations. Could you please detail your investment plan for the funds that come from a possible bond emission. How is the return on investment in the new mines. Unknown Executive: So we have this growth to 300,000 ounces in relation to the investments in Porvenir, Hemco that should -- we could create a lot of value for our shareholders with this organic growth and to maintain this liquidity in case there is an available... Operator: This question is from Juan Soto. What's the forecast for CapEx and for which type of investments would you destine these funds. David Londono: The answer has just been given by David. But just to repeat that a little bit, it's $170 million or $200 million that we want to invest in the construction of Porvenir and about $45 million that we have for the expansion of the bottleneck in Hemco and the possibility to have more production or improvements in the performance in -- with the acquisition of this plant. Operator: Next question that comes from Santiago Mason. Unknown Analyst: Could you please give us a guidance of the dividend for 2026? David Londono: This is something that is defined in the assembly in March. So we cannot give you a guideline of how much it would be. Well, thank you so much. With this, we close the Q&A session for this call for the results of the third quarter 2025. Thank you so much for your participation, and I will see you in the next quarter's call. Thank you very much. Operator: With this, we finish the today's conference. Thank you so much for your participation. You may disconnect from the call now.
Operator: Good day, and welcome to the Angel Oak Mortgage REIT Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. KC Kelleher. Please go ahead. KC Kelleher: Good morning, and thank you for joining us today for Angel Oak Mortgage REIT's Third Quarter 2025 Earnings Conference Call. This morning, we filed our press release detailing these results, which is available in the Investors section on our website at www.angeloakreit.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filings. This morning's conference call is hosted by Angel Oak Mortgage REIT's Chief Executive Officer, Sreeni Prabhu; and Chief Financial Officer, Brandon Filson. Management will make some prepared comments, after which we will open up the call to your questions. Additionally, we recommend reviewing our earnings supplement posted on our website, www.angeloakreit.com. Now I will turn the call over to Sreeni. Sreeniwas Prabhu: Thank you, KC, and thank you all for joining us today. Our third quarter performance reflected another period of disciplined execution and strategic progress for AOMR. We continue to execute both operationally and strategically in a constructive market environment. We capitalized on a couple of strategic opportunities to reallocate capital into high-yielding assets, improve our loan financing funding costs and diversify our lender base. And as always, our team continued to focus on deploying capital into high-quality income-accretive opportunities, supporting both portfolio growth and underlying earnings quality while maintaining vigilance on credit. Our results this quarter were in line with our expectations. This was highlighted by our 13% growth in net interest income compared to third quarter of 2024 and a 2% increase compared to second quarter of the year. GAAP book value per share increased by over 2% compared to the second quarter, driven by increases in valuations across our portfolio. Cash flow dividend coverage increased and is expected to continue its growth trend as demonstrated over the last 2 years. This is driven by earnings from assets purchased during and post quarter end as well as the resecuritization of some pre-IPO deals, which will rotate capital into high-yield uses. Credit continues to perform well, both in aggregate and relative to our peers, and our earnings generation engine continues to strengthen. As I mentioned, we executed on several key initiatives during the quarter. First, we successfully called and retired 2 legacy vintage deals, which is something we have been opportunistically monitoring for the last several quarters. Retiring these deals allowed us to release and reinvest capital into new attractive opportunities and further optimize the yield on our investment portfolio. Second, we added new warehouse credit facility and extended another facility at attractive funding rates, which combined with decreases in SOFR are expected to improve margins while also diversifying our lender base. These actions, along with our continued focus on efficient capital recycling and securitization, emphasize the reliability and the repeatability of our strategy. We are encouraged by the strength and stability in the securitization market as well as the constructive environment for portfolio growth. Securitization spreads continue to tighten and the market continues to function efficiently with new and traditional participants active in the marketplace. The market backdrop has become more positive as the year has progressed and the interest rate trajectory and the efficient securitization execution have supported valuation and earnings growth for AOMR. While the competition in the space has increased, we see this as an indication of solid demand in an area where we have demonstrated expertise. Further, our differentiated platform and dynamic approach to capital deployment and portfolio management positions us to capitalize on opportunities. As we look ahead, we remain committed to continued execution of our strategies, delivering strong results for shareholders and building on our solid historical track record. With that, I'll turn it over to Brandon, who will walk us through our third quarter financial performance in greater detail. Brandon Filson: Thank you, Sreeni. Third quarter operating results were in line with our expectations with 13% net interest income growth versus the third quarter of 2024, an expansion versus the second quarter of this year, demonstrating a positive return on May's senior unsecured debt issuance within 1 quarter. Year-to-date, net interest income increased 11% compared to 2024. Operating expenses, excluding securitization costs and stock compensation expense were 13% lower than in the third quarter of 2024 and 5% lower than the second quarter of 2025. Year-to-date, operating expenses, excluding securitization costs and stock compensation were 19% lower than in 2024 as we continue to push hard on cost rationalization and key expense saving initiatives. Valuations were a tailwind during the third quarter as we observed increases in valuations across the portfolio. As of today, we expect that our book value has grown moderately compared to the end of the third quarter alongside the recent rate rally. For the third quarter of 2025, we had GAAP net income of $11.4 million or $0.46 per diluted common share. Distributable earnings for the second quarter were $529,000. The primary driver of the difference between GAAP net income and distributable earnings were the impacts of $4.3 million of unrealized gains on our residential loan portfolios and $5 million of unrealized gains on hedge contracts. Interest income for the third quarter was $36.7 million and net interest income was $10.2 million, marking a 34% improvement in interest income and a 13% improvement in net interest income compared to the third quarter of 2024. Compared sequentially to the second quarter of 2025, interest income increased by 4% and net interest income increased by 2%. For the first 9 months of the year, interest income was $104.6 million and net interest income was $30.2 million, which translates to increases of 33% and 12%, respectively, compared to the first 9 months of 2024. As we previously noted, we expect our net interest income to continue its growth trend with earnings generated from accretive loans purchased throughout the year and our securitization activity in Q4. Our $238 million of loan purchases in the quarter carried a weighted average coupon of 7.74% with a weighted average combined loan-to-value ratio of 69.4% and a weighted average FICO score of 759. Our total residential whole loan portfolio had a weighted average coupon of 7.98% as of the end of the quarter. The non-QM portion of our whole loan portfolio carried a weighted average coupon of 7.37% and HELOCs carried 11.03% weighted average coupon. As of today, our current weighted average coupon is approximately 8.7%, reflecting the 2025-10 securitization, which closed in October. As of the end of the quarter, our loans in the securitization trust portfolio carried a weighted average coupon rate of 5.8% with a weighted average funding cost of approximately 4.2%. As Sreeni mentioned, the securitization market remains active, and we intend to continue leveraging this strength through our disciplined methodical securitization strategy. As mentioned earlier, we called and retired our retained bonds from AOMT 2019-2 and AOMT 2019-4 securitizations in the third quarter. These deals have become delevered over time, and the [ call ] released $19 million of capital to be reinvested into higher-yielding new loan purchases and other earnings accretive uses. Additionally, in October, we executed the AOMT 2025-10 securitization. This securitization was a $274 million deal that enabled us to pay down $237 million of warehouse financing and released $22 million of cash for redeployment. The execution of this deal was strong with the senior bonds issued at a spread of 125 basis points over treasuries. Operating expenses for the third quarter were $3.2 million. Excluding noncash stock compensation expenses and securitization costs, third quarter operating expenses were $2.8 million. This represents a 13% decrease compared to the same metric in the third quarter of 2024. For the first 9 months of the year, operating expenses were $11.3 million. Excluding noncash stock compensation expenses and securitization costs, operating expenses for the first 9 months of the year were $8.5 million, representing a decrease of 19% compared to the first 9 months of 2024. Going forward, we expect to maintain similar operating expense levels and will continue to be as efficient as possible with our expense structure. Looking at our balance sheet. As of the end of the quarter, we had $51.6 million of cash and our recourse debt-to-equity ratio was 1.9x. As of today's date and factoring in the October securitization, we estimate our recourse debt-to-equity ratio to be approximately 1x. GAAP book value per share increased 2.2% to $10.60 per share as of September 30, 2025, from $10.37 as of June 30, 2025. Economic book value, which fair values all nonrecourse securitization obligations was $12.72 per share as of September 30, 2025, down 1.9% from $12.97 per share as of June 30, 2025. The increase in GAAP book value was driven primarily by the aforementioned valuation increases across our portfolio and valuations of the sold bonds from our 2021-4 and 2021-7 securitizations are included as a liability in our economic book value calculation and the markup of these bonds drove the directional difference between GAAP and economic book value. We ended the quarter with unsecuritized residential whole loans at fair value of $425.8 million financed with $342.6 million of warehouse debt, $1.9 billion of residential mortgage loans and securitization trust and $256.2 million of RMBS, including $21.2 million of investments in commingled securitization entities, which are included in other assets on our balance sheet. We finished the quarter with an undrawn loan financing capacity of approximately $707.4 million. Now looking at credit. We ended the quarter with a total portfolio weighted average percentage of loans 90-plus days delinquent at 2.2%, inclusive of our residential loan, securitized loan and RMBS portfolios, which represents a decrease of 15 basis points from the second quarter of 2025. The AOMT securitization shelf continues to demonstrate outperformance relative to other non-QM shelves in terms of delinquency. We expect that throughout the credit cycle, this outperformance will lead to fewer defaults and lower credit losses than comparable non-QM securitization platforms. This expectation is borne out of our intentional effort to move up in credit for our loan originations and purchases over the past couple of years, which continues to provide us with the confidence that we will deliver consistently amid periods of potential volatility. Additionally, we expect our portfolio-wide low LTV, diligent underwriting standards and inherent credit selection to mitigate losses throughout a cycle if credit becomes an issue. 3-month prepayment speeds for our RMBS and securitized loan portfolios were 9.4% to end the quarter, reflecting a marginal decrease compared to the second quarter of 2025. As a reminder, we model our returns on historical average prepayment speed of 20% to 30%. We continue to expect that mortgage rates would need to fall meaningfully in order to drive a significant uptick in refinances and prepayment speeds in our portfolio. Finally, the company declared a $0.32 per share common dividend, which will be paid on November 26, 2025 to common shareholders of record as of November 18, 2025. For additional color on our financial results, please review the earnings supplement available on our website. I will now turn it back to Sreeni for closing remarks. Sreeniwas Prabhu: Thank you, Brandon. I would like to thank the entire Angel Oak team for their hard work towards building what we believe is the best non-QM loan origination, purchase and securitization platform. We look forward to continuing to build long-term value for our shareholders in the coming quarters and years. With that, we'll open up the call to your questions. Operator? Operator: [Operator Instructions] First question comes from Matthew Erdner with JonesTrading. Matthew Erdner: I'd like to touch on kind of the calling of the old securitizations there. One, get your thoughts going forward? And two, how much incrementally were you guys able to pick up on the margin there in terms of cost of funds kind of coming in as a result of calling the securitizations? And then expectation going forward as to what other calls would do to that cost of funds. Brandon Filson: Yes. Thanks, Matt. Yes, 19-2,19-4, those were our very first securitizations that we did even before this vehicle was a public REIT. They're very delevered, the point, I mean, the factors were down to very, very low levels where effectively our retained interest was earning, the weighted average coupon of the deals are in some cases even a bit less. So 6%, 7% kind of retained yields on those bond positions. The $19 million in cash would be then immediately reinvested into whole loans that would at least lever -- earn that unlevered yield today with leverage 12% to 14%. And then once we securitize a 15% to 20% kind of return. So you can think of 8% of our capital over the next couple of quarters going from earning a 6% to a 14% at a base case level. As we look at other deals, I mean, we do have 19-6 securitization and 2020-3 securitization out there that we're evaluating what to do with them as they delever. It all depends on what the execution price and where we are in terms of the cycle, but I'd expect us to be looking hard at that over the next year. Matthew Erdner: Yes. Got it. That's helpful there. And then you guys mentioned competition earlier on the call. I'd like to touch on this given the amount of people that have entered the space are starting to come in. How are you guys able to go out there and kind of source the loans that you find attractive, opportunistic and whatnot and kind of beat out that competition, so to speak? Brandon Filson: Yes. I think we -- with our affiliation with Angel Oak Mortgage Solutions and the Angel Oak platform in general, we've had a very consistent non-QM program over the past many years. Our rate sheets are similar. We're always buying. We're a surety of closing deals. So when we go out, we think we are able to pull in good demand versus maybe the new guys entering the space that may not be there tomorrow, that may change their mind and they're just coming in and out based on a trade item. Again, we said many times, this is a business for us, not a trade. So we have great relationships, again, with our affiliated originators and other third-party originators where they will show us the loans that we want with the rates we want and the prices we want because they know that we'll be able to execute and close those loans. Operator: The next question comes from Doug Harter with UBS. Douglas Harter: Hoping you could touch on your outlook for growth in the investment portfolio, I guess, given a combination of the resecuritization opportunities plus maybe adding some more leverage to the balance sheet. Brandon Filson: Yes. No, I think we have -- we did our senior unsecured notes offering, second one this last summer. That -- those proceeds have effectively been deployed, maybe not fully. I mean it takes several cycles of securitization to get 100% deployed in terms of capital. We released the securitization from the 19-2, 19-4 deals. You'll also see in the filings and whatnot that we also took back at interest in a vehicle that holds some of the nonperforming loans from those deals. It would be about $7 million that -- those proceeds should also be coming in today, literally. Then 25-10 released over $20 million in capital. So we have kind of a very good runway for growth in terms of what we're looking at in terms of purchasing volume. We like to be consistent in the space. We've been buying $200 million to $300 million a quarter really over the past year of loans. We're also looking at -- we have about $75 million worth of HELOCs in our portfolio. We're looking at doing a securitization in that regard here in the coming quarter that should release additional capital and continuing to grow. So we -- and then as you mentioned, we're going to be looking at the 19-2 and then the 2020-3 securitizations to resecuritize and call if and when that time and opportunity comes up. 19-6, sorry, if I said 19-2. Douglas Harter: Great. I appreciate that. And then I know in the prepared remarks, you did walk through some of the difference between GAAP and economic book value in the quarter. But if you could just kind of give a little more detail on just how we might think about the drivers of change as we go forward on those metrics? Brandon Filson: Yes. So the genesis of economic book value was the 21-4 and 21-6 (sic) [ 21-7 ] securitizations that we did immediately post IPO. Those were the deals that were in the Goldilocks phase of the market when interest rates were 0 and the securitization market was incredibly accretive. So they had one of them, 21-4, the coupon on the senior bond was just over 1%. So literally very little funding cost. We made the election at that time, if you recall, to hold those liabilities for those sold bonds at amortized cost, meaning that as obviously, rates sold off over the next couple of years, they stayed at par when in reality, the fair value of those bonds or the fair value of the liability would have been significantly below par. As we're in this cycle now where real rates are starting to decline, securitization market getting better, things are getting tighter. There's a lot of demand for these products. And again, real rates are declining. Those bonds are starting to mark back up, which doesn't happen under GAAP book value. And that's why you see the divergence or the decrease in economic book value quarter versus the increase in GAAP book value because from a GAAP book value perspective, if you think about those 2 securitizations, we effectively have an unhedged asset with several hundred million dollars in loans in it. And then from an economic book value, then we effectively then hedge that back down as that liability is starting to increase in value. And that liability value is based on the value of those sold bonds. Operator: [Operator Instructions] The next question comes from Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Just one for me. Regarding the size of securitizations, just looking back to prior quarters, it seems like in 2024, securitizations were slightly above $300 million. So far in '25, they've kind of hovered around $280 million. I was just kind of wondering if we could see future securitizations kind of get back to that $300 million level or if you guys are comfortable with kind of the size you're doing now? Brandon Filson: Yes. We've made the conscious decision to be hitting the securitization market very programmatically and consistently, right, and not waiting in this rate environment to get to a $300 million, $400 million level. That was something we did use to do. And now we found it better, especially with all the supply coming on the market to be a very consistent issuer. That's why this year, we're already up to 10, 11 real non-QM securitizations. We've done the resecuritization. And then earlier in the year, we had our first HELOC securitization. I say we here as AOMT or Angel Oak itself. So we're consistently in the market, and we find that has helped tighten up our spreads and keep our risk low on our balance sheets as we move to term out that funding cost. Timothy D'Agostino: Okay. Great. And just a quick follow-up. Could we see you investing more in HELOCs going forward? Or are you going to continue to just like majority focus on non-QM? Brandon Filson: We're majority focused on non-QM, and we consider our HELOCs non-QM adjacent. A lot of times, they look a lot and they feel a lot like a non-QM loan from what we're doing. They're just -- especially in today's environment, they're very attractive in terms of their yield profile. Like you can see from some of the disclosures, the weighted average coupon on those are just north of 11% currently versus new originated non-QM loans, 7.25% to 7.5%. The funding cost is similar between the two, so you can get a lot of extra margin on those. I would imagine that over the coming quarters, we'll keep it kind of where we are today, which is, call it, $75 million to $150 million worth of HELOCs in the portfolio, and then we'll securitize them off. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Brandon Filson for any closing remarks. Brandon Filson: All right. Thank you, everyone, for your time and interest in Angel Oak Mortgage REIT. We look forward to connecting with you again for year-end. In the meantime, if you have any questions, feel free to reach out to us, and have a great day. Operator: Thank you. The conference has now concluded. You may now disconnect your lines. Thank you.
Operator: Welcome to SelectQuote's First Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce Matt Gunter, SelectQuote Investor Relations. Mr. Gunter, you may begin the conference. Matthew Gunter: Thank you, and good morning, everyone. Welcome to SelectQuote's fiscal first quarter earnings call. Before we begin our call, I would like to mention that on our website, we have provided a slide presentation to help guide our discussion. After today's call, a replay will also be available on our website. Joining me from the company, I have our Chief Executive Officer, Tim Danker; and Chief Financial Officer, Ryan Clement. Following Tim and Ryan's comments today, we will have a question-and-answer session. As referenced on Slide 2, during this call, we will be discussing some non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and the non-GAAP financial measures are available in our earnings release and investor presentation on our website. And finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company, and therefore, involve a number of uncertainties and risks, including, but not limited to, those described in our earnings release, annual report on Form 10-K for the period ended June 30, 2025, and subsequent filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. And with that, I'd like to turn the call over to our Chief Executive Officer, Tim Danker. Tim? Timothy Danker: Thank you, Matt, and thanks to our investors and analysts joining us this morning. Picking up from the momentum of a strong fiscal 2025, SelectQuote executed well over the first quarter and is well positioned for a successful fiscal 2026. Beginning with the headline results. We generated consolidated revenue of $329 million, which represents 13% growth over the same period a year ago, driven by strong growth in Healthcare Services. As you saw in our press release, the year-over-year senior revenue compare was unique this period given the changes to beneficiary eligibility requirements during the special election period. Specifically, our senior revenues were $59 million compared to $93 million a year ago. The decline was driven by lower policy production, which was expected given the new SEP parameters we foreshadowed on last quarter's call. Additionally, as also forecasted last quarter, the segment recognized negative EBITDA of $21 million in the first quarter, driven by the combination of lower policy production as well as increased year-over-year investment and new agent hiring in advance of AEP. I'll speak more to our readiness for AEP in a moment, but the high-level takeaway is that our Senior business performed as expected in what was a unique year-over-year compare for SEP. In our Healthcare Services business, our new Kansas facility is ramping as planned, delivering efficiency gains in line with expectations. However, first quarter Healthcare Services EBITDA was impacted by a change in drug reimbursement rates with a SelectRx PBM partner. This is a headwind for our 1Q and 2Q Healthcare Services EBITDA margin. Without providing detail on the contract, it is important to call out from the perspective of the PBM the change in reimbursement rate relates to volume shipped over calendar year 2025, not just fiscal 1Q or 2Q. The change does not impact our prior period results, but instead disproportionately impacts the first half of this fiscal year by approximately $20 million. The majority of that impact will be recognized in our fiscal second quarter. As a result, we now expect second quarter adjusted EBITDA for Healthcare Services to be approximately breakeven. We are actively negotiating a longer-term reimbursement agreement with this carrier that creates better visibility for both parties. We have communicated our need for stability in our financials. The timing of this impact following our initial 2026 outlook is a clear example of that need. We're confident we'll reach a mutually beneficial agreement as this PBM partner recognizes the compelling clinical value provided by SelectRx, which I'll speak to later in my remarks. Regardless of the ongoing negotiation with this PBM, rates per our current contract revert to more normalized levels on January 1, 2026, which underpins our updated fiscal '26 view. While we no longer anticipate reaching our $50 million target for fiscal '26, our confidence and visibility in the long-term economics of Healthcare Services are unchanged. Despite the 2Q impact, we plan to exit the fiscal year at an annualized EBITDA run rate in the $40 million to $50 million range and continue to see SelectRx and Healthcare Services as a meaningful driver of profit and cash flow for SelectQuote. Speaking now at the consolidated level, quarterly EBITDA of negative $32 million was below our guided $25 million to $30 million loss range communicated on the last call due to the SelectRx margin dynamics I just spoke about. Senior EBITDA was within expectations for the quarter and our views on the upcoming AEP season are unchanged. If we turn to Slide 4, I'll detail those views for AEP. Beginning at the top of the page, let me start with our view of the overall industry. As you recall from last year, shifts in planned benefits and structures from carriers drove an elevated amount of policyholder volatility. Looking ahead to this year's selling season, we see a similar backdrop where carriers continue to prioritize Medicare Advantage margins over aggregate policy growth. The importance of a well-fit policy has never been more important to both the carrier and the policyholder. SelectQuote's data-enabled agent-led model is specifically built for that purpose, which we believe is a lasting competitive advantage and one that is especially acute in this environment. Coincidentally, we expect the ongoing strategic shift by carriers to drive another elevated year of policy terminations. As we noted last year, these industry trends drive an increased need for the solutions SelectQuote provides, both for the carrier and certainly for the policyholder. Additionally, we see certain pockets of growth within health plans this season, including HMOs, SNPs and in specific underserved geographies, which our model is uniquely well positioned to help. If we move to the bottom of the slide, let me give our outlook for how SelectQuote is positioned to perform in this Medicare Advantage season. Looking back, the 2025 AEP season exceeded expectations. Our high-touch data-driven model proved its value in a dynamic market, where policyholder questions and confusions were elevated. In that environment, our agile agent-led approach delivered outsized growth per agent and near record margins in the Senior segment. For the 2026 AEP and OEP seasons, we're optimistic that performance will be strong. We entered the season with excellent retention of tenured agents who are about twice as productive as new hires, and had another successful preseason of hiring and training. This positions the platform well for continued growth and improved operating leverage. Moving to our focus on retention. We know carrier plan changes can drive confusion, and we have made a strategic priority to proactively work with policyholders to ensure they understand their plans. This is a differentiated approach that is highly appreciated by policyholders. In the upcoming year, we expect tangible benefits to our results from both keeping policyholders in plans that remain a good fit or helping them find a new plan that best fits their ongoing needs. In fact, we believe there's an opportunity to improve policyholder recapture rates from the 2025 season. We believe our agile sales function and focus on retention positions SelectQuote to once again deliver in what is to be sure another dynamic and disruptive AEP season. On Slide 5, let's add some context on SelectRx and the way our customers and carrier partners benefit. As we've talked about since the inception of the business, there are substantial problems and inefficiencies in how prescription drugs are paid for, distributed and ultimately taken by Americans. SelectQuote, as an efficient healthcare information hub, has significant insight and ability to eliminate inefficiency and improve the experience for all participants in the prescription drug value chain. At the highest level, SelectRx improves lives for Americans, introduces efficiency and cost savings into the system and leads to better health outcomes. Here, we provide a few examples, beginning on the left with improved MA retention. Given medication is a core piece of most treatment regimens, the fit of prescription drugs within a medical coverage plan has a synergistic benefit. We have seen this evidence with SelectRx members, who tend to have lower rapid disenrollment rates and higher retention on the Medicare Advantage plans they select. Next is improved medication adherence in the middle column. Our approach recognizes a fundamental reality of patient care, medications change. Unlike the traditional 90-day bottle-filled approach prevalent elsewhere, we utilize adherence-friendly 30-day packaging with a high-touch service model. This monthly cycle is critical because on average, roughly 10% of our SelectRx members experience a material change to their prescription regimen each month, whether it's adding a new medication, discontinuing an old one or adjusting the dosage. When a patient's therapy changes, a 90-day supply creates a dangerous gap and an unnecessary drug waste. Our 30-day approach more quickly ensures that patients are taking the correct current medications, which is vital. This reduces the risk of patients taking incorrect doses or discontinued medications and lowers the risk of adverse drug reactions. It is well known that taking medication in accordance with the doctor's orders is critical. As we know, especially with American seniors, drug adherence is a tricky and persistent problem, which can lead to worse health outcomes, particularly among the polychronic population we serve, nearly 70% of whom have limited pharmacy access. Nationwide studies suggest that poor medication adherence contributes to around 25% of all hospitalizations, which translates to hundreds of billions of dollars in healthcare costs in the United States each year. Around 40% of our Healthcare Select members have reported either forgetting to take their medications or failing to pick up prescriptions from a pharmacy. We designed SelectRx with this specific problem in mind and have seen clear success in adherence rates. We attribute the success to the convenience and clarity that SelectRx custom drug delivery provides patients. When we enroll patients in SelectRx, we see a meaningful improvement in their active medication adherence over the next 2 years. With our new concierge like program, we call Adherence for All, we are further accelerating and enhancing medication adherence improvement with beneficiaries in the programs improving by roughly 10% within the first year. Finally, the right-hand column is the most rewarding statistic, improvement in health outcomes, which benefits everyone within the ecosystem. By improving adherence, SelectRx members see a reduction in hospital days of around 20%. This directly translates to a better quality of life for the patient, but additionally provides a meaningful cost reduction for the overtaxed healthcare system and similarly for healthcare insurance payers. We provide this color not just because we're proud of the business, but it is important for investors to understand that these numbers matter to our insurance carrier partners. They, like us, see SelectRx and our healthcare services platform as a core value driver for long-term American healthcare improvement. With that, let me turn the call over to our CFO to detail our results. Ryan? Ryan Clement: Thanks, Tim. Beginning on Slide 6, the business executed well in the fiscal first quarter, advancing our strategic priorities across Senior, Healthcare Services and Life, even as we navigated the near-term reimbursement challenge within SelectRx. Consolidated revenue grew 13% to $329 million, driven primarily by our SelectRx and Life Insurance business, which helped offset the unique comparison in Senior related to SEP. The fundamentals of our Senior business are unchanged, where we wrote 32% fewer policies in this year's fiscal first quarter compared to last year. Similarly, first quarter EBITDA is not directly comparable to the prior year due to the new SEP environment and our normal upfront investment to prepare for the upcoming AEP and OEP seasons. If we shift to Slide 7, our Senior financial results again show the impact from SEP. The results were in line with our expectations, and again, are a function of lower policy production because of new eligibility rules and the normal course of investment we make before the AEP and OEP season. I will reiterate that this level of volume was as expected. The impact can be seen primarily in our segment revenue, which declined 37% to $59 million due to the 32% fewer policies. Our Senior EBITDA loss of $21 million was in line with our expectations given the production and investment dynamics I just spoke about. LTVs have remained relatively stable despite increased policyholder volatility in the past year, coming in at an average of 883 for the last 12 months. We are now operating at a revenue to client acquisition cost of 6.4x, which continues to exhibit the synergy of our marketing spend against very attractive and durable cash flow streams for SelectQuote. If we flip to Slide 8, I'll review the dynamics underlying our Healthcare Services results. Members held steady compared to last quarter, in line with expectations, given the first fiscal quarter is typically a slower one for onboarding SelectRx members. We feel well positioned to capitalize on the AEP and OEP enrollment seasons. That being said, we continue to focus on driving profit and cash flow over aggregate member growth. As Tim highlighted, the primary factor impacting first quarter results was a change in the reimbursement structure with one of our SelectRx PBM partners. As a result, fiscal 2026 will ramp more gradually than we initially anticipated. We expect the rate pressure to crest in our fiscal second quarter before we revert to a more normalized rate structure with this PBM starting in January 1, 2026, which is our fiscal third quarter. Despite this near-term pressure, our medium- and long-term outlook for expanding operating leverage and improving margins in Healthcare Services remains intact. To reiterate Tim's point, this partner understands the clinical value our SelectRx solution brings to patients, and as such, we are in constructive discussions to solidify our longer-term rate structure. We believe this new arrangement will provide enhanced visibility and predictability for our growing SelectRx business. Healthcare Services continues to be a highly attractive driver of profit and cash flow for SelectQuote. The value we deliver to customers through SelectRx, combined with strong attachment rates in our Senior Medicare Advantage business, remains central to our strategy. This approach supports increasing cash flows, which benefits shareholders through improved cost of capital and more self-funded growth. Let's shift to Slide 9 to detail our Life Insurance business. The quarter was a strong one for growth as revenues expanded nearly 20%, driven by balanced growth in term life and final expense policies. The lack of pull-through to our EBITDA, as shown at the right, was also driven indirectly by the changes to this year's SEP. As part of our preparations for the season, we shifted agents to our Life business given our expectation for less MA volume during the SEP period. The results for our Life business was a near-term increase in expenses related to production in the quarter. We expect this trend to reverse as the season progresses and agents are reallocated and new agents specifically become more tenured in life. As a whole, the Life business continues to provide another steady stream of profit and efficient cash flow, similar to our Healthcare Services business. In closing, we are pleased with the results from each of our divisions and SelectQuote's overall position for the year ahead. The Senior business is well prepared for AEP, supported by strong agent retention and a successful preseason. Healthcare Services continues on its strong growth trajectory, and our Life division is driving consistent, reliable cash flow. At this time, we are not changing our fiscal 2026 financial outlook of $1.65 billion to $1.75 billion in revenue and the $120 million to $150 million in adjusted EBITDA. While the Healthcare Services adjustment is a headwind, we plan to update our outlook following our fiscal second quarter as we will have additional detail on the AEP period for our Senior business. That said, we remain confident today that we will be operating cash flow positive during fiscal year 2026. With that, I'll turn the call over to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from Ben Hendrix of RBC Capital Markets. Michael Murray: It's Michael Murray on for Ben. On SelectRx, you seem to believe the reimbursement headwind is going to be contained in 2025. What gives you comfort that rates will improve next year? And is there a potential that you'll see a similar reimbursement headwind at the end of next year? Timothy Danker: I appreciate your attendance here. Just to provide a little bit more context on what we mentioned in our prepared remarks. We did have one PBM that made some adjustments to the drug reimbursement rates. Despite this change, the PBM remains profitable. We have a very strong relationship with them. We're in the midst of updating our agreement. As we shared with the market today, they see what we see, an immense amount of clinical value that our SRx solution provides patients. And as such, we're in constructive discussions with them to solidify a longer-term agreement and rate structure. So we are absorbing a short-term impact in Q1, Q2, but the long-term economics remain very attractive. They don't change our perspective on growth or margin profile. As we work towards this new agreement, we will provide enhanced visibility and predictability into the growing business. Michael Murray: Okay. I appreciate that. Just shifting gears a little bit. I appreciate the commentary that SelectRx is improving MA member retention. Could this have a potential positive impact on LTV? And how much data would you need to see before building that into the LTV calculation? Ryan Clement: Yes. I mean we do -- yes, so we do see an improvement in the overall persistency when someone is a member of SelectRx and has a Medicare Advantage plan. So we do see that. We don't actually build that into the lifetime values themselves. So we're not booking that increase, but it's absolutely something we're observing. Timothy Danker: Yes. And really quick to follow that up, just as a reminder, it's not a huge attachment rate, right? It's a very specific cohort of customers. So not a massive overall impact, but a positive. Operator: Question comes from Pat McCann from NOBLE Capital Markets. Patrick McCann: First, I was wondering, with regards to what you mentioned about helping policyholders understand their plans better to focus more on retention, could you talk a little bit more about what that looks like in practice? Timothy Danker: Yes, I'd be happy to -- I'd be happy to start, and maybe I'll ask Bill Grant, our Chief Operating Officer, to expand on it. But obviously, last season was a very disruptive AEP, OEP season. We are really proud of our team's efforts and the service we provided beneficiaries. I mean, just for perspective, this year, nationwide, about 2 million MA beneficiaries are going to be impacted by plan terms -- or planned exits and another several million that are having pullbacks in benefits. So helping beneficiaries, protecting our back book of business is a priority. We've taken several actions, several learnings from last year and feel like we've got a jump start on it. But Bill, maybe you can provide some additional detail on our approach. William Grant: Yes, happy to. So I think that our approach evolves every year. We learn a lot in terms of how we use AI, our center, all the different -- all the data we have in terms of how we approach our book. And then we marry that, right, with how the plans are changing, right, because it's an ever-evolving environment. But we believe that we have a really good strategy to continue to offer our value proposition to consumers as we move along, and that we're targeting or talking to the right folks that need our help. And you can really see that play out in kind of our year-over-year -- in terms of the number of folks that we're recapturing, what it looks like in terms of how that strategy plays out. But we're really using every tool in our arsenal. But I think the biggest thing that we have going for us by far is our long data history along with marrying that with our different AI strategies that allow us to be as cost effective as we can on who we treat, when we treat them, all of those things. Patrick McCann: Excellent. And my next question was regarding the recent research you published on the social determinants of health. And I was wondering if -- how that is informing your strategy in terms of potential new offerings in the Healthcare Services segment, how you are leveraging that data going forward? Timothy Danker: Yes, I'll actually start it, and then I'm going to have [Audio Gap] on what we do to solve those problems. I'd say first and foremost, right, we just want to understand our customer base better and better. That's really informed the products that we've picked from the healthcare side of the house. That's how we found SelectRx, was folks need for a better solution than they were currently on to save them time and money and then ultimately help them adhere better. I think, though, there's also products within the actual SDOH space that we're looking at that would help folks afford their daily needs better and to really look at the actual membership side of the house. So Bill, do you want to speak to the membership side and ultimately kind of what we're trying to do to solve SDOH issues on top of just traditional healthcare issues? Because we kind of break those things apart. William Grant: Yes, sure. So as you know, we have over 2.5 million Healthcare Select members. Healthcare Select membership involves a fairly robust health risk assessment, where we determine through that health risk assessment social determinants of health and what services may be applicable and help with our overall charter with that group, right, which is improving their overall health lives, all those things. So we have a variety of products within that now. It's ever expanding. Again, we use a combination of kind of AI, Next Best Action, our consumer data –- or MarTech tools, right, to be able to talk to those customers. We've now helped over 50,000, taking our services through FindHelp or SDOH. We have a number of products there and we're expanding quickly. But we feel really good about our value proposition of our membership, and that just helps our overall engagement with Healthcare Select. Operator: Question comes from George Sutton from Craig-Hallum Capital Group. Unknown Analyst: This is Logan on for George. I wanted to start with just kind of a high-level one on AEP. You touched on it a little bit kind of talking about the similarities to last year, but I was hoping you could characterize a little bit more kind of anything you're seeing in the market different relative to last year. Timothy Danker: Logan, I'll start and ask Bob Grant, our President, to elaborate as well. Early in the AEP season, but we're pleased with performance thus far. As we've shared before, it is certainly a dynamic AEP season, given some of the profit actions taken by the carriers to get their margins in line. We're seeing that play out. We are seeing a very high level of consumer engagement as MA beneficiaries are out evaluating options. We would share that we think both our new agents as well as our tenured agents are performing very well within expectations. And as Bill shared, we've been spending a lot of time also working on our back book of customers to ensure that they understand all of their options. But thus far, the AEP environment is what we expected. It's still very early, but we feel very prepared in the early days, a lot more innings to play out. Bob, do you want to talk about some of the things you're seeing kind of more broadly in the market? William Grant: Yes. I think we're just seeing another year of kind of pullback from certain carriers, to Tim's point, and push forward from others, which does cause some switching. I think the difference this year, though, is that every carrier pulled back to a certain degree, as you guys have kind of heard them talk about, to really focus on profitability, which does create a lot of calls and education, which we feel really, really good about kind of helping people understand how to use their plan, a lot of the Healthcare Services benefits and things that we're doing. So I'd say it's just a little bit of a unique environment relative to other years, but probably more similar to last year than any year we had seen prior. And we do like some of the simplification of benefits. I think HMOs typically are a really good plan for a customer, easier to understand, easier to cost contain. And then ultimately, sometimes while ancillary benefits can be good, they can be a little bit confusing. So pulling back on those 2 simplifies offerings and I think really helps the payers. So we feel really, really good about where AEP is going and where the plans are, especially from a multiyear view. I do think payers are really, really focused on making sure that's profitable into the long run. Unknown Analyst: Got it. That's helpful. And then maybe switching over to SelectRx. Obviously, you guys have shown the ability to grow that business. You more recently talked about kind of focusing on the profitability. Can you just talk about how you plan to manage the growth or manage the funnel kind of through the busier quarters here where you probably have more opportunities to grow? But it sounds like you're kind of looking for the right members. If you can just talk about that, that would be helpful. Timothy Danker: Maybe you can talk about the -- our member growth, and I'll highlight one other item. Go ahead, Bob. William Grant: Yes, sure. So as far as member growth, we've been very -- I think we've been very measured on that. As we talked about before, we're very focused on profitability and members that need the service the most mixed with PBMs and payers that appreciate the service the most. I know that sounds funny, but just like in value-based care or any other thing, we have a closer partnership with some payers than we do others. And we are very focused on how we expand the clinical aspect of that business. We announced earlier our Adherence for All program. We have quite a few participants that are very curious in that program because it speeds up. Tim alluded to how fast we improve adherence. That speeds it up by multiple months and is a very powerful program from SRx perspective and other things. So we are very focused on that. I do think the market is still massive for us, right? It is a very big need. And I think the more and more we have quality conversations with payers and PBMs, the better and better kind of results we get even with the short-term headwind that we've seen. Ultimately, as Tim alluded to, that's still a great relationship. And we've had a lot of really good discussions about how we can get to a really stable yet powerful contract that really focuses on the clinical aspect of that. Go ahead, Tim. Timothy Danker: Yes. I think it's a great point, Bob. And I would say, again, none of this changes our underlying conviction and the massive opportunity ahead of us. We think this is a very powerful model, certainly for the patients. We shared a lot around the clinical value. It's important to that patient. It's important to the payer. Obviously, we're working through a very short-term reimbursement issue. We have our arms around it. We don't anticipate anything of this magnitude happening again. We're confident in our ability to continue to work with all of our PBM partners given the massive value that we see here. And we're confident in our ability. We feel like we have very strong line of sight into the business and a strong level of conviction around the go forward of this business. Operator: This concludes our Q&A session. I will now turn the conference back over to Tim Danker, CEO, for closing remarks. Timothy Danker: Thank you. We want to thank everybody for joining us today. We're really proud of the start to fiscal '26, the strong execution despite navigating the dynamic SEP environment this past quarter. The entire organization is very well positioned for another successful AEP and OEP season, and we plan to leverage our competitive advantages as a health care ecosystem across the entirety of our business. It's early days, but we're very encouraged by AEP results thus far, and we look forward to sharing more about the season and our strategy on our next earnings call. I want to thank you again. Have a great day. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to the Netlist Third Quarter 2025 Earnings Conference Call and Webcast, [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Smargiassi, Investor Relations. Please go ahead. Michael Smargiassi: Thank you, Dave, and good day, everyone. Welcome to the Netlist Third Quarter 2025 Conference Call. Leading today's call will be Chuck Hong, Chief Executive Officer of Netlist; and Gail Sasaki, Chief Financial Officer. As a reminder, you can access the earnings release and a replay of today's call on the Investors section of the Netlist website at netlist.com. Before we start the call, I would note that today's presentation of Netlist results and the answers to questions may include forward-looking statements, which are based on current expectations. The actual results could differ materially from those projected in the forward-looking statements because of the number of risks and uncertainties that are expressed in the call, annual and current SEC filings and the cautionary statements contained in today's press release. Netlist assumes no obligation to update forward-looking statements. I will now turn the call over to Chuck. Chuck Hong: Thank you, Mike, and hello, everyone. Since our last call, we continue to make further progress on product and IP initiatives. We filed a new legal action, again, Samsung at the ITC and further strengthened our cash position. The memory market has entered a period of shortage. And we believe that this will continue for the foreseeable future, all the way through 2027, when additional capacity is brought online. AI-related demand is consuming the majority of DRAM and NAND capacity, leaving very little availability for the rest of the market. Pricing has increased significantly for most product categories in the last several months, and it is forecasted to continue on this upward trend. Netlist is well positioned to capitalize on these market trends through innovative IP and custom memory solutions such as the Lightning DDR5 DIMM for overclocked and low-latency memory module for servers. Lightning in particular -- Lightning provides faster memory performance, which is particularly important in markets such as quantitative trading, where the reduction of even a microsecond and executing a trade can bring about a significant improvement in the performance of the customers' systems. At the moment, a global OEM as well as half dozen system integrators continue with their qualification of our Lightning products. We expect some of these qualifications to be completed by the end of the year and provide meaningful contribution to revenues next year. On the R&D side, we continue to work on the CXL-based solutions such as the CXL NVDIMM as well as low-power MRDIMM. Netlist invented the NVDIMM over a decade ago, and we continue to innovate in this segment with data backup solutions that will leverage the versatility of the CXL channel. The LP-MRDIMM will be a critical technology in the years ahead as the current generation of MRDIMM has shown to consume excessive power. And power, we know is a critical variable in AI computing. MRDIMM is likely to replace the RDIMM in the next generation of servers, but only if the power consumption of these memory modules can be lower. Thus, the LP-MRDIMM is being pursued by the broader industry -- broader memory industry, but Netlist is the only company that is designing a solution with significant power savings as well as lower latency without sacrificing error correction or chip kill. On the IP front, in the past 2 years, Netlist has obtained 2 jury verdicts awarding combined total damages of $421 million for willful infringement of its patents by Samsung. Samsung has also lost 3 district court cases against Netlist and their bid to somehow revive a terminated license. Despite this, Samsung continues its unauthorized use of Netlist's intellectual property. At the end of September, Netlist expanded, it's -- at the end of September, Netlist expanded the defense of its IP by initiating legal proceedings before the U.S. International Trade Commission, or the ITC. Netlist is seeking exclusion and cease and desist order against Samsung, Google and Supermicro, which would direct U.S. customs and border protection to stop Samsung memory products that infringe on Netlist IP from entering the U.S. The ITC does not order monetary damages. The IP at issue in the ITC action include Netlist Patents 366, 731, 608, 523, 035 and 087. Each patent read on one or more of the following products: DDR5 memory modules, such as DDR5, RDIMM, UDIMM, SODIMM and MRDIMM and HBM or high-bandwidth memory. The ITC is an independent agency of the executive branch that investigates and makes the termination against unfair acts of import trade that violate U.S. IP rights. The process of bringing legal action before the ITC differs from core proceedings and is much quicker in duration, typically around a year to receive an initial determination. The ITC will review Netlist's complaint to decide if it should institute an investigation. This review process occurs within 30 days of filing and our filing was September 30. If the ITC decides to institute an investigation, it assigns an administrative law judge to the case. Within 45 days of institution, the judge sets a target date for an evidentiary hearing or a trial and the issuing of a final decision. The evidentiary hearing or trial is administered by the administrative law judge or the ALJ. There is no jury. This hearing typically takes place a year after institution and is followed by an initial determination issued by the ALJ. The ITC's commissioners may review the initial determination at the party's request or of their own volition. If review, the commission may affirm, modify, reverse or remain all or part of the initial determination and will issue a final determination. In order to find the violation of Section 337 of the Tariff Act, the ITC investigation must determine that there is infringement of a valid U.S. patent that relates to an imported product and that the patent is being used in an existing domestic industry. A party may appeal final determination to the U.S. Court of Appeals for the Federal Circuit. However, regardless of any appellate process, once the ITC makes its determination and this determination is ratified by the U.S. trade representative within 60 days, the import ban of the infringing product goes into effect immediately. The ITC ceased operation during the federal government shutdown, which will impact the timing of the ITC process just outlined. Netlist filed its complaint on September 30 and the federal government shutdown started the next day. Netlist has previously litigated 2 prior cases at the IT seat. Let's now move on to the federal court actions, which include 3 separate jury verdicts that awarded Netlist combined damages of $866 million for the willful infringement of its patents by Samsung and Micron. In addition, we now have 4 separate actions filed this year in the U.S. District Court for the Eastern District of Texas against Samsung and Micron and their distributor, Avnet. In these cases, Netlist is asserting new patents covering next-generation HBM and DDR5 memory technologies. In the Eastern District of Texas, one case against Samsung, Netlist secured an order finalizing $303 million of damages award in July 2024. Samsung filed an appeal, and we estimate that the appeal hearing will take place sometime mid next year. In the Eastern District of Texas case 2 against Samsung, where Netlist was awarded $118 million in damages, post-trial briefing has been completed. We expect the court to rule on these post-trial motions in the coming months. In the $445 million damages award against Micron, this case has concluded in the district court, Micron filed an appeal with the Federal Circuit, and we are currently in the briefing process. In the breach of contract case against Samsung, again, which Samsung has lost 3 separate times, Samsung has filed a notice of appeal before the U.S. Court of Appeals for the Ninth Circuit. We expect this process to approximately 16 to 18 months. Regarding IPRs, oral arguments before the U.S. Court of Appeals for the Federal Circuit has been set for several patents, the 314, 506 and the 608 patent in early December 2025. We expect the Federal Circuit to issue its decision on these appeals, and these are important appeals in later in December this year or early this year. In closing, Netlist remains active in advocating for the rights of patent owners. Over the past several weeks, I've had the opportunity to meet with government officials in Washington, D.C. and was encouraged by these discussions. We welcome the constructive reforms brought on by new leadership at the patent office that could bring a more balanced approach to the IPR process. We also urge Congress to take action on several patent reform bills that are currently under review. We believe these bills, if enacted, will bring much more clarity to the issues of patent eligibility, patent enforcement and provide American innovators a predictable framework on which to create new groundbreaking technologies and provide assurances that their innovations will be protected from unauthorized use. Now I'll turn the call over to Gail for the financial review. Gail Sasaki: Okay. Thanks, Chuck. For the quarter ended September 27, 2025, revenue was $42.2 million reflecting solid demand from both our OEM and resale customers and in line with our expectations. While we do not formally guide given booking and shipping for the fourth quarter of 2025 to date and subject to the visibility we have today, we currently expect fourth quarter revenue to be slightly higher than the third quarter of 2025. Operating expense for the third quarter 2025 declined 17% compared to the prior year's quarter and declined 38% on a 9-month basis. Net loss improved by -- net loss for the third quarter 2025 declined 25% compared to the prior year's quarter and declined by 45% for the 9-month period. We ended the third quarter with cash and cash equivalents and restricted cash of $20.8 million compared to the $29 million at the end of second quarter with minimal debt. After the end of the third quarter, we raised $10 million through a registered direct offering. With a $10 million working capital line of credit from our bank and approximately $74 million available on the equity line of credit, we continue to maintain significant financial flexibility and liquidity. And as always, we manage the operational cash cycle very carefully. Inventory churn improved by 17 days over last year and the overall cash cycle improved by 2 days over last year's Q3 and by 16 days over last quarter. Operator, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from Suji Desilva with ROTH MKM. Sujeeva De Silva: So the products that you're talking about, Chuck, and seeing opportunity in AI infrastructure into calendar '26, can you talk about which products, which AI infrastructure server platforms they may target? And what could be the magnitude of contribution potentially in '26, maybe ranges there? Chuck Hong: We've made -- Suji, we've made good progress with the Lightning line of products. These are the fastest server memory. Most of them go into high-frequency trading, quantitative trading the Chicago area, New York area and the commodity markets and in the stock exchanges. So they are being qualified at one of the top 2 server OEMs in the world, along with probably half a dozen other major system integrators. We believe -- we're making good progress. We have clearly a product that has industry-leading low latency and speed. And we expect those to -- we're seeing revenues already. We've seen some revenues probably in the 4%, 5% of our overall revenues in the last few quarters came from this line of product. We believe once these are qualified as some of the bigger players, bigger server manufacturers, we will certainly get into next year to double-digit percentage of the overall revenues with these lighting line of products. Sujeeva De Silva: Okay. All right. And then I'm just curious of the ITC process and the government shutdown. Are really -- are all the processes that you talked about pause at this point? Are some proceeding in the traditional branch? Or any color there would be helpful. Chuck Hong: So the ITC was part of the government shutdown, and we filed September 30 against Samsung and to stop them as well as Google and Supermicro, which are major customers of Samsung. And what we're -- just to give you kind of context of what we're trying to accomplish, it is a significant dollar value of memory products coming into the U.S. As we've indicated, we've gone through 5 federal court trials over the last 3 years with Samsung, against Samsung. We won them all, and yet they continue to -- they continue to engage and infringement and selling of infringement. We are committed to shutting them down in the U.S. That's what we're committed to seeing this process through all the way to the end. These guys are beyond the pale in terms of the -- just unapologetic and just -- they just go about ignoring IP rights of U.S. patent holders. So -- we believe that since District Court, they award dollars, but they do not provide since eBay, there is no injunctive relief at the -- from District Court rulings. So ITC is injunctive relief. There is no dollar damages. So the only way to stop people who are completely ignoring U.S. laws and patent laws is to stop their business. And that's what we aim to do. The government shutdown will impact us -- will not impact us at all. As soon as it reopens, our filing will be put on to the Federal Register. And then the 30-day clock will start to a decision on institution. Once the case is instituted, it goes forward, investigating patent infringement as well as patent validity. And the third prong, which is industry, whether these patents are being practiced in the U.S. in terms of U.S. domestic industry and products that are built and shipped into the U.S. -- in the U.S. Those will be investigated and there'll be a decision. We've been to the ITC twice before. We understand the process. We understand the impact that it can create to bring some of the infringing parties to their consensus. So that is what we're committed to seeing that process all the way through to the end. Sujeeva De Silva: Okay. I appreciate that color. And then Gail, maybe you could talk about the litigation expense trend you're expecting from here. I know the ITC expenses are second half '25 and they fall off or they remain? Any color there would be helpful. Gail Sasaki: Sure. Well, we are on track to have reduced our legal fee expense by 50% over last year. ITC expenses will occur in 2026 towards kind of increasing over time towards the end of the year when the trial will actually occur. So we continue to believe that there will be a reduced amount of legal expenses compared to 2024, but probably about the same in 2026 as has been for 2025. Chuck Hong: Suji still on? Sujeeva De Silva: Yes. I'm here. Chuck Hong: Yes. I just -- I kind of ended on perhaps a negative note regarding Samsung. I just want to highlight that there are good actors and bad actors. We have Hynix, which is a licensee. They respect U.S. IP laws. They've licensed from us. They are the #1 supplier of HBM products to NVIDIA in the AI space. And they have also committed -- announced a plan to invest $4 billion in building of the HBM in the U.S and Lafayette, Indiana in a joint venture with Purdue. Now that contrasts completely with a bad actor, who is way behind in the HBM technology. They are a very small player as a supplier into the U.S. for HBM. They have not taken a license in the last 5 years. And they have announced no plans to build HBMs in the U.S. So that, I think, is the contract that we're looking at. It's not everybody is flouting the laws and getting a free ride. There are good actors that abide by the IP laws of the U.S., and there are others. And it provides a huge contrast and we're trying to correct that, create parity amongst the different implementers. They all have to respect the rights of IP holders in the U.S. Sujeeva De Silva: Appreciate you pointing out the model that works through the U.S. there. Operator: This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Backblaze Third Quarter 2025 Earnings Call. [Operator Instructions]. I would now like to turn the call over to Mimi Kong, Investor Relations. Mimi, please go ahead. Mimi Kong: Thank you. Good morning, and welcome to Backblaze's Third Quarter 2025 Earnings Call. On the call with me today are Gleb Budman, Co-Founder, CEO and Chairperson of the Board; and Marc Suidan, Chief Financial Officer. Today, Backblaze will discuss the financial results that were distributed earlier. Statements on this call include forward-looking statements about our future financial results, the impact of our go-to-market transformation, sales and marketing initiatives, cost-saving initiatives, results from new features, our ability to compete effectively and manage our growth, our strategy to acquire new customers, retain and expand our business with existing customers and the impact of previous price changes. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those described in our risk factors that are included in our quarterly report on Form 10-Q and our other financial filings. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them, except as required by law. Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for our GAAP results. Reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC. You can also find a slide presentation related to our comments in the webcast, which will also be posted to our Investor Relations page after the call. Please also see our press release or presentation for definitions of additional metrics such as NRR, gross customer retention rates and adjusted free cash flows. And finally, we will be in New York to participate in the Craig-Hallum Alpha Select Conference on November 18 and the Needham Tech Week one-on-one event on November 20. Thank you for joining us. And I would now like to turn the call over to Gleb. Gleb Budman: Thank you, Mimi, and welcome, everyone, to the call. We delivered strong results this quarter. In Q3, revenue and adjusted EBITDA margin both came in above the high end of guidance, and we continue to be on track to be adjusted free cash flow positive in Q4. Overall company revenue grew 14% year-over-year and B2 Cloud Storage delivered strong results, growing 28%. Now I'd like to take a step back and share how we see the AI industry evolving because AI is becoming central to both our customers and our opportunity ahead. AI is built on models, compute and data. While just a couple of years ago, models were the domain of only a few large providers. Today, they are widely available with literally millions of open source options. So models are no longer a bottleneck for AI innovation. The next component of AI is compute. The GPUs that make up compute have become increasingly available, but access at scale remains challenging, and the market has also become quite fragmented with approximately 200 Neo clouds, such as CoreWeave and Nebius offering GPU capacity for it. That brings us to data, the key differentiator for AI success and where Backblaze helps companies win. Data sizes are exploding as AI expands beyond text to images, audio and video, driving massive storage and performance needs. The teams leading in AI aren't just the ones with the most data. They're also the ones who can aggregate, clean and organize it for today's workloads, move it to whichever Neo cloud they choose, all while preparing it for tomorrow's architectures. Backblaze has already built one of the largest, fastest and most cost-effective storage clouds on the planet, offering throughput of up to 1 terabit per second and priced at about 1/5 that of traditional cloud offerings. Add to that, our free egress and universal data migration that allow customers to easily move their data from other cloud providers where they may feel locked in and then freely send their data to one of the 200 Neo clouds or anywhere else they needed to go. Then layer on our team actively supporting customer success, and it becomes clear why hundreds of AI companies are choosing Backblaze. Highlighting this, Backblaze recently received industry recognition in both cloud security and technology innovation, including an award for B2 Overdrive. These honors reflect the strength of our technology and the pace of our innovation. Now let me share a few customer examples that bring this to life. This past quarter, we signed a new 6-figure deal with an AI start-up focused on large-scale vision language models. The team was small but scaling rapidly and racing to finish key projects. They couldn't predict how their data volumes might grow and needed a high-performance and cost-effective solution that could scale with them. They started self-serve and later engaged our sales team to access even higher performance. B2 Overdrive gave them the performance they needed, and our team made it easy, freeing them up to focus on their critical projects. Another AI customer in the surveillance space expanded their commitment by almost 10x to a 7-figure TCV deal. We won this customer away from a hyperscaler whose platform limited how they could automate their workflow. Our platform offers a valuable multi-cloud upload that streamlined their workflows. They expanded their commitment with us because we offered a predictable and cost-effective way to scale easily. Finally, we had another 6-figure win is powered by Backblaze's white label deal with an app developer in the media space. This was another competitive win from a hyperscaler. The customer was growing fast and needed storage that could support millions of users. After being hit with a surprise roughly $100,000 charge for moving data with the hyperscaler, they came to Backblaze for predictable pricing and scale. Backblaze is now their storage platform, and they will join our 100,000 customers who collectively serve hundreds of millions of end users to our platform. Across all these examples, the reasons customers choose Backblaze are consistent, performance that rivals the biggest clouds, predictable and fair pricing, and people who make it easy to get things done. Whether it's a start-up training models, immediate team moving petabytes, or an enterprise scaling to millions of users, the story is the same, faster, simpler, more affordable, and supported by a team that actually helps. Now I'll share how we see our growth opportunity. In Q3, we grew B2 28%. And for Q4, we now expect B2 to grow in the range of 25% to 28% year-over-year. We're proud of our growth. But this is below the 30% target we set for ourselves at the beginning of the year. To help reach our growth goals, we're launching Phase 2 of our go-to-market transformation, focused on accelerating the velocity of both our self-serve and direct sales motions. For self-serve, we're proud of the consistent growth engine we've built. Now we're going to scale it by making it more frictionless for data-heavy AI use cases and by kicking off robust developer relations. These steps are aimed to deepen our connection with the developer community and make it even easier to adopt our platform. For direct sales, we're building on the progress we've made over the past year. We're adding talent and upgrading our core systems in order to better target customers and improve sales efficiency. To accelerate this, we're also partnering with advisers and a consulting team who has helped both Snowflake and Databricks in their go-to-market execution. We're reinforcing our sales and marketing engine and remain confident in our ability to deliver consistent, durable growth over time. With that, I'll turn it over to Mark to take us through the financials. Marc? Marc Suidan: Thank you, Gleb, and good morning, everyone. We delivered a strong third quarter with results coming in above the high end of our guidance for both revenue and adjusted EBITDA. We have solidified our balance sheet, improved our path to be free cash flow positive, and accelerated revenue growth. We're focused on getting B2 to a Rule of 40, and we are on track to roughly triple our score this year. Now, let me walk you through the details of the quarter. Starting with revenue. Total revenue exceeded expectations. It came in at $37.2 million compared to the high end of guidance, which was $37.1 million. This represents a 14% year-over-year overall growth. B2 grew 28% year-over-year compared to the organic growth of 19% in the same period last year. This represents an acceleration of about 900 basis points this quarter. This improvement was driven by the first phase of our go-to-market transformation. As mentioned last quarter, usage from one of our larger AI customers has been variable as the customers' data storage needs have fluctuated for their business. Overall, industry-wide demand for data storage is expected to grow rapidly, and our platform is well-positioned to support those expanding needs. We're also seeing diversification within B2 across our core use cases, which are live application hub storage, backup, media, and AI-related workloads. In Computer Backup, revenue was flat year-over-year, reflecting the final roll-off of the price increase implemented in 2023. Turning to net revenue retention. Overall, the trailing 4-quarter company NRR for Q3 was 106% compared to 109% in the second quarter. Going forward, we believe it's clear to show in-quarter NRR versus the previously reported trailing 4-quarter average. As an example for Q3, in-quarter NRR for B2 improved to 116% from 109% in Q2, and this was driven by a large AI customer we discussed last quarter. You can see that dynamic on Slide 11 of the earnings presentation. Moving on to gross margin. It was 62%, up from 55% a year ago, reflecting operating leverage and the benefit from our recent useful life study. Adjusted gross margin was 79% compared to 78% last year. Overall, margin performance remained stable. Data center costs are generally rising. However, they are being offset by scale in labor, greater code efficiency, and lower amortized R&D as a percentage of revenue. Operating expenses were 71% of revenue, an improvement from 92% a year ago. This reflects the structural changes that we made last year through our restructuring and zero-based budgeting process. R&D spending held steady in dollars, but declined as a percentage of revenue from 33% a year ago to 30% this quarter. When you combine the R&D expense and capitalized R&D, the improvement is even more pronounced at 35% of revenue, down from 43% a year ago. Sales and marketing came in at 24% of revenue, down from 36% a year ago. We're focused on improving efficiency in our go-to-market model, including reallocating funds to strengthen our top-of-funnel programs and investing in operational go-to-market talent, all while maintaining the same cost discipline you've seen from us over the past year. G&A was 17% of revenue, down from 23% last year. We continue to drive efficiencies across our corporate functions and general and administrative spend. Operating results. GAAP net loss was $3.8 million, a 70% improvement from a loss of $12.8 million in the prior year. On a non-GAAP basis, net income was $1.9 million compared to a loss of $4.1 million last year. Adjusted EBITDA margin reached 23%, almost double the 12% from a year ago and a quarter ahead of our outlook. That performance reflects continued financial discipline and the operating leverage we've built into the model. In Q3, adjusted free cash flow was negative $3.5 million, improving by roughly $0.5 million year-over-year. As we discussed last quarter, we used $2.5 million of our line of credit to fund capital expenditures outside of the U.S., so we can cut our international borrowing rate in half. Balance sheet. We ended the quarter with $50 million in cash and marketable securities, largely unchanged from last quarter. We believe the balance sheet remains strong and provides flexibility to support continued growth and investment. As we announced last quarter, we initiated a modest share repurchase program. In Q3, we repurchased $1.2 million of shares as part of our ongoing work to manage equity dilution. Guidance. For the fourth quarter, we expect revenue in the range of $37.3 million to $37.9 million. We're slightly widening this range to account for the variability we see in certain large customers. B2 growth in Q4 is expected to be between 25% and 28%. We continue to focus on driving operating leverage and remain on track to be adjusted free cash flow positive in Q4. To close, our financial transformation is progressing well. We're reducing equity dilution through our repurchase program, on track to achieve positive adjusted free cash flow in Q4 and continuing to build operating leverage towards GAAP profitability. While we haven't yet reached our 30% B2 growth goal, we expect the next phase of our go-to-market transformation to drive stronger growth. Together, these efforts are building a stronger, more efficient company, one that's on path towards operating at a Rule of 40 profile. Just looking at B2, we started the year with a Rule of 40 score of 9 and are on track to roughly tripling that in Q4 of this year. Operator, please open it up for questions. Operator: [Operator instructions]. Your first question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group. Jeff Van Rhee: Just a couple here. In terms of the sales evolution in Phase 2, talk to me about how you were envisioning the sales sort of evolution. I think you commented last quarter that most reps are more than halfway through the ramp. Are the existing reps ramping the way you had expected? Or was there something you experienced in the sales process that led to you sort of implementing the second phase? Gleb Budman: Jeff, this is Gleb. Thank you for the question. So what I would say is that in the first phase, one of the things we talked about was that our goal was to move upmarket. And so you could see that we've definitely moved upmarket with the multiple 6- and 7-figure deals that we've consistently announced over the year. The Phase 2 for us is about driving the velocity -- of the execution velocity. So it's a slightly different focus. We want to continue to move upmarket and support those larger deals, but we're spending more time focusing on moving things through the funnel more explicitly and more actively. In terms of the reps themselves, most of the reps were hired at the beginning of the year or earlier. So they are largely through their ramps as part of their onboarding. Jeff Van Rhee: Okay. And on the -- just revisit, if you would, on the B2. You had the 30% goal for Q4, and I heard a little bit of commentary there, but just expand on that a bit more. What's explicitly -- what specifically was it that you thought was going to play out that didn't play out? And when do we get to that 30% plus? Gleb Budman: So on our -- from our last earnings call, basically, 2 things happened. One is we had a large customer that we talked about in the prior call that in Q2, the outperformance was in part driven by the variability of a large AI customer. And as we look towards Q4, the variability in part is driven by this same large customer trimming more than we expected. The other thing that drove that is just the larger deals as we move upmarket, a number of them have taken longer to execute. And so the combination of those 2 things have changed our expectations for Q3 somewhat. That's why we're doing Phase 2 of the GTM transformation. We love that we've been able to move upmarket. It's proven that the platform supports these larger customers, it supports these larger use cases. And we also want to have more core predictability in the business. So it's interesting because before we used to have lots and lots of small deals and having lots and lots of small deals provided really great predictability, and we were able to go public on lots of $300 and $2,000 type deals. The challenge with those was it was harder to significantly outperform, significantly rapidly accelerate growth. The bigger deals in moving up market allow us to do that, but we want to focus on increasing that core base of smaller deals to drive that consistency also. Jeff Van Rhee: One last quick one, if I could, on the data variability, Gleb, you mentioned several times on the call. Just talk about how that variability is maybe different than what you had expected from these customers, obviously, as you're getting AI workloads, some new experiences here as to how people are going to use you both in that moment as well as over time. Just a bit more about the variability on the data usage would be helpful. Gleb Budman: Yes. The AI use cases are obviously all evolving very rapidly, and we're trying to support the customers where they are. So the different use cases that we see across AI are things that we are supporting and learning along with the customers. This particular customer that we talked about, as their business goes up and down in terms of the needs for their data, that we support them with that. So the way that we work with customers is many of our customers are pay-as-you go. They enter a credit card and they just sign up and go. Some of our customers, we sign contractual commitments with. And for a number of the contractual commitments, they'll often sign a contractual commitment and then have the ability to scale up above that. And with some of these larger AI customers, they'll sign a contractual commit and then they'll ramp up even faster than that because their business is growing faster than they expected and then sometimes they need to do some pullback. So that's what we're seeing with some of these. The nice thing, obviously, is we have 100,000 customers on B2, we're distributed across a variety of use cases. So it's not it's not all variable AI customers. We still have a lot of core predictability in our business. But we do want to lean in with the AI use cases because we do see that, that is transformative for the industry and where we see a lot of opportunity ahead. Operator: Your next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets, LLC. Eric Martinuzzi: Yes. I'd like to touch on - I know you haven't given a guide for 2026, but I just wanted to learn your expectations for the 2 sides of the business going forward. Obviously, we've got good growth, but not the 30% you want in B2. And then we were flat here in Q3 on the CBU as we got through the last of the price increases. But to put it in broad strokes, we're looking at a year in 2025, where combined, we're at about 14% growth. I know I'm looking for that 14% growth to persist into 2026. But what are you thinking about for longer-term growth rate for B2 and CBU? Marc Suidan: Yes. Eric, this is Mark. So 2025, right, for B2 is on track to be in that mid-20s year-over-year growth rate. 2026, we don't want to give guidance yet, but we feel pretty comfortable it's going to be in that range given what we're seeing now as well as that second phase of that go-to-market transformation. And those larger deals Glen spoke about, if those come in, I mean, it could bring that number higher when they come in, in those specific quarters. On the computer backup, just like we said last time, it would be low to single, mid-single digits, the contraction of that business. We're obviously taking action to try to stabilize that. We probably need more time to come back and report a different outlook there. But for now, those are the right assumptions for B2 and computer backup. Eric Martinuzzi: Okay. And then the restructuring that you announced this morning as well, just curious to know where are we - you talked about some facilities, but it also talked about severance. Where are we cutting back on the headcount that we had versus the end of September? Marc Suidan: Yes. Listen, that is how we're funding that next phase of our go-to-market transformation. Gleb talked about needing that mid-market, high-velocity deal volume to improve. It's done really well over the past year, but we think it should be way better than where it is. And that's the key formula to get to that 30%. So a lot of that restructuring cost is to transform our go-to-market practices. It's to bring on new talent on board. We have started that. So it's a lot more around getting talent that's a lot more operational in their go-to-market skills, know how to use the technology, the data science behind it. So I would say that it's more of a reinvestment versus a cost-cutting exercise. Operator: Your next question comes from the line of Ittai Kidron with Oppenheimer. Unknown Analyst: This is [ Nolan Genvine ] on for Ittai. First, I just want to sort of double-click on these 7-figure customers. You're clearly showing traction in selling to enterprises now, and you've added yet another 7-figure customer this quarter. How many 7-figure ARR customers do you have now? And then how has their expansion dynamics evolved in recent quarters versus sort of the smaller cohort? And then I have a follow-up. Gleb Budman: No, thanks for joining us, and thanks for the question. One clarification I would say is we have these 7-figure deals. The interesting thing is they're not all enterprises. They're heavy users of data. right? And so one of the things that we've seen is that customers are generating large volumes of data and needing high performance for those data sets. The AI-powered video surveillance customer that I mentioned, they're not an enterprise company, but they're a 7-figure deal. So, and that actually, I think, bodes well for us for the future because these smaller mid-market companies that have high data needs are generally faster moving than the traditional enterprises, and there's more of them out there. So that's one thing I would just say in terms of outlook and opportunity for us. In terms of the number of them, we've generally announced 1 or 2 per quarter over the last year. So it's not a large number of these 7-figure deals, but it's considering that in our first roughly 15 years of the company, we signed 1. And in the last year, we've highlighted at least one a quarter, I think is a great proof point to say that when we said we were moving upmarket, we moved up market. Marc Suidan: Yes. And what I'll add, Nolan, is last quarter, we shared the number of customers with $50,000-plus ARR. It was up in Q2, 30% year-over-year. In Q3, it was up 41%. So we're maintaining good momentum on that front as well. Unknown Analyst: Got it. That's very helpful. And then I know you're not giving '26 guidance. But how should we think about the potential catalysts heading into the next fiscal year, things like overdrive ramping, this sort of Phase 2 of the go-to-market transformation? Could you just maybe put a finer point on what you think could maybe drive upside or downside, just to the sort of current growth rate? Gleb Budman: Yes, it's a good question. So the go-to-market transformation Phase 2 is certainly something that we're leaning into heavily, right? We're putting a lot of focus on them in terms of talent system upgrades, leveraging advisers, and the consulting team. We believe that there's a lot of opportunity in driving the ability and execution for us to get to market, faster with the products that we have. In terms of B2 Overdrive, we announced that product line fairly recently. We've already closed multiple 6-figure deals on there, which is, I think, a great sign that it has product-market fit. It's we believe it's the highest throughput per dollar offering on the market, and that's a great fit for customers that really need that performance. One of the other things that we've seen on Overdrive, which has been interesting, is that we've seen customers come to us because of Overdrive. They heard about Overdrive, they heard about the performance availability, and they came to us for that. And then when they showed up, they realized that our B2 standard offering is actually quite a high-performance offering, and it was sufficient for them. So I think it's changed some of the perception around what we offer. And so even customers that aren't signing up for Overdrive are often coming to us with these higher performance needs, which is a great direction for us as we become a more strategic partner for them. Overdrive provides up to 1 terabit per second of throughput. So it's a blistering fast offering for them. So I do think that the GTM transformation is the thing that we look at as key to the overdrive offering. The other thing that I would just mention is I don't want to undersell the Phase 1 transformation that we did, right? The Phase 1 transformation was all about moving upmarket, and that is continuing to be an important catalyst for us, including for 2026. Mark mentioned that the big deals are something that can accelerate us even further, and that's something that we're excited about. The last thing I'll just mention is that the GTM Phase 1 transformation, I mean, it doubled pipelines, it doubled bookings, doubled channel. So it did help quite a bit. And so we're excited for Phase 2 of that. Operator: Your next question comes from the line of Simon Leopold with Raymond James. Simon Leopold: I wanted to ask about this Phase 2 initiative, in that I don't imagine there are free lunches and have to assume that there's some investment involved. I know earlier, you talked about sort of reallocating. But if we think about it, your sales and marketing have been running between roughly 21% and 23% of revenue. What are you budgeting for next year? How should we think about either a dollar basis or a percent of revenue basis, but some metrics to try to get an understanding of what investment you're making for this Phase 2 initiative? Marc Suidan: Simon, it's Mark. The percentage of revenue for sales and marketing should stay stable as a percentage of revenue. The funding is going twofold. The restructuring allows us to fund the one-time cost that's not in that percentage of revenue. That allows us to drive the transformation work, which is really to rejigger all our go-to-market systems to make them work better together, cleanse the underlying data, and drive that data science capability I was talking about. The talent refresh we're doing is within existing OpEx budget, right? As one of you highlighted earlier, yes, there are severance costs that are one-time charges that fit into the restructuring. But on a recurring basis, when we finish this as a percentage of revenue, it should be pretty stable. Simon Leopold: Great. And then in terms of the outlook for B2, slight downtick, nothing to be embarrassed about, high 20% growth. But what changed in your mind versus your expectations when you set the goal? What's different? Marc Suidan: Well, we set the goal all the way back when we launched our first phase of that transformation, which was exactly a year ago. That was a while back. That is our aim. Frankly, it remains our aim. And our Phase 1, as Gleb said, doubled our pipelines, doubled our bookings, doubled our channel business. What we noticed candidly is our inbound motion is really strong, right? Like we addressed a lot of our technical marketing content, or blogging. We started doing more events and webinars, and all that really improved our inbound. I mean, our inbounds are up substantially. The inbound pipeline is up 100% year-over-year. Our outbound motion is newer to the company. So that muscle is newer. That's the muscle we're working on fixing now in this next phase of this transformation. And it's unfortunately, one of these things, like until you get into it, you don't know how much you don't know. And we're realizing it's a muscle that needs to be a lot stronger to make it successful, and we're hard-charging at it now. Our aim is that, when we do our Q4 earnings release in February to give a lot more details around what makes up that Phase 2 go-to-market transformation. When should you expect a change in the outcome from it, an improvement, and how that would address the year-over-year B2 revenue growth? Operator: Your next question comes from the line of Zach Cummins with B. Riley Securities. Zach Cummins: Gleb or Mark, either one. I was wondering if you could give a little more context around some of the larger deals in the pipeline. It sounds like maybe those were pushing a little to the right when it came to the B2 side of the business. So any additional context around just the pipeline that you're seeing with some of these larger deals and maybe the reason that some of them pushed to the right? Marc Suidan: Yes. Thanks, Zach, for the question. So one thing I'll say is when I looked at some of the deals and dug into it with Jason on the sales side, frankly, there wasn't any pattern in them. They were kind of random reasons. signer got sick, a different project internally came up that has to take priority, et cetera. So there wasn't any kind of clear pattern for why, but it just spoke to us about that in the small deals, a lot of times what happens is it's one person who is the person that's interested, the decider, the buyer, the purchaser, the user, and they go in, they make a decision and they go. In these larger deals, it's just more complex where you have a buying committee, you have the various different oftentimes security compliance reviews. There are sometimes different departments that need to be involved for how it's going to get used, how the migration is going to happen, et cetera. So it's just one where as we're moving upmarket, we're closing these bigger deals, and that's fantastic. And at the same time, we want to be realistic about that some of them take longer than I think we were seeing because we also have seen some large deals close very quickly. The BT Overdrive deal at the beginning, the first one that we announced last quarter closed incredibly quickly. Some of the customers that I talked about in my prepared remarks, when I was looking at them, the 6-figure deals that from start to finish were three months. And that's quite quick for a 6-figure deal from the first conversation to fully onboarded. But we're also realizing that not all deals move that quickly. Zach Cummins: Understood. And in terms of the Phase 2 of the transformation, I'm sure we'll get much more detail in your Q4 earnings call. But can you give us a sense of some of the things you're looking to improve within the self-serve motion? Is this largely targeted towards some of these faster-moving higher data usage customers and reducing the friction there? Or anything you can provide there would be helpful. Marc Suidan: Yes. It's interesting because we built the company basically on the self-serve motion, right? When we went public, almost the entire business was driven by self-serve. We had a very, very nascent sales motion at the time. And so the great thing was that we built a blog that a few million people a year would read that drove a lot of inbound interest into the company. We had people will be able to sign up, enter their e-mail just enter a password and go and then try it and then get a credit card and sign up. And as we moved upmarket, we had said concretely at the beginning of the year that our focus was going to be on that upmarket move, and we were not going to be doing a lot to change the self-serve motion. But at the same time, our team was focused on that the whole SEO world was changing, right, with the way that companies and individuals were searching was changing and moving to AI use cases where people would look on ChatGPT or Anthropic or whatever to find information. And so, they actually leaned in on making sure all the content was updated and positioned well to be read by these applications. And one of the things we saw was that our self-serve accounts account creation was -- is actually up 56%. And if you -- as you look to a lot of the companies out there for whom they're self-serve or driven by inbound type content, a lot of them were down quite a bit because they hadn't adjusted to the new AI chat type of search algorithms. So the team leaned in and supported that quite well. Going forward in this Phase 2, one of the things that we're doing is really focusing on how these new AI native start-ups and developers build themselves and ensuring that we're well integrated through the whole life cycle of those workflows and making sure that it's really easy for them to learn about and then adopt the platform. So it's a lot of work in terms of making sure that the content, the guys, but also the flows and the integrations are all there to support those data-heavy use cases. One thing I'll mention is one of the customers I gave on the call, they came in as self-serve. They started just by themselves. And then as they wanted even higher performance, even larger deals, they requested to reach out to the sales team, and they had a conversation with us and then they bought B2 Overdrive. And that's a motion that we love to see. Operator: Your next question comes from the line of Mike Cikos with Needham. Jeff Hopson: This is Jeff Hopson on for Mike Cikos. I just wanted to see if there is any more info on how the power -- the Powered by white label solution is going. Obviously, NeoClouds is coming more popular trend, and it seems like that could be a good place for that or any sort of partnership to offer their customers more flexibility. So maybe just any info on that opportunity. Gleb Budman: Thanks, Jeff. Good to have you on. So we're actually pretty excited by the Powered by. As you saw in my prepared remarks, one of our largest deals this quarter was a Powered-by deal. We also have seen some of our channel partners actually adopting Powered by where instead of trying to resell and integrate at the customer level, they actually build it into their own offering and offer it directly. And then, same like you said with the NeoHubs, we have various discussions that are in progress around that front. It's certainly an exciting opportunity. There's about 200 of them out there. So they all have GPUs, and they all have storage needs. So we engage with them today in a variety of ways where we service our customers using the NeoCloud by providing this open platform, free egress, high throughput, but also are in conversations with some of them to help them with their storage needs directly. Jeff Hopson: And maybe hardware storage has been on the top of investors' minds recently as AI video generation comes into the forefront. And I know you guys called out some AI video wins with customers. Just curious if you're seeing an actual uptick in AI video companies just in the past 6 to 9 months, as those models have kind of have become more popular. Gleb Budman: I'm sorry, can you repeat the very first part of the question? Did you say hardware storage? Jeff Hopson: Yes. We've seen in the market hardware storage has become.. Gleb Budman: So initially, AI was all about text, right? It was generative AI for text. Then it became generative AI for images, then audio, and now video. Obviously, each of those is in order of magnitude bigger in terms of the data sizes. So, video is a very data-heavy cloud format. So we absolutely are seeing customers signing up for that. I was looking, we had one of the interesting AI, Gen AI, video companies was a recent customer this quarter. There was another large one in the prior quarter. And we have hundreds and hundreds of AI companies. So obviously, I don't know all of them, but just as they come up, I see ones that catch my attention. So it's something where they create models for the video that requires a lot of data on the front end, then it requires the data to generally get sent to one of the Neo cloud providers for the model creation. And then the inferencing itself, where they're generating the video, that video needs to go somewhere. And so we're supporting customers on the various fronts. One thing I'll tell you is that AI in general is a space that we're seeing significant adoption. Today, about 1/4 of all of our new business is coming from AI companies. Over time, it's going to become harder to say what is an AI company and what is just a company using AI. But today, about 1/4 of that new business is actually coming from companies that are specifically in the AI space. So it's an area that we're excited to lean into. Operator: Your next question comes from the line of Rustam Kanga with Citizens. Rustam Kanga: Great to see the outperformance and new high watermark on the net income and adjusted EBITDA there. Mark, given your prepared remarks, it sounds like there's going to be a lot more honing in on the operational go-to-market skills in Phase 2. And given the success from Phase 1 moving upmarket, getting these larger deals, perhaps you have some better picture on the talent most equipped for what you're looking for in Phase 2. Is that reps with a prior focus on cloud computing and storage or more well versed for lack of a better term, the language of AI? Ultimately, any insights you can share on what kind of reps have been the most successful on the direct sales front and that you might be looking to replicate in Phase I? Gleb Budman: This is actually Gleb. I'll start, and then Mark can join in if he wants to add as well. So first of all, what I'll say is in terms of talent, a lot of the talent is actually on the systems and operational side of it. So we're looking for a top-tier Rev ops person, the consulting firm that we're working with, we're doing a large project around both the systems transformation as well as the sales enablement and execution side. So Mark mentioned that we have a success with inbound. At the same time, what we see is there's a lot of stuff that comes at the very top of the funnel. And then there's a lot of opportunity to be more efficient and effective in having it go through the funnel. And then on the outbound side of it, one of the things that we realized is that we can do better with targeting the right types of customers who are ideal customer profiles, both in terms of identifying them and also in terms of how we reach out to them. So a lot of the work in the transformation isn't even specifically about the different reps. It's about the infrastructure of people and systems around the reps to help them. Marc Suidan: This is Mark. Our reps have done well. Our win rate is 30% from opportunity to close, which is a very healthy win rate. So we just want to be flowing more opportunities through that team. And then as that opportunity flows through that team, you start expanding capacity and optimizing capacity within. So as Gleb said, there's a lot more around making things available to every stage of the process in a way where people are following up at the right time. They got the right content, the right messaging, the multimodal approach to the customer, when you place advertising versus e-mail versus text message. So there's just an incredibly scientific way of doing that these days. And I mean, the people helping us are people who help companies like Snowflakes and Databricks. So they bring the best-in-class on that process. And we want to adopt it and drive a lot more volume through there. Operator: That concludes our question-and-answer session. I will now turn the call back over to Gleb Budman for closing remarks. Gleb Budman: Thank you, everyone, for joining us. With the double beat this quarter and how well we're positioned to help companies with AI workloads, we're enthusiastic about our opportunity ahead. I want to thank our employees, our customers, our partners, our investors for being on this journey with us as we build this core storage backbone of the Internet. For our investors, we look forward to seeing you at the Needham Conference and at the Craig-Hallum conferences this month and chatting with all of you next quarter. Thank you. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Q3 2025 Cummins Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Arens, Executive Director of Investor Relations. Thank you, sir. You may begin. Nicholas Arens: Thank you, Maria. Good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the third quarter of 2025. Participating with me today are Jennifer Rumsey, our Chair and Chief Executive Officer; and Mark Smith, our Chief Financial Officer. We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information that you will hear or be given today will consist of forward-looking statements within the meaning of the Securities Exchange Act of 1934. Such statements express our forecasts, expectations, hopes, beliefs and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of risks and uncertainties. More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission, particularly the Risk Factors and section of the most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During the course of this call, we will be discussing certain non-GAAP financial measures, and we will refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website within the Investor Relations section at cummins.com. With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off. Jennifer Rumsey: Thank you, Nick. Good morning, everyone. I'll start with a summary of our third quarter accomplishments and financial results. Then I will discuss our sales and end market trends by region. Finally, I'll provide an update on how we are navigating the evolving trade and policy landscapes, along with our market outlook for the remainder of the year. Mark will then take you through more details of our third quarter financial performance. Before getting into the details of our results, I want to take a moment to highlight a few major accomplishments from the third quarter. In September, we announced a collaboration with Komatsu to develop hybrid powertrains for surface haulage heavy mining equipment. This joint development effort will leverage the breadth and scale of Komatsu's and Cummins' global capabilities to enable the acceleration of optimized hybrid solutions for mining. Retrofit hybrid solutions hold the potential to help mining customers accelerate their decarbonization journey today while lowering the cost of operations of their installed fleet assets. We are excited about this opportunity to bridge current operational needs with future low-carbon goals to support our customers' sustainability efforts. Additionally, our latest 15-liter engine delivered standout results during this quarter's Run on Less –- Messy Middle event hosted by the North America Council for Freight Efficiency. Three of the 13 participating fleets ran the new X15N natural gas engine through some of the most demanding duty cycles of the demonstration, showcasing its ability to deliver true heavy-duty performance while unlocking the cost and emissions benefits of natural gas. At the same event, our X15 diesel led in fuel economy and operational efficiency, reinforcing its position as a benchmark for dependable high-performance power. These results highlight the growing adoption of Cummins' technologies and the tangible value customers are experiencing from our advanced powertrain solutions, all produced here in the U.S. Now I will comment on the overall company performance for the third quarter of 2025 and cover some of our key markets. Sales for the third quarter were $8.3 billion, a decrease of 2% compared to the third quarter of 2024. Lower sales were primarily driven by weaker North America heavy and medium-duty truck demand with unit volumes declining 40% from a year ago, which was largely offset by continued strength in our global power generation markets, higher light-duty truck volumes and favorable pricing. EBITDA was $1.2 billion or 14.3% compared to $1.4 billion or 16.4% a year ago. Third quarter 2025 results included $240 million of noncash charges related to our electrolyzer business within the Accelera segment, reflecting lower demand expectations due to reduced U.S. government incentives and slower market development internationally. Excluding those charges, EBITDA was $1.4 billion or 17.2% of sales, an increase of 80 basis points from a year ago as the benefits of higher power generation and light-duty truck volume, pricing, operational efficiencies and lower compensation expenses more than offset declines in North American truck volumes and the unfavorable impact from tariffs. We did increase the proportion of tariff costs recovered through pricing and other mitigation actions in the third quarter compared to the second quarter. However, the magnitude of total tariff costs increased from Q2 as expected and the net impact to Cummins was negative year-over-year. Our third quarter revenues in North America decreased 4% compared to 2024. Industry production of heavy-duty trucks in the third quarter was 46,000 units, down 34% from 2024 levels. While our heavy-duty unit sales were 16,000, down 38% from a year ago. Industry production of medium-duty trucks was 20,000 units in the third quarter of 2025, a decrease of 51%, while our unit sales were 17,000, down 55% from 2024. We shipped 40,000 engines to Stellantis for use in their Ram pickups in the third quarter of 2025, up 44% from 2024 levels, driven by a ramp-up of model year '25 product, which was launched earlier this year. Revenues for North America power generation equipment increased 27%, driven by continued strength in data center demand. Our international revenues increased by 2% in the third quarter of 2025 compared to a year ago. Third quarter revenues in China, including joint ventures, were $1.7 billion, up 16% from a very weak quarter last year as stronger unit demand was partially offset by unfavorable product mix and weaker part sales. Industry demand for medium- and heavy-duty trucks in China was 311,000 units, an increase of 50% from last year. Our sales and units, including joint ventures, were 41,000, an increase of 35%. The increase in the China market size was primarily due to higher-than-expected domestic demand driven by NS4 scrapping incentives. Industry demand for excavators in China in the third quarter was 54,000 units, an increase of 22% from 2024 levels. Our units sold, including joint ventures, were 9,000, an increase of 18%. The increase in the China market size is primarily driven by domestic rural development and small infrastructure projects as well as strong export demand. Sales of power generation equipment in China increased 26% in the third quarter due to accelerating data center demand. Third quarter revenues in India, including joint venture, were $713 million, an increase of 3% from a year ago as stronger demand across markets was partially offset by depreciation of the rupee against the dollar. Industry truck production increased 6% from 2024, while our shipments increased 8%, driven primarily by domestic demand recovery as well as a pre-buy in advance of the potential goods and service tax rate changes. Power Generation revenues increased 41% in the third quarter, driven by strong data center demand. To summarize, we achieved strong results led by record performance in our Power Systems and Distribution segments, which were offset by sharp declines in the North America heavy- and medium-duty truck demand, which negatively impacted our Engine and Components businesses. We expect the near-term weakness in North America on-highway truck markets to persist at least through the end of this year. Across all North America on-highway applications, we anticipate unit shipments declining approximately 15% from third quarter levels with most of the reduction expected in light- and heavy-duty trucks. This reflects some normalization in light-duty trucks after a strong Q3 ramp-up in the new model production along with fewer production days in the quarter and continued weakness in heavy-duty trucks. While we believe Q4 on-highway Engine production could mark the bottom of this cycle, the pace of recovery in these markets will depend on broader economic sentiment and the clarity of trade and regulatory policies. While near-term challenges remain in our shorter cycle markets, we continue to see strong demand for power generation equipment beyond this year. The global trade and policy landscapes remain dynamic, presenting ongoing challenges across our industry. As anticipated, tariff costs increased in the third quarter. We are nearing full recovery for those tariffs announced prior to the third quarter and are currently assessing any incremental impacts from the more recent announcements, including the medium- and heavy-duty vehicle Section 232 proclamation. We believe, overall, we are well positioned to support our customers and keep the U.S. economy moving with our long-established strategy of making products in the U.S. for the U.S. market. Rising geopolitical tensions could also pose risks to semiconductor supply and other products that utilize rare earth minerals, potentially impacting our supply chain and broader industry production. So far this year, we have not experienced significant disruptions to our production, and we are actively monitoring this evolving situation and taking steps to mitigate risk where we can. The reduction of government incentives in the U.S. to support the adoption of green hydrogen, along with slower-than-expected market development in some international markets has contributed to significantly lower demand for our electrolyzer products. As a result, we are undergoing a strategic review of our electrolyzer business to assess the best path forward, and there may be further charges as we respond to a very weak demand outlook. 2025 has presented significant challenges for our industry, as I've outlined, requiring us to focus even more on cost containment and risk mitigation than we had anticipated at the start of the year. Our experienced leadership team and dedicated employees have worked tirelessly to navigate these dynamics and also capitalize on the growing demand for power generation equipment and significantly improve company performance cycle over cycle. Looking ahead, we are hopeful that global trade policy will stabilize and that the administration's review of the 2027 EPA regulations will conclude in the coming months. This clarity will be critical for our industry and will support our plan to reinstate guidance for 2026 in February. Now let me turn it over to Mark. Mark Smith: Thank you, Jen, and good morning, everyone. We delivered strong results in what can be best described as a tale of 2 economies, certainly here in the U.S. Key takeaways today are: number one, business trends in the third quarter played out as we communicated at a high level 3 months ago. Demand for our Power Systems and Distribution businesses remains very strong, driven in part by rising demand for backup power for data centers. U.S. truck production, on the other hand, slowed sharply with our shipments in heavy- and medium-duty truck engines down 27% from the second quarter, right in the middle of our uninspiring projection of a decline of between 25% and 30%. Our margins were strong with sales growth in Power Systems and Distribution converted into EBITDA margin expansion and cost containment efforts across the company helped mitigate the impact of declining truck volumes in the U.S. And thirdly, also as we projected, the negative impact of tariffs continued to grow in the third quarter. However, we managed the net hit to our profitability through price recovery and other actions, and the proportion of cost recovery in the third quarter increased sequentially. Fourth, our operating cash flow was strong at $1.3 billion in the quarter. Amongst those highlights, it's worth reinforcing that we're extending our track record of meaningfully improving our performance cycle over cycle. Now let's take a little closer look at our results. Our revenues were $8.3 billion, down 2% from a year ago. Sales in North America decreased 4%, while international revenues increased 2%. EBITDA was $1.2 billion or 14.3% of sales for the quarter compared to $1.4 billion or 16.4% of sales a year ago. Third quarter 2025 results included $240 million of noncash charges related to our electrolyzer business within the Accelera segment. Excluding those charges, EBITDA was $1.4 billion or 17.2% of sales. The higher EBITDA percent, excluding the noncash charges, was driven by higher power generation demand and light-duty truck volumes, pricing, strong operational efficiencies and lower compensation expenses, all of which was partially offset by lower North American truck demand and the unfavorable impact of tariffs. Now I will go into more -- a little bit more detail by line item. Gross margin for the quarter was $2.1 billion or 25.6% of sales compared to $2.2 billion or 25.7% of sales last year. 2025 margins included a $30 million noncash charge for inventory write-downs for our electrolyzer business, which were part of the previously mentioned noncash charges for Accelera. Excluding those charges, gross margin percent was 26%, improved from the prior year as a result of higher power generation demand and light-duty truck volumes, pricing, operational improvements, all offsetting negative truck and tariff impacts. Selling, admin and research expenses were $1.1 billion or 13.6% of sales compared to $1.2 billion or 13.8% of sales and reflected strong cost control across the company. Joint venture income of $104 million increased $5 million from the prior year. This increase was driven by higher China volumes within our Engine and Power Systems segments. That was the primary driver. Other income decreased to a negative $186 million compared to $22 million of income from the prior year, which was primarily a result of the $200 million noncash goodwill impairment to the electrolyzer segment. Interest expense was $83 million, flat with the prior year. The all-in effective tax rate in the third quarter was 32.7%, which included $36 million or $0.26 per diluted share of increased tax expense related to the One Big Beautiful Bill Act as a result of reduced foreign income deduction and research and development credits. We do anticipate cash benefits from our elections under this recent U.S. tax legislation, but the current period income statement impact was negative. All-in net earnings for the quarter were $536 million or $3.86 per diluted share compared to $809 million or $5.86 per diluted share a year ago. Accelera noncash charges were $240 million or $1.73 per diluted share. Excluding the Accelera charges and the impact of adopting the recent U.S. tax legislation changes, our net earnings were $812 million or $5.85 per diluted share, down just $0.01 on a 40% decline in U.S. truck volumes. Operating cash flow was $1.3 billion compared to $640 million a year ago. We have significantly improved our credit metrics since absorbing the Meritor acquisition and are now in a position of greater flexibility for capital allocation. Now let me comment a little bit more on segment performance and the remainder of 2025. Tariff costs impacted all of our operating segments. In the interest of time, I'm not going to call that out 5 times as I discuss each individual segment performance. For the Engine segment, third quarter revenues were $2.6 billion, a decrease of 11% from a year ago. EBITDA was 10%, a decrease from 14.7% as weaker North American and heavy-duty truck volumes, the costs and additional overhead of investing and deploying new engine platforms ahead of the 2027 emissions regulations, some weaker aftermarket sales were partially offset by higher volumes and pricing related to the launch of updated products in light-duty markets and overall disciplined cost management. Components segment revenue was $2.3 billion, a decrease of 15% from a year ago. EBITDA was 12.5% compared to 12.9% of sales a year ago as weaker on-highway demand in North America was partially offset by operational efficiencies, tight cost management and lower product coverage costs. In the Distribution segment, revenues increased 7% from a year ago to a record $3.2 billion and EBITDA was also a record 15.5% compared to 12.5% of sales a year ago, driven by higher power generation demand and higher aftermarket earnings. In the Power Systems segment, revenues were a record $2 billion, an increase of 18% from a year ago. EBITDA dollars were also a record at $457 million, increasing as a percent of sales from 19.4% to 22.9%, driven by strong volume, particularly in data center applications, positive pricing and effective capacity expansions in a cost-effective way. Accelera revenues increased 10% to a record $121 million as increased e-mobility sales partially offset lower electrolyzer installations. Our EBITDA loss, excluding noncash charges, of $96 million compared to an EBITDA loss of $115 million a year ago, reflecting a lower cost base resulting from the actions that we took in the fourth quarter of 2024. In summary, we delivered strong profitability for the third quarter as a result of improved operational execution, strong demand in power generation markets and pricing that more than offset the sharp declines in North American truck markets and unfavorable impacts from tariffs, although it has to be noted that all of these factors were not uniform across each individual segment. While we saw an increased impact from tariffs in the third quarter, we've worked hard to mitigate the impact and expect to enter the fourth quarter close to a price/cost neutral position for tariffs or for those tariffs that were announced prior to the third quarter. The ongoing addition and adjustment of tariffs continues to present challenges. In summary, our third quarter results underscored Cummins' strong financial position and ability to navigate ongoing uncertainty. Our diversified portfolio and global network leave us well positioned to support our customers and continue to drive improvement in performance cycle over cycle. As we've discussed, we expect demand for Power Systems and Distribution to remain strong through the fourth quarter and going into 2026. At the risk of sounding cautiously optimistic, I hope that demand in North American on-highway markets is close to bottoming in the fourth quarter in what has been a protracted and difficult slowdown. We do anticipate a further 15% decline in our engine shipments to on-highway markets in the fourth quarter compared to the third quarter. We are hopeful of reinstating our guidance in February as we have more -- we hope to have more clarity on trade and regulatory policies that hopefully will provide stability for the North American truck industry and the broader industrial economy. As these markets recover, we are confident in our ability to build on this year's strong performance and continue delivering value to shareholders. Now let me turn it back over to Nick. Nicholas Arens: Thank you, Mark. [Operator Instructions] Operator, we are ready for our first question. Operator: [Operator Instructions] Our first question comes from Jamie Cook with Truist Securities. Jamie Cook: Congratulations on a nice quarter. I guess 2 questions. One, Mark, how you're thinking about Engine margins in the fourth quarter and the ability to cover tariff costs or how to think about margins would be my first question. I guess then just my second question. As we think about Power Systems, obviously, the margins were very strong in the quarter. Just trying to think through how we think about 2026, the ability to ramp production more? How you're thinking about price cost? And I guess, Mark, do we need to raise the margin targets in Power Systems? Mark Smith: High-quality questions to answer. Let's start with the Engine business, and then Jen can comment on Power Systems. Yes, I think there are a number of things that the Engine business is dealing with that provide great complexity, right? We've got product changeover. We're preparing, hopefully, to launch new platforms. We've got some additional extra costs. We saw some slowdown in parts in the third quarter, and we're having to maintain this higher engineering budget until we get through the product launches. Having said all that, they're doing a lot. The leadership team within the Engine business across the company doing a lot to manage their costs. Hopefully, we're getting towards the low point. So I think, yes, I wouldn't expect with what I know right now to see a dramatically different performance from the Engine business, albeit on lower volumes in the fourth quarter. Clearly, volume is a temporary downward pressure given short quarters and inflated ramp-up, which we're excited about on the Ram pickup, which will kind of ease a bit. But overall, I think, well, hopefully, we're moving towards the bottom in terms of the pressures on the Engine business and Components. Jennifer Rumsey: And Jamie, on the power gen, we've -- obviously, we've seen really strong performance from both Power Systems and Distribution business. In Power Systems, in particular, we've been on a couple of year journey to really fix some of the underlying performance of that business, look at rationalizing the products that we're offering, how do we leverage the footprint that we have, get more strategic on how we're pricing in the market. And we did that at the same time that the power generation demand has grown at a really high rate, and we've been able to invest modestly in capacity expansion, about $200 million, bringing in new products kind of exactly the right time. So that really has been firing on all cylinders, if you would, and delivering incremental margins that are touching on 50%. So what I would say is we are committed to continuing to invest for profitable growth in that business. We had record order intake in Q3. So we think that the demand remains strong, in particular for data centers and that we will continue to invest as it makes sense in capacity and products to profitably grow and improve business performance, but I would not expect it to stay at that trajectory of incremental margin improvement as we go into future years. Operator: Our next question comes from Angel Castillo with Morgan Stanley. Angel Castillo Malpica: Congrats on another strong quarter here. Jen, I was hoping you could just kind of expand on your last comments that you just made about capacity additions. I think at this point, you're well kind of ahead of your expectations at Investor Day on data center sales. And as you mentioned, you already have that doubling of kind of large diesel engines capacity underway. But just in light of kind of the stronger demand, can you maybe walk us through what work or kind of assessments you might be doing on the back end to understand whether there is a need or a desire to kind of do either additional capacity investments in large diesel engines or potentially and maybe more importantly, are you exploring any potential for expanding your lines on the natural gas engine to kind of increase to the larger engine sizes to perhaps pursue some of the kind of prime power opportunities that we're seeing out there for data centers as they look for other prime power kind of speed to power opportunities? So just kind of any comments on the kind of this longer-term backdrop given the strong demand we're seeing? Jennifer Rumsey: Yes. So first, I'd say our focus has really been on this capacity investment that we've talked about. We're reaching the end of that doubling in capacity on large engines, as you noted, and position has heavily been in the backup power for data centers with the products that we have that we're selling into the market today. I'm really pleased with the execution of that team. We've tracked kind of ahead of schedule on that capacity expansion. We're reaching the end as we come to the end of the year. And just to give you a sense, in 2024, for data center power generation, our total revenue for the company was $2.6 billion. About half of that was in Power Systems. About half of that was in DBU because one of the unique things that we have is engine, some of the key components and auxiliaries that we sell to that market plus the channel. So we're getting benefit in both PSU and DBU. For '25, we expect that revenue into the data center market is going to be up 30% to 35%. It's been ramping up Q4 last year. We had a nice bump up, continuing to ramp up this year. And so we'll be kind of at that full run rate on that product expansion for data centers. And then that leads to kind of the second part of your question is really focused now on what's next? Are there additional places where we want to do a capacity expansion of the products that we have because we think that, that demand in that market is going to remain strong? So we're actively looking at that. With the products that we have, engines for peak shaving, should we invest in prime power engines or more natural gas engines? So no decisions there. But certainly, those are things that we're looking at, and we'll continue to share as we make decisions on where we want to go next in the data center. Mark Smith: Yes. And then just on the component technologies, we're also selling to other customers as well, somewhat akin to the components business story. So yes, it's exciting to be talking about investment with visibility and the returns in that business. Angel Castillo Malpica: That's very helpful. And then just for my follow-up, Mark, on the Section 232, could you help us quantify, I guess, how much the headwind is in 3Q and 4Q on kind of a gross basis? And any comments or kind of way to maybe put guardrails around the potential for getting a similar rebate on engines manufactured in the U.S. as we've seen, I think, the U.S. trucks manufacturers get? And what is kind of the financial impact of that as we think about potentially 2026 if getting such a rebate? Mark Smith: Tell you what, I've got exactly the same questions that you've got. And we've got -- we need to know a lot more details than we've currently got to be able to predict that. What I will say is we're in a -- we are a strong manufacturer of engines in our plants here in the U.S. So we're really well positioned to help our customers and navigate through. But honestly, all these modelings, I know it's important in some regards, but the actual details, there's 5 or 6 questions that we need a lot more details to be able to calculate it, let alone communicate it. So what I would say is we're in a strong position given our footprint, and we'll remain a strong partner to our customers through all of this. And you can generally tell from our tone that stability going forward would be really, really helpful. For what is outside of a broad economic recession or what I'd call a hard emissions change, this is the sharpest decline in truck orders that many of you who have been here a long time have witnessed. And it's not all down to tariffs, but they also don't help with that uncertainty. So look forward to more clarity, even more so the stability, but we're in a good position overall. And we're trying to work through all these collaboratively with customers and suppliers. It's been a huge demand on all participants. Operator: Our next question comes from David Raso with Evercore. David Raso: Thinking about a delta between '25 and '26, the actions taken in Accelera sort of set up an interesting dynamic there. What percent of the losses right now are electrolyzers? How should we think about the actions taken sort of the decision around that business? How much that can improve the size of the losses from '25 to '26? Mark Smith: Yes. What I would say is all we've recorded in this quarter, the really noncash impairment charge is mostly goodwill write-down, which is disappointing, but necessarily given the weaker outlook. So I would say what we've done really doesn't so far, David, hasn't -- doesn't do much to change the trajectory. But as Jen pointed out, we obviously have been and continue to look very closely at further actions we can do to reduce the rate of losses. It's less than half of the total of the overall Accelera segment. But yes, watch for updates on that from us. David Raso: Okay. And actions that would help reduce that loss. I mean once you make that decision on the write-down, I would think there's harder decisions playing out behind the scenes on cost. Are those actions that could help '26 or is there a longer time frame when I think of the delta between '25 and '26? Mark Smith: There are different types of actions, but we are conscious if there's a lower demand environment, we're not -- nobody is comfortable sitting at the losses that we're at when the demand environments change. So we're looking at all that, and we'll be transparent when we've concluded that here, but we're working on it right now. Jennifer Rumsey: It's fair to say strategically, we're continuing to look at the Accelera portfolio in light of how markets are moving, slowdown that's happening and what technologies we think are most likely to win. And then investing in the places that we see the opportunity to position ourselves for the medium and long term and looking at how we reduce losses in other areas. At the end of last year, we did that in the fuel cell part of the business, and we're continuing to execute some of those changes. And now we're looking at electrolyzers, as Mark noted. Mark Smith: It's fair to describe the decline in revenue outlook as sharp and dramatic and merits further close review, which is ongoing right now. Operator: Our next question comes from Rob Wertheimer with Melius Research. Robert Wertheimer: Thanks for all the comments on direction. It's very helpful. On nat gas and data centers and prime power, I mean, Cummins obviously has very successful nat gas platforms in different engines. So I wonder if you could give us a mini teach-in on what that entails? Is it a hard engineering challenge to bring it to large engines? Is it you need a lot of operating hours? Maybe what goes into that decision? And then I wonder if you could just talk about any changes. I mean you guys were ahead of the data center boom or capitalizing on that. Anything shifting now? Any change in data center design? Is it all of them use -- back up the ratio? Just maybe what's evolved in the market over the last few months? Jennifer Rumsey: Yes. So as you said, I mean, Cummins has strength in engine, research and development and manufacturing capability. We understand natural gas. So the question is, we have a certain portfolio of natural gas products today and assessing what is -- if there's demand for natural gas for data centers, what's the right product? If we don't have it today -- our development is a multiyear development cycle, typically, but we have the capability to do that if we think that, that is going to be attractive growth opportunities. So that's how I would think about natural gas. In terms of the data center landscape, what you see is high reliability is absolutely critical. So the need to have backup power to ensure that high reliability is not going to go away. They don't run that often. Really, where the challenge is, is more on the prime power and can the grid support it and how do they solve the prime power challenge. And so that's where using a backup genset maybe for peak shaving or additional sources of prime power or what data centers are out exploring. And as I mentioned in my comments earlier, I think we have ability to do some peak shaving with products that we have today. We've started to invest in some stationary energy storage solutions that could be used in data center applications, and we're continuing to evaluate where else we think we're positioned to invest and get attractive returns. Operator: Our next question comes from Kyle Menges with Citigroup. Kyle Menges: I was hoping if you could just talk a little bit more about Accelera and actually just looking at the performance and -- I mean, it seems like you're actually still on track to hit the midpoint, if not a little bit above the full year guide within Accelera on revenues for this year. It sounds like e-mobility had some nice growth in the quarter as well. So it would be helpful just to hear about the growth you're seeing in new mobility versus electrolyzers and then also maybe at a high level, the differences in profitability that you're seeing right now between the e-mobility piece of Accelera and the electrolyzer piece. Mark Smith: Yes. I would say most of the actual sales in e-mobility are bus applications, a lot of it here in the U.S. and that's continuing, and we're in a great position there. There's lots of other explorations and discussions. There's been a big shakeout even in the e-mobility industry given, I would say, lower prospects for accelerated growth, even though we're growing the overall -- everybody's projections for growth has come down, and that's led to a shakeout certainly in a lot of the start-up, some of the less well-capitalized participants. So I think there's still a lot of discussion and future opportunity for Cummins in e-mobility. And I think that's been generally been a good story that as the volumes and we've released new iterations of products that we've moved from, yes, significant losses and negative gross margin to something a lot more stable and sustainable going forward. It's still somewhat muted, right, in the grand scheme of a $35 billion company, but we've seen clear progress there, and we're positive and staying invested there. On electrolyzers, we went back a couple of years, we had pretty ambitious targets for growth and we were tracking that trajectory every quarter. It was -- we were tracking years out where do we need to be, and we were on that curve for significant revenue growth for quite some time. And the reality is, yes, it's dried up faster than anything I have seen in my career for a variety of reasons, especially here in the U.S., but also some of the adoption in international markets. So whilst, yes, we probably guided a little cautiously going into the new year, not knowing exactly what would happen. So we're not way off on the revenue from the guidance that we no longer have, but the one that we originally gave. But yes, it's just internally, it's surprised even us to the downside. And so that's why. It might look to you like we're on track, but electrolyzer is way off. And it's not just for now, but then that leaves the orders as a big gestation period between taking an order, shipping a product, having it installed, recognizing the revenue. And so not only is that shorter orders now, that's leaving like a hole in the projections going forward for the next couple of years. So that's why we're acting now. So it's tough, very tough in ex e-mobility, but we're pleased with the progress, and I don't want that to be lost from the e-mobility team. Kyle Menges: That's helpful, Mark. And then just a follow-up on clarifying some of your comments on the emission margins and maybe just thinking about some of the puts and takes into the fourth quarter on Engine margins as you start to neutralize tariffs even though volumes could still be down sequentially. I mean, I guess the question when you said Engine could be kind of similar to the third quarter, does that mean that you have confidence in doing roughly 10% EBITDA margin again in the fourth quarter? Or are we talking about similar decrementals in which case you could be talking about 8% EBITDA margins for Engine in the fourth quarter based on volume... Mark Smith: I'll just say it out here and this -- you can all -- I don't expect to have 8% margins in the fourth quarter in the Engine business, but some of the factors -- the volume is going down, not we expect it to. I'm unfortunately, confident, but we hope that's a bottoming. We also saw a slowdown in parts. We hope that doesn't continue. And then, yes, all the other things that we're doing on cost, productivity, managing through tariffs can all help mitigate. It's certainly not going to be dramatically better. We're dealing with more headwinds. I've tried to be clear about that. So hopefully, that helps. I would just say, there's always a bit of seasonality, fourth quarter going into the holiday period. Those usually get exaggerated when you're in a weak economic environment. But just now, we're working hard. The Engine business is working hard every day to get this balance right. And what you can see from our financial reports that we disclosed the engineering costs by segment, by quarter. You can see our engineering costs are up year-over-year because we're still in this prelaunch development, not yet final certain regulations. So that's got to continue, but that shouldn't be a step worse in the fourth quarter. So don't expect magic, but don't expect 8% EBITDA with what I know right now. Jennifer Rumsey: I'll just add a couple of points. I mean we've been working to flex down plants and so seeing that action coming through the full Q4 as well as the Engine business has seen more than its share of the net tariff impact that impacted them in Q3, but we get to more full recovery. In Q4, it will reduce. Mark Smith: Yes. I mean there's always some natural variation across some of the businesses. In general, as we've said, we expect Power Systems and Distribution to be strong. It's -- no quarters are ever identical to the prior one, even if it looks similar on the top line. Pressure is still there on Engine business and Components. We still got a tight control on costs and we're figuring out what else we can do on Accelera. That's the headline. And then as I mentioned, we've also done a lot to improve our credit metrics, which gives us flexibility for capital allocation going forward. So as much as troughs are tough, they also give you -- working through them effectively gives you that platform and that confidence to move forward when demand improves. Unfortunately, I wish I could be more bullish and say we're super confident. We feel like we're getting to the closer -- to the bottom of the trough on on-highway. We think the trends on power generation, data centers, which benefit Power Systems and Distribution are going to continue. So hopefully, we get this coming together of strong demand across the company at some point here in the not-too-distant future. It's a little elusive right now on trucks. But we feel, given how long it's been and how far it's been down, that is a question of time in a cyclical business. But it's not imminent that it's going to turn up. Operator: Our next question comes from Tami Zakaria with JPMorgan. Tami Zakaria: Great quarter, and thanks for your time. Are you able to speak to the distribution or services opportunity you see long-term as you're selling these gensets and probably have a very sizable installed base right now? What is the typical expectancy of these? Is there a scenario where we would see the first wave of aftermarket services picking up for those units that you've sold over the last 12 to 24 months? So any way to comment on that or quantify that? Jennifer Rumsey: So Tami, for data centers, the distribution business gets revenue on the front end for a lot of the customers as they do the installation and some of the additional components and product around the engine and the genset in the data center. There's not a lot of aftermarket revenue in data center backup power because they don't run that often. So there's some service and support that we provide to those customers to ensure they stay up. It's not the same if you think about like a mining application or a heavy-duty truck application. That said, our installed base has been growing and those other applications that do drive more aftermarket content. So we believe aftermarket, in general, will be a tailwind for the Distribution business and especially as customers come back, there's a little bit of waiting on service that isn't necessary right now because of business financial conditions, but we think that we'll see some improvement in aftermarket as Mark had noted. Tami Zakaria: Understood. That's very helpful. And if NOx 2027 is not delayed after review, how are you thinking about the cadence of any product launches in 2026 tied to that? Jennifer Rumsey: Yes. Great. Well, we continue to maintain our focus on development of the new products that we're launching for '27 and feel good about how we're positioned with the new platforms and technology that we're bringing to our customers. It's important to understand, we've never had this level of uncertainty around regulation. So that's certainly been challenging and keeping our team focused on the launches ahead, starting to work with our supply base on different scenarios and what that could mean to try to ensure we can offer a product to our customers as we understand that decision. And really, we've been engaging closely with the EPA as they look at opportunities to try to take some cost out of that rule and also just emphasizing the need to get certainty as soon as possible. And I think everybody, all the OEMs in the industry are pushing on that certainty point. So we're prepared to launch, really hoping to give that certainty on direction in the not-too-distant future. And assuming that the '27 regulations largely stay in place as they are today, we'll be ready to launch our products into the market in '27. Operator: Our next question comes from Steven Fisher with UBS. Steven Fisher: Congrats on the power results. Just curious on the international data center opportunities relative to the U.S., how do you see those being different? And is there any difference in the momentum there? And how are the competitive dynamics differ internationally versus on the domestic side? Jennifer Rumsey: If you look at the data center market, I mean, we see strong and growing demand in U.S. and China. Those are the kind of the standouts. There's growth globally. You heard in some of my numbers on how the market is moving. We're seeing investment in data centers and other markets around the world. But the 2 biggest areas are really U.S. and China. And of course, everybody is trying to figure out how to get in and compete in that market. So we're well -- very well positioned today and really trying to focus on continuing to maintain a strong position with our products as others try to figure out how do they take advantage of those market opportunities. Mark Smith: Okay, and then... Steven Fisher: Go ahead, Mark. Mark Smith: I was going to say, obviously, in China, you tend -- in most of our markets, you tend to see more presence of local competition or trying to get in than we do in the U.S. or in other markets. Steven Fisher: That makes sense. And then on the Power Systems margins in general, obviously, still very strong, and you talked about the 50% incrementals before. I guess just noticing as the year has progressed, the segment's margins have kind of flattened out a little bit. I'm just kind of curious what's driving that? Are there other things outside of data centers that are restraining that? I know at the beginning of the year, we talked a lot about the aftermarket components in there. Maybe that was just fluctuating a little bit. Just curious how to think about sort of that flattening that we're seeing over the course of this year. Mark Smith: I would say the general -- so that's the great news. There is some natural variation between aftermarket, all goods segments. So some of that sometimes is at play a little bit. The good news, Steve -- back to somebody asking that should we raise the targets? I really like the way you think. I'm sure Jenny and the team might be dialing in. If not, we'll relay that to them later. But yes, really proud of the work that we've done there. And with rising demand, yes, there's some capacity investment. We're expecting earnings growth. Let's just put it out there. We're expecting earnings growth from here going into next year with what we know right now. Operator: Our next question comes from Noah Kaye with Oppenheimer. Noah Kaye: Jen, I think you framed it well and talked about the level of uncertainty right now as you prepare for next year's product launch vis-a-vis the regulations. But as you kind of get into year-end budgetary planning, is it fair to think of as a baseline that engineering and development spend can be a potential tailwind into next year? Or would you expect it to be a headwind if the base case of unchanged regulations goes forward? Jennifer Rumsey: In the base case of unchanged regulation, I would think of our research spend is pretty flat through next year when we launch the product, and then we'll have the ability to start decreasing that after that. And then I would think about just in terms of demand, that's where our -- as we're planning for next year, that's where the highest error bars are is what's going to happen in on-highway demand. As Mark noted, we think we're reaching the bottom. We think there's some upside. When does that happen given the capacity that's been taken out as we've responded to this big down cycle, how quickly will capacity be added back once demand starts to come up? So I'm thinking about some revenue increase at some point in the year, but R&D is staying pretty flat. Mark Smith: Yes. Accelera probably won't be growing, and there's always the question of what are we investing in the future, whether that's in Engines and Components or in Power Systems or future technologies. But yes, not a dramatic change for the next year. There's just natural inflation because a lot of those costs are people costs. There is some natural inflation that we're always counting against. So it will not be a significant tailwind, let's put it like that. Longer term, yes, but not tomorrow. Jennifer Rumsey: Yes. Noah Kaye: Yes, yes, yes. And on that topic of investing, and I want to tie it back to the discussion around the prime power opportunity. 30% of data center sites could be using prime power in some form 5 years out from now. You've got fuel cell in the portfolio. You've got battery. You've got natural gas and diesel gen. How do you think about tying together some of those elements, including what might sit in Accelera today to go after expanded wallet share if prime power becomes more of a growth opportunity? Jennifer Rumsey: Yes. Well, our strategy really has been to maintain a portfolio of solutions likely across different customers and markets. There's not going to be one answer. I think our strong position in engines as power demand grows and as energy transition pushes out, positions us really well. We're really more focused, frankly, in both power generation and in mobile applications on the battery opportunities where we think there's more opportunity versus fuel cell. We -- as you know, we've slowed down some of the investment and work in the fuel cell side. And there'll be more to say if we have a clear investment that we think is going to be attractive on the prime side. But today, we're really focused on continuing to execute on some of the investments that we've made to expand capacity in standby and being disciplined in how we think about additional investments into that market. Mark Smith: Yes, I think the great thing with what we've done right now, it's relatively modest investments for a lot of growth with quite high predictability of returns. So we're definitely enjoying that in our financial results. Should do more going forward. Operator: Our next question comes from Scott Group with Wolfe Research. Cole Couzens: This is Cole on for Scott. Maybe just to expand on Engine margins, it sounds like the net tariff impact peaked in 3Q as you recover more price and ramp down facilities in 4Q. But as you look ahead to 2026, a 3.75% rebate is not immaterial. How much could this positively impact margins in 1Q or throughout 2026, all else equal? Mark Smith: I just can't -- I simply can't answer that. I wouldn't be thinking about tariffs as margin improvement things. It's been a big cost headwind that we've been trying to recover and work with all that we can to mitigate the cost. I think -- I understand why you're asking it, but we are not framing tariffs as a margin opportunity in any way, shape or form. It's been a big hindrance to our industry. And hopefully, we get stability and relief. Cole Couzens: Okay. Fair enough. Mark Smith: You're right. Going into Q4, we are -- it is true, we're catching up more with the recovery of the tariffs. I'd correct myself, but anything incremental, that's not the way we're thinking about it. We're hoping there's a platform for greater demand for the end user customers. Jennifer Rumsey: Yes, just to reiterate Mark's point, the way to think about it is if we get stability in tariffs and customers start ordering again, that will help our margins because we'll be utilizing our plants more, but by itself as a margin improvement. We're just trying to cover the cost basically. Mark Smith: Yes. And we don't know enough to know all these -- the nuances of any recently announced things, rebates or other things. There's just a lot more detail. Even the emissions regulations, it's great to get the headline. There's a gazillion things that you need to know between that as to how that actually works financially, practically and other things. So we'd love to give you more clarity, we just can't. Cole Couzens: Yes, all makes sense. And maybe just on the competitive dynamic, there's like a lot of moving pieces with certain OEMs now either in a better or worse competitive position due to these new Section 232 tariffs. How do you expect this to impact your share position across the Engine business moving forward? Mark Smith: We are in a strong position to support all of our customers with our U.S. base, and we've got -- the great news is we've got great penetration across multiple brands and OEMs and our -- generally, the trend has been for our customer demand for Cummins products has been rising in heavy- and medium-duty truck over the last few years. So we feel like we're really well positioned, but it's obviously been very complex for all involved and continues to be so. Operator: Our final question comes from Chad Dillard with Bernstein. Charles Albert Dillard: So just given the market demand for standby power, I think you guys talked about record level of orders this past quarter. Does Cummins need to expand capacity beyond what you've already announced? And then I was hoping you could comment on, I guess, the role of standby power as more prime power moves behind the meter. Jennifer Rumsey: Yes. So from a capacity perspective, certainly, we're looking at in addition to evaluating our -- if we do anything on the prime power side, which we've talked a lot about this morning. We are evaluating are there places that we can continue to invest in capacity because we do see such strong demand and whether it's orders we took last quarter, it's the conversations we are having with some of our customers around the world, we think that, that demand is going to continue. And so if there's places that we think we can invest and take capacity up, we will be evaluating that, certainly. And we still think that in the coming years, this demand for prime power is going to continue. While I do think that there tends to be a hype cycle around technology, fundamentally, the need to store more data in the cloud, whether it's AI or other driven is a trend that's going to continue to grow. Charles Albert Dillard: And then second question, just on tariffs. So can you quantify the gross tariff impact in 2025? And then what's the split between IEPA versus 232? And if we do get IEPA rollback, I mean, should we consider this more like a pass-through? Mark Smith: We have not provided the guidance on the gross amounts generally, but the net position has been negative for the company, and we're in the tens of millions of dollars of negative impact each quarter so far. That's what I can tell you. And what happens, I'm just not going to speculate. We just don't know enough for what happens. But we -- as we said, as clear as I possibly can, we've been battling to offset costs on the industry. It's not a margin -- it's a margin dilutor even if we recover it, right? Jennifer Rumsey: There's a lot of moving parts between IEPA and 232 tariffs and uncertainty around that. So really, we want to understand the details on that before we provide any color on what that looks like. The great news is we make our engines and our gensets for the U.S. here in the U.S., and the team has done an outstanding job of navigating a lot of change and challenge and working to recover the cost of those tariffs. So really proud of what they've done given the environment that we've been navigating this year. Mark Smith: All right. Appreciate it, everybody. Thanks for joining us. Nicholas Arens: That concludes our teleconference for today. Thank you all for participating and your continued interest. As always, the Investor Relations team will be available for questions after the call. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the NCR Voyix Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. And I would now like to turn the conference over to Sarah Schneider. Thank you. Please go ahead. Sarah Jane Schneider: Good morning, and thank you for joining our third quarter 2025 earnings conference call. This morning, we issued our earnings release reporting financials for the quarter ended September 30, 2025. A copy of the earnings release and the presentation that we will reference during this call are available on the Investor Relations section of our website, which can be found at www.ncrvoyix.com and have been filed with the SEC. With me on the call today are Jim Kelly, our Chief Executive Officer; Nick East, our Chief Product Officer; Beimnet Tadele, President, Restaurants; Darren Wilson, President, Retail; and Brian Webb-Walsh, our Chief Financial Officer. This call is being recorded, and the webcast is available on the Investor Relations section of our website. Before we begin, please be advised that remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our earnings release and our other reports filed with the SEC. We caution you not to play undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. In addition, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this morning and our supplemental materials available on the Investor Relations section of our website. With that, I would now like to turn the call over to Jim. James Kelly: Thanks, Sarah, and good morning, everyone. Thank you for joining us for our third quarter earnings call. Beginning with our performance, we are pleased with our third quarter results, which reflect continued progress towards the financial and operational objectives we set at the beginning of the year. I previously outlined a clear strategy to reposition the company as a software-led business, supported by robust payments and service capabilities. We remain focused on executing against each of our strategic initiatives and driving profitable growth for the company. A key milestone in our strategic shift to becoming a platform powered software and services provider is the outsourcing of our hardware business. The ODM implementation remains on revised schedule with a phased transition to Ennoconn beginning in January. Cross-functional teams across engineering, supply chain and technical operations are actively finalizing readiness activities, validating integrations and preparing customer support processes to ensure a smooth transition. This shift will reduce capital intensity, streamline our operating model and enable greater focus on our high-margin software and services businesses. We are also modernizing legacy commercial structures across our installed base. As multiyear software and services contracts come up for renewal, we are introducing price escalators to better align pricing with the value we deliver. We are applying the same disciplined approach to our payments contracts. This, coupled with the completion of the migration from the former JetPay front end, will provide us a foundation to scale payments more broadly. Our focus on expanding our payments presence across the enterprise, grocery, fuel and restaurant verticals will further strengthen recurring revenue and enhance our long-term growth profile. Looking ahead, the company's primary growth driver will be the acceleration of innovation across the Voyix Commerce platform. NCR Voyix has the advantage of deep domain experience in nearly 3 decades of enterprise software development backed by more than 50 proprietary applications and thousands of purpose-built features created in direct response to customer needs. We understand how retailers and restaurants operate. And what they require to run their stores efficiently; serve their customers and scale their businesses. We have now paired that industry experience and extensive application library with AI-enabled development, significantly accelerating the time to market for our microservices architecture and new platform capabilities. Further, this approach enables us to extend the VCP to additional vertical and geographic markets at a faster pace and with greater precision. As the new solutions are deployed across our customer base, we expect higher margin software and connected payments revenue to represent a greater portion of our total revenue and enhance our growth profile. Customer engagement continues to reinforce our strategy and product direction. At the NACS show last month, we previewed only our next-generation platform solutions and the feedback was overwhelmingly positive. We demonstrated our ability to deliver the cloud capabilities customers have been asking for to align with their modernization priorities and validate the relevance of our platform roadmap. We expect this momentum to continue as we prepare for the NRF show in January, where we will introduce a broader suite of software and payment innovations for additional retailers. On January 9, we will have the honor of ringing the closing bell at the New York Stock Exchange to commemorate 100 years since our initial public offering in 1926, a milestone achieved by only 40 public companies in the NYSE's history. This achievement reflects both the longevity and our ability to adapt and lead through market change. As we celebrate a century of progress, we remain guided by the same commitment to innovate and disciplined execution that has defined our success for generations. With that, I will turn the call over to Nick, who will discuss our product acceleration initiatives and the formal introduction of the VCP and microservices architecture at the NRF Show. Nick East: Thanks, Jim, and good morning. Our software journey began 15 years ago with strategic investments and acquisitions to build a portfolio of category-leading, retail and restaurant applications. Today, these solutions power a significant share of global commerce, serving retailers and restaurants across more than 35 countries and representing approximately $1.4 trillion in transaction volume. Our software constitutes a significant portion of the industry's business logic library, the comprehensive brain trust that represents a massive collection of codified industry wisdom. That software value and the transaction volumes it powers every day is undeniable, but it's also trapped within a prior-generation architecture, making it slower to update and harder to integrate, the kind of friction modern architectures eliminate and our customers have demanded. Beginning in 2018, we initiated a push for modernization that is now reaching a tipping point. First, we built a SaaS-based microservices platform in the cloud, which today connects nearly 78,000 of our retail and restaurant sites and enables online and in-store transactions, 24/7 for some of the largest operators in the world. Second, we re-architected our powerful monolithic applications into microservices, unified them on a modern code base with open APIs and secure, resilient operations baked in. And third, we acquired the industry's only edge native application engine designed to meet the run-time challenges of modern retail and restaurant environments, enabling customers to deliver change in their physical locations at the pace of their best digital channels and without the dependency on any specific hardware manufacturer. Consumer expectations continue to rise as technology cycles accelerate. Our customers are seeing us as a partner who will help them move faster, innovate confidently and scale profitably. NCL Voyix is positioned to be the platform-powered leader in unified commerce for retail and restaurants. Our mission is simple: to enable our customers to accelerate new possibilities, to make every experience seamless so they keep their customers coming back. Our domain and technology experts are leveraging our extensive software footprint, together with the modern architecture of the Voyix Commerce platform to accelerate the delivery of our next-generation applications across our entire portfolio now with the added advantage of AI-enabled development tools. AI is not merely layered on top of our platform, rather it is integrated into the build, deployment and support of our customer environments. AI is enabling us to accelerate the availability of our application across markets and formats. As an example of bringing innovation to market this quarter, 3 grocery brands went live in the U.S. and Europe with our new, modernized point-of-sale application. Each migrated from an older on-premise point of sale and began its state-wide rollouts that will accelerate in 2026. The go-lives exceeded customer expectations, underscoring the agility and reliability of our platform and its role in delivering improved customer experiences. We expect this momentum to build in 2026 with more customers migrating from our current solutions and new customers adopting our platform applications for their differentiated market capabilities. We are also seeing increasing demand for cloud-native microservices-based architectures in the restaurant space, driven by the same forces we've experienced in retail, the need for faster innovation, easier integration and more flexible deployment. Given our deep expertise and proven success in modernizing retail technology, we have chosen to bring our market-leading restaurant point-of-sale application onto the same VCP architecture. This creates a unified modern foundation across our businesses, accelerating our road map and enhancing value for retailers and restaurants, and an increasing number of brands that operate combined retail and restaurant formats. As an illustration into how this modern architecture has been received, we showcased the integration of our cloud-native microservices kitchen application within convenience store environments at the NACS show last month in Chicago. Customers will be able to place food orders directly from a modern pump interface and pick them up inside the store, enhancing convenience while creating new in-store revenue opportunities. The integration of our kitchen application into the retail point of sale was completed in less than a week as both were built on the microservices architecture. To validate our expansion efforts, we recently completed a comprehensive competitive market analysis, supported by a third-party research firm with engagements from industry analysts to assess our positioning. The results of this 6-month review were clear. Our strategy is aligned with that of our existing customers and the broader market. The VCP enables retailers and our restaurants to simplify their ability to accelerate their business. Additionally, our product road map delivers solutions to both enhance the consumer experience and optimize operational efficiencies, while our proprietary domain assets are highly differentiated. As we now shift into activation mode, rolling out our commercial programs and scaling our production environments, we remain excited about the outcomes our initiatives will drive for both our customers and our business. We look forward to showcasing our latest innovations at the National Retail Federation show in New York this January. This will be followed by 6 additional conferences across the markets we serve. We invite investors to join us at the Javits Center to experience the solutions firsthand and engage with our teams and customers. With that, I'll turn the call over to Benny to discuss our Restaurant's performance. Beimnet Tadele: Thanks, Nick. In the third quarter, our restaurant business signed more than 200 new software and services customers. Our platform and payment sites increased 6% and 2%, respectively. Software ARR increased 3% and total ARR increased 7% in the quarter. In our Enterprise division, we signed a multiyear platform and point-of-sale agreement with Marco's Pizza, one of the fastest-growing pizza chains in the United States, to support its global expansion efforts. The initial phase of this rollout will commence in Mexico before the end of the year, followed by subsequent international locations. This partnership reflects the strength of our global footprint and offering, and we anticipate further growth in our enterprise business worldwide. As Jim and Nick mentioned, the company recently made the decision to leverage our edge-enabled microservices architecture to bring our Aloha next-generation point of sale to market, beginning with enterprise restaurants. The customer response to the initial preview of our edge-enabled microservices architecture has been incredibly positive, validating our strategy and reinforcing the depth of our enterprise relationships. We plan to begin lab testing the Aloha next-generation point of sale for targeted formats in the first quarter of 2026, with a broad availability across all segments by the third quarter. I'm excited about the significant growth opportunity as we deploy our edge-enabled dual cloud microservices applications and continue transforming the future of restaurant operations. In payments, customer adoption of our payments gateway solution continues to grow. This quarter, one of our existing software customers a, Mexican fast casual restaurant with nearly 600 sites, selected Voyix Connect as their payment gateway interface. Additionally, we continue to execute on our pricing initiatives, moving to a model based on transaction volume, which provides a solid foundation for our business and is in line with the market. I will now turn the call over to Darren to discuss our retail performance. Darren Wilson: Thanks, Benny. Good morning. In the quarter, our retail business signed over 30 software and services customers. Our platform and payment sites increased 16% and 9%, respectively. Software ARR increased 11% and total ARR increased 4% in the quarter. Over the last 2 years, we have signed more than 15 mid-market and enterprise customers for our Voyix point-of-sale and self-checkout solutions, which will be implemented over the coming months. We continue to enhance the Voyix Commerce platform with value-added applications and direct integrations that serve both new and existing retail customers. Most recently, we significantly expanded our domestic fuel offering, signing long-term agreements for commercial fleet card acceptance with two of North America's largest providers. These agreements will enable us to serve as both a point-of-sale provider and full service payments processor for both consumer and commercial fuel transactions at over 18,000 locations. By managing the entire transaction life cycle, we are enhancing the value of our integrated payments capabilities and strengthening our overall value proposition. This also materially expands our addressable market for payments in the U.S. With nearly $600 billion in volume running through our fuel payment gateway and $800 billion in consumer card volume, we now have the ability to target approximately $1.4 trillion in U.S. payment volume. We also launched our next-generation loyalty solution, Voyix Loyalty. The delivery of this cloud-native and microservices-based application facilitated a multiyear agreement with HEB, the largest grocer in Texas and a new NCR Voyix customer. We will enable promotion execution across HEB's nearly 400 store footprint through a direct integration into HEB's in-house point-of-sale software, demonstrating the agnostic design of the VCP and its edge-enabled microservices applications. Additionally, we signed an expanded multiyear agreement with a regional grocery store alliance, encompassing nearly 300 stores across 3 brands in the Northeastern United States. Through this partnership, we will now deliver a full suite of next-generation platform solutions, including Voyix point of sale and self-checkout, loyalty and hardware maintenance across their entire state. Finally, in services, we expanded our longstanding relationship with a large multinational wholesale grocer, becoming the exclusive service integrator for over 20,000 lanes across 2,000 stores in Belgium and the Netherlands. In addition to providing hardware maintenance, we will now provide vendor management and be the sole point of contact for all the brand's technology-related services. This large-scale expansion demonstrates the strength of our services division and its ability to meet the complex needs of our global customers. With that, I will turn the call over to Brian. Brian Webb-Walsh: Thank you, Darren, and good morning. For the quarter, total revenue of $684 million declined 3% due to lower hardware sales and onetime software and services revenue. Recurring revenue increased 5% to $425 million, driven by 7% growth in restaurants and 4% growth in retail. Software ARR and total segment ARR increased 8% and 5%, respectively, platform sites increased 12% to $78,000 and payment sites increased 3% to nearly 8,500. It's important to note that the majority of our customer base consists of large enterprise brands whose entire store or restaurant footprint is converted to the platform once connected in its entirety. As such, platform site growth can fluctuate depending on the timing of a complete onboarding. Adjusted EBITDA of $125 million increased 32% as margin expanded 490 basis points to 18.3%. This was primarily driven by larger-than-anticipated hardware margins and the previously announced cost actions. Turning to our segment results, beginning with Restaurants. Total segment revenue of $210 million was flat, which reflects an increase in recurring revenue, offset by declines in onetime services revenue. Recurring revenue increased 7% to $146 million, driven by payments growth and the ramping of a new large customer agreement. Segment adjusted EBITDA increased 12% to $74 million as margin expanded nearly 400 basis points to 35.2%. This improvement was driven by revenue mix, coupled with the previously announced cost actions. Turning to Retail. Total segment revenue declined 4% to $467 million, primarily due to declines in hardware sales and onetime software and services revenue. Recurring revenue increased 4% to $276 million, driven by the ramp of a new large customer agreement and platform revenue growth. Segment adjusted EBITDA declined 17% to $90 million, driven by lower revenue and customer adjustments tied to prior year delayed software implementations now resolved, along with favorable expenses in the prior year period. Adjusted EBITDA margin decreased 290 basis points year-over-year to 19.3%, but increased 150 basis points sequentially as expected. Lastly, net corporate and other expenses improved to $39 million, which reflects the previously discussed cost initiatives. Adjusted free cash flow was $42 million for the quarter before considering $23 million of restructuring cash expenditures and $3 million of accelerated product investments. We invested $38 million in capital expenditures during the quarter. For the full year, we expect CapEx to be approximately $160 million, inclusive of accelerated product investments. Restructuring cash outflows totaled $23 million for the quarter. We have now exited all of our remaining TSAs with NCR Atleos, are winding down our TSAs with Candescent and are approaching the ODM implementation. In connection with these initiatives, we have taken incremental cost actions including headcount reductions in the third quarter. Therefore, we now expect transformation restructuring cash outflows for 2025 to be approximately $100 million. Our net leverage position was 2x at the end of the third quarter based on our net debt as of September 30 and the last 12 months adjusted EBITDA. Turning to the outlook. We now expect revenue to be between $2.65 billion and $2.67 billion. Hardware revenue is anticipated to be above prior expectations, while software and services revenue will be slightly below. The lower software and services revenue is primarily due to customer adjustments tied to prior year delayed software implementations, which have now been resolved. Adjusted EBITDA is now expected to range between $420 million and $435 million and non-GAAP diluted EPS is expected to be between $0.85 and $0.90. We expect adjusted free cash flow to be between $170 million and $175 million, excluding restructuring and transformation costs and accelerated product investments. With that, I will turn the call back over to Jim for closing remarks. James Kelly: We are encouraged by the progress across the business. Our innovation engine is accelerating, our pipeline is strengthening, and customer engagement remains constructive and aligned with our strategy. We are focused on disciplined execution and position the company for sustainable, profitable growth. I will now turn the call over to the operator to begin the question-and-answer session. Operator? Operator: Before beginning the Q&A portion, the company has an additional item to announce. James Kelly: Thank you, operator. I'd like to highlight an additional update this morning. A new 6-year exclusive agreement with Chipotle, deepening a trusted partnership that stands more than 25 years, was signed this morning. Under this agreement, Chipotle will expand their relationship with NCR Voyix and become the first to implement our Aloha next-generation point-of-sale and supporting applications across 4,000 restaurants worldwide. Built on the Voyix Commerce platform, dual-cloud edge-enabled microservices architecture, this first-of-its-kind solution in the restaurant industry reflects our multiyear investment in microservices technology. I'll add to that, that this work dates back for a number of months. We would have liked to have it at the start of the call, but we only finished it early this morning. And I would like to thank the team at Chipotle in addition to Benny, Miguel and their teams and our GC, Kelli Sterrett, and Laura and the rest. This was a big effort. And I think for the company, this is a very big event. I think it's a clear indication that there is a change at the company. I don't think there's a better way to see it than have a relationship that's 25 years renew for another 6 years with us. And it's really based on the product set that Nick has been talking about and the company has mentioned on a number of calls since I've been involved and also our ability to execute at a level that we are -- our customers are expecting. So with that, I'll turn it back over to the operator and let's go to questions. Operator? Operator: [Operator Instructions] And your first question comes from the line of Matt Summerville from D.A. Davidson. Matt Summerville: Congrats on the win, by the way. Can we talk about the price escalators you've referenced, the magnitude we should be sort of expecting, how much revenue is ultimately impacted by that and would be set a benefit from what you're doing there? And maybe more importantly, can you talk about how this maybe differs from Voyix's historical practice? And then I have a follow-up. James Kelly: Sure. Matt, I think if you go back to whether it was the the year-end call or the first quarter, I think I've mentioned this before, but the company historically had not had escalators in all of its agreements. In some areas, it did, but typically did not. And even if it did, it was unclear if they were actually billing them accordingly. So we've just gotten back to make sure the ones that were actually in the agreements are there, and we're charging accordingly. And then secondly, where they're absent as the contracts renew. So on the retail side, it tends to be every 5 years as a general rule and restaurant tends to be 3 years. I don't think we've scoped the order of magnitude. I mean these are not extreme increases. This is more cost of living plus something as opposed to some material increase. So I think what we'll see, and we've already started to see it, it's relatively small since it's just gotten started. But we are seeing increases on the revenue and earnings line as a result of this. And this is really the value that we're providing, supporting, these are very tired, old legacy applications that are continuing to operate at our customers. And for the company to be able to continue to invest in its business, keeping a 5-year contract flat over a 5-year time period just degrades its value in years 2, 3, 4 and 5 because, obviously, we experienced cost escalators as well. And that's not the primary focus. Our primary focus is to sign new customers and then ultimately to launch all the products that Nick outlined on the call, which we expect to see we will have at NRF in January for the market. Matt Summerville: And then just to talk about the payment side of the business. I would think these new relationships on fuel and convenience have to be more needle-moving in nature. Is there a way for you to somehow quantify or directionally quantify what that maybe adds to the payment side of the business, and maybe when we can expect to get a little bit more granular financial detail on the payments performance? James Kelly: Sure. I think it's a good question because a lot of what I've been outlining since I stepped into this role are the opportunities kind of the TAM for the company that it's not taken advantage of in the past. So just because -- which is your last question about the opportunities on escalating prices appropriately for contract renewals, et cetera. These are early days. I mean, this is a company that's been around for 145 years. This is not like the credit card industry, where you just decide to raise prices and you raise prices across the board, either in concert with the brands or on your own initiative. That's what this is. These are longstanding important relationships for us. We're just kind of equaling the table. But I think on the -- if you're referencing the commercial side, I think we've already given the opportunity domestically, we touched $800 billion in the U.S. alone today on our Voyix Connect platform. But what we announced right after -- during or right before and after NACS, the convenience show in Chicago a few weeks ago, was 2 very important relationships, one Corpay and the second one, WEX. That enables us -- even though we're in the business in the sense that our point of sales support commercial fuel, we have never been on the commercial fuel payment side. And as a result, it's more difficult to do the retail forecourt if you're not really providing a complete relationship for the customer. And that's what the future holds for us, is that for our large relationships on commercial fuel or just fuel in general, we're not just the point of sale any longer. We're the point of sale and we're a payments solution for both commercial and retail. So to give you an order of magnitude, and these are estimates that we -- our data -- we don't touch the payments today, but we see it flowing through, through the point of sale. It's 17 billion transactions domestically and roughly $500 billion in volume. So the U.S. combined between what's on our Voyix Connect and what's on another application called Epsilon, you're talking about $1.3-or-so trillion in the U.S. That's our TAM opportunity, to now have the ability to go to customers and say, "Hey, we're not just the point of sale. We can also provide payments and in this area on commercial, we can provide it." That, together with retail that you would see in a gas station, 18,000 gas stations, it was something that Nick and I who were at NACS in last month, this was very well received because the alternative is, our customers have asked for the point of sale. They have somebody generally as an intermediary and then they have somebody who's doing the payments. So this gives us the opportunity to provide one solution, which takes a lot of noise out of the system. Now some people say, well, they like multiple players. But the problem with multiple players is, we have to integrate to multiple players. We have to manage multiple players. And things always slip through the cracks. There's changes that are not well coordinated. So for us to provide a single solution all the way to the actual receipt of payments is, in my view, and I think what we've heard from our customers is going to be very well accepted. This is not just for our new next-generation Voyix POS, point of sale. But in terms of timing, I think was your other question, this can also get retrofitted onto our existing applications because they already do commercial fuel at the point of sale as well as just fuel more generally. Our preference is to launch this together with our next gen, and that's -- that was the push at NACS and that's also going to be what we're going to be focused on between now and January and then also at NRF. Operator: [Operator Instructions] Your next question comes from the line of Dan Perlin from RBC Capital Markets. Daniel Perlin: Congratulations on that Chipotle expansion. That's obviously very significant for you guys, and clearly a showcase win for the Aloha platform. The question I had -- yes, that's huge. The question I had is you've obviously had an opportunity to have conversations and actually implement the payment gateway strategy in terms of pricing. I'm just wondering what those conversations are like. I know you're talking about the value that you provide and now that, that's in motion. I'm just wondering what the market is kind of absorbing there. And then secondarily, it sounds like Global and Worldpay is closing now in the first quarter, so a little bit sooner than expected. I'm just wondering what that might offer you potentially in terms of potential accelerants, so to speak, with opportunities around Worldpay? James Kelly: Okay. Look, we have a really good -- obviously, I've worked at Global. We have a really good relationship as I do with Cameron and other people there. And I think the combination of the two actually works very favorably to us because Global is Global, more so than Worldpay and Worldpay has some capabilities that Global doesn't. So I think the combination will be additive for us. I didn't know that it was accelerating in terms of its close. We're at the tail end of migrating on both sides, getting off of the legacy JetPay application. I think in terms of the reaction from customers, I think they're all very positive. I actually have a large customer coming in next week. We're going to talk specifically on payments. I think they all like the conversation from what I was mentioning in my comment where my comments with Matt, having multiple intermediaries, especially in the technology world, just generally provide something that's going to break. Somebody doesn't update, it doesn't flow all the way through and it presents issues. So I haven't seen any pushback. Has everybody just dropped their existing relationship and switched to us? No. That's going to take time. I think people appreciate that. But as I said earlier, in my comments, what I've been laying out are the opportunities ahead. There's huge opportunities on payments. There's huge opportunities on our next-gen application, on services, et cetera. So that you understand where the future of the company lies, not within just our existing customers but new customers. I mean it's a big organization. It's going to take some time to turn the organization, but our attrition is still at 1%. So it's not that we're losing customers. We just have to execute on it. And again, Chipotle, I think, is a very good kind of watershed event for us where a relationship, when I first joined in February, was not nearly as strong as it is today. I've gotten to know both Scott and Curt through the process. And as our team has gotten to know them, we did some innovation work for them during their RFP process that they were very pleased with. So I think the notion of selling other services into our customers that wasn't core to us previously, like payments, it's not as though we are additive in terms of cost; if anything, we might be able to reduce cost for them and definitely reduce complexity. Because in the end, that's what the customers are looking for, they are looking for cost, savings. They're looking for efficiency, and they're looking for a solid relationship that they can rely on, which they do with us. Operator: And your next question comes from the line of Parker Lane from Stifel. J. Lane: Jim, you mentioned the ODM phasing project is going to kick off in January. Just wondering if you can give an update on how long you expect that to take place and what the phasing of that project actually looks like. James Kelly: Sure. So I think, again, on the background on this, we had earlier expectations that would go faster. There was some technology challenges on their side, and so we pulled back. Obviously, hardware remains important to us and, obviously, to our customers, but this is better. I think where we're moving as a company, this is still the right direction. The expectation, there's effectively 3 major facilities that have to switch over. So we are intending to start that the first -- not the first day, but the first week or second week of January, start moving it in pieces. I believe we'll retain our employees that would otherwise transfer across that have already been alerted to this during the roughly 90-day period. I think the expectation is 90 days. Could it extend beyond that? Anything is possible, but we're trying to do this in a way that has 0 impact to our customers and as well makes it an easy transition for our employees. During the first quarter, we'll continue to report gross revenue as we have today. But my current expectation is that by the beginning of the second quarter, that will be on a net accounting basis as we've outlined from the beginning. J. Lane: Got it. And then in your conversation and your salespeople's conversations with your customers, I was wondering if there's any insights they're sharing on the health of the consumer. And how that's informing their willingness to spend into '26? And I guess more importantly, as a backdrop, what sort of cyclicality have you historically seen around technology investments in response to consumer sentiment there? James Kelly: Okay. We want to let everybody have something to say on this call. So I'll say a little bit, and then I'll let Darren and Benny who deal with the customers on that basis probably more than I do. I mean Chipotle is an example. This is a significant investment on their side. They're looking for the technology that we have to offer that we haven't. We offered this on the retail side. The restaurant side historically has gone a different direction. It was more of a monolithic application in Aloha Cloud, which is being built out to replace the legacy application, which we refer to as Essentials version 19. So I think where you're able to add value together with lowering costs, I have not seen a reluctance to customers in terms of buying. And I can use an example. When I was at the NACS show, it was the first time I've attended, especially the trade shows in this industry, we had 3 brand-new products. We had no legacy products in group. Two of the products had only been -- only come together in 3 weeks before the show. That's how fast we're innovating. There were lines for one of them in particular, which is around our commercial fuel or fuel replacement application. And the major players in that space were very interested in what we had to show because it looked very similar to what they have today. And I think that's a key that we have. And as Nick said this in his comments, we have a library of over 50 existing applications. We know what our customers want because we're servicing it today. So we can modernize what they want. They're not having to transition to something new or reformat the way their organizations work. And in the end, it does lower the cost because we have the ability to manage the store as opposed to and you're not using third-party operating systems that provide cost, updates, et cetera. It's just easier. I'll stop talking and let Darren and Benny give you their view. Darren Wilson: Thanks, Jim, Parker, yes, the conversations with our customers through the shows are 1-on-1 around the globe continue on a very healthy nature. Many of our enterprise customers are looking at infrastructure or capability upgrades, be that on new or existing hardware solutions. But ultimately, therefore, our microservices play, and open API models are having real appeal in terms of either elongating or sweating their existing hardware assets or coming with new hardware propositions. But bolting on to that is a real appeal about enhancing the servicing or the services solutions for them as an added-value feature. So they are very healthy conversations globally on that basis. And there's a real appetite for a unified commerce-type model. And therefore, as Jim has outlined, bolting on our payments gateway and our payment solution is having universal appeal. Now these are long-term contracts with ourselves and with payments provider. So there's been a lot of questions about the timing of this. I think as Jim has alluded to previously, the typical contract duration in retail is 5 years; in restaurant, it's shorter in terms of 3. So that gives you the kind of renewal cycle of the materiality of the contract, but bolting on the additional capabilities in the interim is coming. And typically, a payments contract would normally be a 3-year cycle in both verticals. So that opens up the scale of the conversations, opportunities to switch on that unified commerce capability into our customers. In terms of health of consumer, as we see various earnings releases from many of our retailers around the globe, I think universally, it's steady. I think in some markets, grocery supermarkets are saying that they're having probably the best consumer stability or growth record for many years. I know there's a reporting kind of steady, low single-digit performance. I think we're starting to see a trend to that unified commerce model in terms of consumer behavior, looking at the multiplicity of channels into the retailers we support. And I think, again, we're well positioned for that. So I don't think there's any massive revolution coming in terms of growth potential or otherwise. But I think the steady evolution is encouraging as we speak today. So I'll pass over to Benny or Nick. Nick East: I mean I'd add to that. I speak to customers a lot. And I mentioned in my prepared remarks, I was also in -- we've taken some grocery chains live on our new stack this quarter, and I visited those customers and was in store. I can tell you they were extremely busy. I don't think I can recall a single conversation with the customer that's grounded in a lack of consumer confidence. In fact, what I would say, it's making our customers hungrier to compete for their consumer business. So the key conversation is, how do they ensure they deliver the right experience so consumers keep returning to them. And that's really the technology conversation. They want to be able to deliver faster experiences. They want to be able to make sure that those customers have a competing offer. And that's why they want to invest in technology because technology enables them to do that, technology enables them to be more loyal and also to be able to offer competing offers more quickly. That's the main conversation. It's like how can we more quickly bring better competitive experiences to our customers. And those are technology investments that they're not just willing to make and talk about it, in fact when they are making. That's really about speed, being able to accelerate the journey for their end consumers. There are specific cases where they're also investing, I would say things like loss and waste. So it's important for our customers they do have a focus on cost control amongst rising costs. So we do have offers and discussions about making sure that we reduce loss and waste for our customers in both retail and restaurants. But yes, I would say the core theme is actually looking to invest in technology in order to attract and remain loyal to their consumer base and compete over those customers. Beimnet Tadele: I agree. It's similar in restaurants, it's the same trend. I acknowledge that there is economic pressure on a lot of restaurants, logistics, food cost labor cost, labor shortage, et cetera. That has actually an opposite effect in terms of looking at technology, restaurants when we have conversations, are having more and more conversations on how can I leverage technology to create either the revenue acceleration, which Nick talked about, how can I get more consumers into the door, how do I understand on a one-to-one basis my diners so that I can provide the service required and repeat customer same-store sales growth, et cetera? But also efficiency, efficiency in terms of automation. So technology that can easily integrate so that you can manage the the journey of the consumer from online ordering, coming into the restaurant, understanding what is available in the restaurant so that you can actually offer up and make that one-to-one offer, et cetera, all the way to automation so that I can transfer some of the things that required heavy labor from employees, store managers and free them up and have less labor costs. All of those things are technology conversations. So we're having those conversations whether it's in the super RFP cycle that I referred to that we're in. We're actually seeing a lot of RFPs looking at innovations and creations like Chipotle example that Jim provided around the innovation during the RFP cycle, one of the key things is the ability to innovate, the ability to capture revenue and the ability to create automation inside the restaurant. So we're having a healthy conversation, a pretty good pipeline. I think that's what we're seeing. Operator: There are no further questions at this time. I will now hand the call back to Jim Kelly for any closing remarks. James Kelly: Thank you, operator, and thank you all for your continued interest in the company. Operator: And this concludes today's conference call. Thank you for participating. You may all disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to B2Gold Corporation's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] The conference is being recorded [Operator Instructions]. I would now like to turn the conference over to Clive Johnson, President and CEO of B2Gold. Please go ahead. Clive Johnson: Thank you, operator. Good morning or afternoon or evening, everyone. Thanks for joining the call. We're here to talk about the financial results of the third quarter of 2025. We had a strong operational and financial quarter. Fekola, Masbate and Otjikoto mines all came in ahead of expectations in the third quarter on the production side, resulting in lower-than-expected cash operating cost per ounce. On October 2 of this year, we announced that we achieved commercial production at our newly constructed Goose mine. This milestone comes just 3 months after the inaugural gold pour, and we look forward to many years of successful operations; in Nunavut in close collaboration with our partner with our partners Kitikmeot Inuit Association. At Goose, third quarter production was impacted by the previous disclosed crushing capacity shortfall and a temporary delay in accessing higher grade from Umwelt underground. We are now in the higher-grade. To ensure a consistent feed of crushed ore to the mill, the company has implemented the use of supplemental mobile crushing capacity. Permanent modification and modifications are in progress and are expected to be implemented in 2026. Continued use of the mobile crusher will assist in operating at higher throughput until these modifications are implemented. We expect to be at design capacity of 4,000 tonnes per day by the end of the year. Underground mining of the Umwelt deposit commenced in late October 2025 and will be a strong contributor of high-grade ore at Goose over the next few years. In Namibia, B2Gold announced a construction decision on the Antelope underground deposit. Production from Antelope is substantial to increase Otjikoto mine gold production, leveraging the low-cost platform and extend the life of the mine into the 2030s. In this strong gold price environment, B2Gold is well positioned to take advantage with annual gold production of approximately 1 million ounces this year with both capital spending at Goose now complete, the company is set up well to add significant shareholder value over the coming years. Before I turn it over to Mike to give us more financial detail, I just want to talk a little bit about the political situation in Mali. We've had some news come out, I think what I think are some responsible headlines from some of the media talking about that it's imminent that a terrorist group organization is going to take over Bamako in the country of Mali. We think that is completely erroneous, and it's a great exaggeration of the situation. Yes, there have been some fuel challenges, particularly in Bamako, but we continue to run the mine as we have for many years now and haven't missed any mining due to any kind of political situation or turmoil associated with that. So the mine continues to run well. We're 500 kilometers from Bamako. And we look at the situation that the government still enjoys popular support from the population. And they see these organizations that are cutting off fuel to Bamako as foreigners. This is not the bad of the people of Mali from our understanding from the intelligence that we have received. So operations continue. It's nice to see some support from other governments in the United States and others. The U.S. came out and posted -- they supported Mali military and said they're looking forward to closer collaboration, working on intelligence together. There's no Western company that wants to see Mali fall into other hands, and there's a lot of international support gathering. So we're very confident of our ability to continue to produce in Mali and work very closely with the Mali government. We're expecting the permit for our regional mining and trucking at the Fekola mill. That's imminent. And we received not that long ago the permit to go underground at Fekola. So we think we're on track there. And once again, we're not impacted by any of the things going on in Mali right now, and we're disappointed to see this irrational or not true headlines that are running around and lasted little while. And clearly, that's hurt the value of B2Gold. With the benefit of time, I think we'll see that this is a situation not impacting the mine. With that, I'll hand it over to Mike to give us a financial summary of the quarter. Michael Cinnamond: Thanks, Clive. As Clive said, financially, it was a strong quarter. I mean GAAP earnings were $0.01 per share, but they were impacted by several noncash derivative mark-to-market adjustments. And after adjusting for those onetime items, the company's earnings per share were $0.14 per share of adjusted earnings. And clearly, you can see that benefiting from the strong average gold sales price that we saw in the Q and continues now. The company recorded revenue of approximately $783 million in Q3, and that included $144 million related to the delivery of just over 66,000 ounces under the company's gold prepay obligations. And by the end of October, we had another delivery into those obligations. So we've now delivered into 1/3 of what we own there, and that leaves us just under 200,000 ounces that we'll need to deliver into by the end of June. So we're in good shape there. Operating cash flows totaled $171 million in the third quarter and or before working capital adjustments, $180 million, which is another strong result, and it highlights the continuing cash-generating potential of our assets and the strong gold price environment. Balance sheet-wise, we continue to remain in a strong financial position with cash and cash equivalents of $367 million at the end of the quarter. During the quarter, we drew down -- as we disclosed last time, we drew down $200 million on the revolver. That just helped us manage through some of the working capital timing differences that we have, especially as we deliver in the prepaid. So we'll continue to do that. But with these gold prices, we expect to repay some or all of it by the year-end. So I'd say, overall, we maintain excellent financial flexibility to deliver to the prepaid, complete our other sustaining growth initiatives, continue to fund the healthy exploration programs that we have and I think continue to return capital under our share buyback plan. So I think that's the summary that I want to touch on in the financial sections. And with that, I'll turn it over to Bill for an operational project update. William Lytle: All right. Thanks, Mike. So at Goose having key commercial production, the focus now moves to steady-state operations and consistent performance at nameplate capacity. We've identified the source of the crushing issues that impacted performance early in Q3 and have made a temporary fix to the use of the mobile crushing unit. Permanent optimization to the primary crusher and secondary grinding circuits and the installation of the surging capacity are being engineered and designed with a finalized study and remediation plan in December '25. Use of the mobile crusher is expected to continue until the modifications are implemented. Due to the shortfall of the crushing capacity and temporary delays in accessing the higher grade ore at Umwelt underground, B2Gold has revised its 2025 gold production guidance for the Goose mine down to between 50,000 and 80,000 ounces. Underground mining of the Umwelt deposit commenced in late October '25, and the company expects underground operations to ramp up quickly through the final months of 2025, setting the operation up well for the first full operating year in 2026. The company reiterates the near-term and gold and long-term gold production estimates at the Goose Mine, which includes a production forecast of approximately 250,000 ounces of gold in 2026 and approximately 330,000 ounces of gold in 2027 and average annual gold production for the initial full 6 years of operation of approximately 300,000 ounces based only on existing mineral resources. Significant construction activities for the first 9 months of 2025 included completion of the mining in the Echo pit and commissioning of the pit as a TSF to include construction of the winter deposition infrastructure. Mining of the Umwelt open pit commenced ahead of schedule with full ramp-up achieved during the second quarter of 2025. Development of the Umwelt underground continued, including development of Fresh Air Raise 1 and 2 to support stope ore production in the fourth quarter of 2025, continued dewatering of the future site of the Llama pit, commissioning of 3 large glycol heating systems, excavation and construction of foundation for the arctic corridor for the camp and construction of mechanically stabilized earth wall for the reclaim tunnel. In Mali, the site continues its strong performance in 2025, exceeding gold production expectations again in the third quarter. Cash costs per ounce were also lower than expected. Of note, Fekola underground is also performing above expectations despite operations commencing earlier in Q3 on July 30, 2025. At Masbate, the operation continues to perform well with a world-class safety record. Mine throughput has significantly outperformed expectations in 2025, and we anticipate consistent production in the fourth quarter. At Otjikoto, open pit and underground mining went very well in the third quarter with production also exceeding expectations. During the third quarter, the company approved a development decision for the Antelope deposit. The company has also completed further optimization and believes preproduction capital costs can reduce from $129 million in the PEA to $105 million. Production from the Antelope has the potential to increase Otjikoto mine gold production to approximately 110,000 ounces over the life of the Antelope underground mine. With that, I'll turn it back over to Clive for an intro to Q&A. Clive Johnson: Thanks, Bill. Operator, we're ready for Q&A. Operator: [Operator Instructions] The first question comes from Ovais Habib with Scotiabank. Ovais Habib: Congrats on a good quarter. A couple of questions from me. Just starting off with Fekola. Fekola underground seems to be ramping up really well. What are the kind of grades you're expecting going into 2026? And is there a target that you have in mind in terms of ore tonnes mined and kind of grade on the Fekola underground? William Lytle: Yes, I don't have what the exact grade is, but I think we were targeting about 4.5 grams is what I remember, 4.5 grams and a throughput of about 1,500 tonnes a day. So you can do the math on what it's going to be. It's something like that. And remember, those are replacement ounces of low grade. Ovais Habib: And Bill, in terms of the development rates into Fekola underground, is that all progressing well and kind of confident in terms of what you guys are going to be producing in 2026 then? William Lytle: Absolutely. So the contractor is Byrnecut, the same contractor we've had in Namibia, very good relationships and the development has actually been on or at schedule really the whole way. Ovais Habib: Good stuff. And then just moving on quickly to Fekola regional permit. I know we are expecting the permit by the end of 2025. In terms of any sort of predevelopment or anything that you guys can do prior to that? Or basically, you guys are just ready as soon as the permit comes in, you start pre-stripping and then start bringing the ore? William Lytle: We are, in fact, pre-stripping some. We've been given approval to go out and do some clearing and grubbing. So all of that is happening. Obviously, we're hiring people, getting the equipment. So really, we're putting a little bit of money at risk, knowing that everything we've been told that the permit is coming. Ovais Habib: Got it. And then just moving quickly to Goose. Underground grades seems to be picking up as kind of we're going into Q4. Are development rates also picking up as well? And again, I think this is kind of a question that has come up in other mining operations as well. Do you have the right people and kind of equipment in place right now? William Lytle: Yes. We have the right people for sure. Remember, this is remote mining, remote stope mining. So it is a specialized skill. And we do have the right people on site now, and we see that it will be coming up as planned. Operator: The next question comes from Anita Soni with CIBC World Markets. Anita Soni: I just wanted to ask a few questions on Goose. And I just want to understand the key drivers of the cost increase into -- obviously -- sorry, into the fourth quarter. Obviously, there's lower tonnes are going to be pushed and that's going to impact the numbers. But how do you expect that to evolve into next year? I mean you maintained the production guide for next year. So I'm just trying to get an understanding on what we should be thinking about on costs? Are they going to be as indicated previously? Or will there will be some impact? Michael Cinnamond: So it's Mike. Just on the cost, Anita, for the fourth quarter, we guided that the per ounce costs are a little higher. You're right, then we had before. We've left the production costs that were in the budget for Q4 there, but we reguided down the ounces to 45,000 ounces just on the basis that we're a little later getting into the higher-grade stopes and the total production for the Q. So I don't think those are reflective of the cost going forward. This is just a function of the continued ramp-up. And then on the cost, as we look forward, the 250,000 that Bill was talking about and beyond into the later years of the mine life. We don't have any change to those right now. We're doing the budget for next year and then also an updated sort of upside like mine case as well that we're looking at. So I think we don't have anything new to put out on those at this point. But certainly, the key message is these Q4 ones are ramp-up ounces. So the cost related to those shouldn't be extrapolated into anything in the future. And we've tried to be relatively conservative in that guidance. We had to re-guide it down just for the fourth quarter. So we've tried to be conservative in that guidance and give a chance to meet or even beat it for the Q. Anita Soni: Okay. And sorry, could you just -- Bill, could you just give me an idea of what's actually going on with the delay accessing on well? Like what was the reason for the delay? William Lytle: The reason for the delay was lack of equipment parts for Sandvik and then operators to run it. And so it's one of those things that you assume in Canada, these things come on a very set schedule, and it just didn't happen. And so we have rectified the situation. We do have the people on site now, and we do have the appropriate drilling media. So it's been solid. Operator: The next question comes from Don DeMarco with National Bank. Don DeMarco: Maybe first off, at Goose, you're looking at some different options regarding the crushing, the optimization of the crushing. Among the options that you're considering, we look forward to the results of your report and so on. But what's the potential magnitude of these range of solutions just to get away from that mobile crushing. William Lytle: Yes. So we talked before. Remember, the initial one when we were in Denver was the concept of really kind of a very small change. Obviously, we've disappointed on it. And so we've got a third-party consultant coming in that will deliver a report in December. So I really don't want to once again tell you a number and then have to walk it back. But it's still a small magnitude compared to fixing it and getting the throughput. Don DeMarco: Okay. And I guess, like whatever you decide, I mean, you got the sea lift coming up and decisions to be made to kind of sequence with that and you'd have things on the ground as needed, I would imagine. William Lytle: That's correct. Don DeMarco: Okay. So in Mali, the regional permits, we're looking forward to year-end to have them. The time frame for getting these permits has been somewhat fluid. What are the reasons behind that? I mean you guys have a good line of communication with the government. You've been out there a number of times. Is it a different priority for the government? I mean from your point of view, what's the reason for the pushing back the schedule multiple times? Clive Johnson: Well, I think we're in the bureaucracy of Mali in terms of winding its way through various approval levels. Our understanding most recently is that it's -- we're in the final stages of approval, and we expect that definitely before the end of the year and maybe quite imminently. Don DeMarco: Okay. Well, we'll look forward to that. And then -- but I see in the report, too, that you're going to start right away with the stripping once you get that and other prep work and look forward to seeing all that production reflected in guidance next year. So that's all for me. Clive Johnson: As Bill said, we've already started some prep work, let's say. Operator: The next question comes from Kerry MacRury with Canaccord Genuity. Carey MacRury: Maybe a question for Mike. You drew down $200 million last quarter, and I see you paid off $50 million. Do you anticipate needing to use the credit facility as you go through these prepay payments? Michael Cinnamond: I think you'll see us -- like you said, I think if gold prices stay where we see them right now for the fourth quarter, then we expect that we'll have paid down a substantial part of that line, if not all of it by year-end. I think you'll see us utilize it a little bit as we move through Q1 and Q2 just to manage the timing of the prepaid deliveries and the fact that we already got the cash for those. But after that, the line be repaid and it's off to the races. So I think we'll use it as a temporary inter-quarter thing and it's a relatively small draws. And then as we move forward, we're into these cash flow harvest years. Carey MacRury: And then just maybe on CapEx at Goose. I mean Q3 CapEx seemed a bit higher than what we were expecting. Maybe that's just seasonality in Nunavut. But any guidance on what we should be expecting for growth capital at Goose for Q4? Michael Cinnamond: Yes. So I'd say if you look at the budget that we put out for half 2, it was $176 million. And we didn't give a split, but it was heavily weighted to Q3. So the budget was roughly $130 million for Q3 and then $45 million, $46 million for Q4. So in Q3, the recorded CapEx in the financials was $157 million, but that includes -- we ended up capitalizing a bunch of site general costs and commissioning costs just because of the timing of the ramp-up, which are -- they were budgeted as operating costs. And so we ended up capitalizing them so they flow through the CapEx line. Like-for-like, the hard assets in the budget, we were $120 million versus the budget of $131 million plus these site G&A costs. So on the capital front, the pure CapEx front that we budgeted we're pretty much on budget. Q4, we did add $15 million to Goose's capital budget. So it's gone from $45 million to $60 million. And that really is to factor in some -- there's still quite a few folks on site that are gradually being wound down, but there are a few more people on site than we thought for a little longer. So we added that $15 million. So the way to think about Q3 is if you look at the capital and operating costs, we were pretty much right on budget. It's just to split how we ended up. We capitalized some of the site G&A and some of the commissioning costs that we didn't expect. But that was just a reallocation of cost from 2 areas of the budget. And then Q4, yes, adding $15 million for CapEx for Q4. So it goes from $45 million to $60 million. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Clive Johnson for any closing remarks. Please go ahead. Clive Johnson: Thanks, operator. As we said at the outset, a strong quarter operationally and financially, and we look forward to progressing ramp-up at Goose and continuing our strong performance at the other operations. So if you have any follow-up questions, feel free to reach out to Michael McDonald, and he can put you in touch with the right party to answer your questions. So thanks for joining us today. Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Greetings. Welcome to CION Investment Corporation Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Charles Arestia, Managing Director and Head of Investor Relations. Thank you. You may begin. Charles Arestia: Good morning, and welcome to CION Investment Corporation's Third Quarter 2025 Earnings Conference Call. An earnings press release was distributed earlier this morning before market open. A copy of the release, along with the supplemental earnings presentation is available on the company's website at www.cionbdc.com in the Investor Resources section. It should be reviewed in conjunction with the company's Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Joining me on today's call will be Michael Reisner, CION Investment Corporation's Co-Chief Executive Officer; Gregg Bresner, President and Chief Investment Officer; and Keith Franz, Chief Financial Officer. With that, I would like to now turn the call over to Michael Reisner. Please go ahead, Michael. Michael Reisner: Thank you, Charles, and good morning, everyone. Overall, we reported a strong third quarter with continued NAV appreciation and significant quarterly earnings. We reported $0.74 a share in net investment income for the third quarter, driven by robust transaction activity involving 20 of our portfolio companies with several fee events, new investments and repayments. As in past quarters, increased transaction activity tends to translate into higher earning quarters through increased transaction-related fees and other yield enhancement measures such as MOICs, exit fees and call protection. During the third quarter, we realized significant transaction-related accretion related to a portfolio company and is part of our opportunistic strategy. As we discussed on our prior call, we expected this transaction to close in the third quarter which contributed meaningfully to our net investment income. Excluding the income from this transaction, we still would have covered our base dividend for the quarter, which we believe reflects the ongoing earnings power of our portfolio. Gregg will discuss this transaction in greater detail later on during the call, but I want to reiterate how we view our opportunistic strategy as a differentiated component of our overall earnings potential. While these contributions can appear episodically, we consider these potential earnings to be a strategic component of our portfolio as we manage the business and the dividend over the longer term. We appreciate that the timing of these contributions can be difficult to predict, which is why we provided the additional context on our prior earnings call. Going forward, we plan to provide comparable guidance on any similar anticipated transactional income to help manage investor expectations in the short term, should conditions allow. As we have mentioned previously, we believe the volatility that these potential returns create tends to skew meaningfully to the upside versus consensus expectations and thus should be evaluated on a longer-term perspective. Our net asset value increased 2.5% quarter-over-quarter to $14.86 up from $14.50 in the prior quarter, driven largely by fair value increases in our equity portfolio with significant increases in Longview Power and Palmetto Solar. Following the upside of our share repurchase program announced in the prior quarter, we were able to take advantage of a meaningful sector-wide sell-off in the BDC space in September to repurchase our shares in the open market, which remains accretive to NAV. Overall, we repurchased approximately 330,000 shares at an average price of $9.86 per share during the quarter and have continued repurchasing shares in the fourth quarter. So far in the fourth quarter through last week, we have repurchased approximately 325,000 shares at an average price of $9.33 per share. The largest contributor to our quarterly NAV growth was Longview Power, which continues to see tailwinds from stronger fundamental performance and broader sector growth from AI-driven digital infrastructure demand. Longview is now our largest equity position, and we are pleased with the underlying asset performance so far. Looking ahead, we believe successful monetization of our equity positions will be a significant driver of the growth potential for our stock, and we are encouraged by recent trends on that front. Despite broader headlines about problematic loans in the credit space, we believe our portfolio continues to perform well. Underlying LTM adjusted EBITDA growth trends in our portfolio companies in our debt portfolio remain in the mid- to high single digits and our portfolio nonaccruals remained relatively low at 1.75% of the portfolio at fair value. We added 2 names to nonaccrual status this quarter, including a relatively small position in one of our very few second lien holdings. Following our quarterly review process, we downgraded 3 loans, including the 2 new nonaccruals I just mentioned, partially offset by upgrading 1 loan that was subsequently repaid at par at quarter end. Overall, investments risk rated 4 or 5 comprise approximately 2.4% of the portfolio at fair value. I'm also excited to announce today a shift in our timing of paying base distributions to our shareholders beginning in January 2026. We will be converting to paying base distributions from quarterly to monthly. We are pleased with the continued performance of our portfolio and believe that shareholders will appreciate the increased frequency of our base distributions going forward. We have also declared a base distribution of $0.36 per share for the fourth quarter of 2025, the same amount as the third quarter, and Keith will discuss this in more detail. In summary, we believe that this was a strong quarter for CION and a reinforcement of our differentiated strategy, which pairs traditional first lien focused direct lending with an opportunistic capability to enhance overall returns over the longer term. We have seen a noticeable pickup in repayment activity in recent quarters, which allows us to redeploy into our active pipeline and allows us to recapture incremental fee income as the portfolio turns over. I'm especially proud of CION's performance amidst a highly competitive operating environment. There is certainly no shortage of press out there today on the headwinds of spread compression, looser lender protections and credit concerns driven by recent high-profile bankruptcies. We have no direct exposure to these names or sectors. We believe that our results today validate the diligent work of our team and continuing to source and execute on differentiated opportunities in a challenging environment. With that, I will now turn the call over to Gregg to discuss our portfolio and investment activity during the quarter. Gregg Bresner: Thank you, Michael, and good morning, everyone. We've remained highly selective with new portfolio company investments in Q3 as we were highly active and focused on transaction opportunities within our portfolio of companies. We were also effectively at full investment during most of the quarter and worked to maintain our targeted net leverage range of 1.25x to 1.3x while simultaneously balancing the timing of expected investment pipeline investments versus repayment amounts. Most of our exiting repayments occurred towards the end of the quarter. During the quarter, we passed on a historically higher percentage of potential investments in new portfolio companies based on credit and pricing considerations as the continued hangover of record 2024 private debt fundraising still translated into lower coupon spreads, higher leverage levels and looser credit documents in the market. As Michael discussed in his remarks, market conditions continued to rebound in Q3 as stronger economic indicators and reduced concerns regarding tariffs have boosted overall economic sentiment in equity markets. We focused our Q3 activities on incremental opportunities with our own portfolio of companies as we had significant transaction and fee events with over 20 of our portfolio companies this quarter. We believe our continued investment selectivity and proportional deployment levels helped us to invest in first lien loans at higher spreads when compared to the overall private and public loan markets during the quarter. The weighted average yield for our funded first lien investments for the quarter based on our investment cost with the equivalent of SOFR plus 7% for our direct strategy and SOFR plus 14% for our opportunistic strategy investments. As we discussed in previous quarters, the majority of our annual PIK income is strategically derived from highly structured first lien investments or where PIK income is incremental to our cash coupon. Together, these categories represented approximately 71% of our total PIK investments in Q3, approximately 67% of our PIK investments are in portfolio companies risk-rated either 1 or 2 and 98% risk-rated 3 or better. As a result, we believe this PIK income may not compare to restructured PIK driven by a deterioration in credit. Turning now to our Q3 investment and portfolio activity. Our Q3 investment activity consisted of a co-lead investment in 1 new portfolio company metric and incremental add-on investments and secondary purchases in existing portfolio companies, including Avison Young, Senex, Community Tree Services, David's Bridal, [ Invincible Boats, I&W ], Ivyhill, LAV Gear, Juice Plus, Precision Medical, STATinMED and Tactical Air Support. During Q3, we made a total of approximately $73 million in investment commitments across 1 new and 12 existing portfolio companies, of which $65 million was funded. We also funded a total of $8 million of previously unfunded commitments. We had sales and repayments totaling $151 million for the quarter, which consisted of the full repayment of the first lien loans for American Family Care, Health e-commerce, HW [ Wachkner ] [ KeyImpact ], Lamons, Nova Compression and Rogers Mechanical. As a result of all these activities, our net funded investments decreased by approximately $69 million during the quarter. As Michael referenced, our NAV increase during the quarter was driven primarily by net increase in the unrealized mark-to-market value of the portfolio as improved market conditions and reduced tariff concerns positively impacted comparable public company valuations and the overall projected macroeconomic outlook. Four notable portfolio companies for the quarter were Longview Power, Palmetto Solar, Juice Plus and Anthem Sports. The value of our equity investments in Longview Power and Palmetto Solar increased due to the strong fundamental performance and projected financial outlook for these companies. As Michael mentioned, CION co-led the consensual restructuring and refinancing of Juice Plus during the quarter, which resulted in significant realized earnings for CION and repositioned Juice Plus the fuel product growth and strategic investments. Our investment in Juice Plus represents an illustrative example of our opportunistic first lien investment strategy where we acquire lightly syndicated first lien loan tranches in quality companies at significant discounts to par due to technical reasons where we expect to have active roles in the processes that drive the refinancing or restructuring of the investments. Historically, we have been able to realize healthy earnings on our first lien restructured and recapitalized transactions as our realized weighted average total recoveries have been in excess of the amortized cost of these investments at the time of the restructuring. Additional examples include our investments in Longview Power, Yak Mat, Heritage Power and Dayton Superior. We experienced a mark-to-market decline in our first lien debt investments in Anthem Sports which were driven primarily by the less-than-expected ramping of the revenue for the quarter. The company continues to transition from a subscription base to an advertising-driven revenue model and is in the process of integrating a recent strategic acquisition completed in the second quarter. From a portfolio credit perspective, our nonaccruals increased from 1.3% of fair value in Q2 to 1.75% in the third quarter. This increase was driven by the addition of 2 new names to nonaccrual, our first lien investment in Trademark Global and second lien investment in Aspira. Trademark Global's operations have been materially impacted by tariffs in 2025 as the company continues to diversify its sourcing away from China. While the company is executing a comprehensive plan to rebuild its earnings we have placed on nonaccrual and will reassess based on the company's execution of that plan. Aspira is rolling out a new generation of subscription products to its customers, which has impacted short-term performance. During the quarter, we sold our second lien investment in Seqirus, which removed the name from nonaccrual. On an absolute basis, nonaccruals continue to be in line with historical experience, and we are pleased with the continued credit performance of our portfolio, particularly in the current interest rate environment. Overall, our portfolio remains defensive in nature with approximately 80% in first lien investments. Approximately 98% of our portfolio remains risk rated 3 or better. Our risk rated 3 investments which are investments where we expect full repayment but are either spending more engagement time or have seen increased risk since the initial asset purchase decrease from approximately 11.6% in Q2 to 10.4% in Q3. I'll now turn the call over to Keith. Keith Franz: Thank you, Gregg, and good morning, everyone. During the third quarter, net investment income was $38.6 million or $0.74 per share compared to $16.9 million or $0.32 per share reported in the second quarter. Total investment income was $78.7 million during the third quarter as compared to $52.2 million reported during the second quarter. This is an increase of $26.5 million or an increase of about 51% quarter-over-quarter. The increase in total investment income was driven primarily by higher interest income earned as a result of certain investments being restructured and other yield-enhancing prepayment fees recorded during the quarter, as well as higher transaction fees earned from originations and amendment activity when compared to the prior quarter. On the expense side, total operating expenses were $40.1 million, compared to $35.3 million reported in the second quarter. The increase in operating expenses was primarily driven by higher advisory fees due to higher investment income earned during the quarter. At September 30, we had total assets of approximately $1.9 billion and total equity or net assets of $773 million, with total debt outstanding of about $1.1 billion and 52 million shares outstanding. Our portfolio at fair value ended the quarter at $1.7 billion, and the weighted average yield on our debt and other income-producing investments and amortized cost was 10.9% at September 30. Our PIK income for the third quarter was largely impacted by one of our portfolio companies in connection with its amended loan facility. The amount capitalized was about $5 million for the quarter. And excluding this transaction, our PIK as a percentage of total income for the third quarter would have been lower and in the mid-teens level. At September 30, our NAV was $14.86 per share as compared to $14.50 per share at the end of June. The increase of $0.36 per share or 2.5% was due to mark-to-market price increases in our portfolio, mostly due to price increases from our equity book and the accretive nature of a share repurchase program during the quarter. We ended the third quarter with a strong and flexible balance sheet with over $1 billion in unencumbered assets, a strong debt servicing capacity and interest coverage ratio of about 2x and solid liquidity. We had over $105 million in cash and short-term investments and another $100 million available under our credit facilities to further finance our investment pipeline and continue to support our existing portfolio companies. At September 30, we continue to have a healthy debt mix with about 63% in unsecured debt and 37% in senior secured bank debt. About 75% of our debt capital is in floating rate, which aligns well and creates a natural hedge with our mostly floating rate investment portfolio. Our well-diversified debt structure is focused on unsecured debt in order to maximize our balance sheet flexibility and at the same time, creates a strong buffer for our financial covenants. At the end of the quarter, our net debt-to-equity ratio decreased to 1.28x from 1.39x at the end of June. And the weighted average cost of our debt capital was about 7.5%, which is unchanged from the second quarter. We currently manage our portfolio and leverage levels on a net of cash basis as all of our outstanding debt is currently noncallable and at their minimums. Now turning to distributions. During the third quarter, we paid a base distribution to our shareholders of $0.36 per share, which is the same as the second quarter distribution. The trailing 12-month distribution yield through the third quarter based on the average NAV was about 10%. And the trailing 12-month distribution yield based on the quarter end market price was about 15.7%. As announced this morning, we declared our fourth quarter base distribution of $0.36 per share, which is the same as the third quarter. The fourth quarter base distribution will be paid on December 15 to shareholders of record as of December 1. And finally, we also announced this morning that we will be changing the timing of paying base distributions to our shareholders from quarterly to monthly beginning in January 2026 to better align with our shareholder base. Monthly base distributions will continue to be declared quarterly in advance. With that, I will now turn the call back to the operator, who will open the line for questions. Operator: [Operator Instructions] Our first question is from Erik Zwick with Lucid Capital Markets. Erik Zwick: First question maybe for Keith, and I appreciate all of the commentary kind of walking through the puts and takes there and interest income for the quarter. Curious if you could kind of break it down either in terms of dollar terms or percentage terms, and what of that $51 million, what came from kind of regular ongoing interest payments? And what was more from the periodic in nonrecurring events? Keith Franz: Yes. I would think that on a baseline basis, we had interest income similar to what we recorded in Q2, maybe slightly up and then the rest of it came from the restructured investments that we experienced during the quarter. Erik Zwick: And maybe a similar line of questioning on the PIK income in the quarter. You noted the $5 million of capitalized costs. So that was more onetime in nature? Is that the correct interpretation that $5 million... Keith Franz: I don't know if I would necessarily use that vernacular, but yes, that was a pick event that occurred uniquely in this quarter. Erik Zwick: And then so the remaining, call it, $12 million or so, could you provide a breakout of that part, what is structured versus kind of credit related because I know you've got a fair amount that's structured by design? Keith Franz: Yes. No different than the pool that Gregg had mentioned on his comments that the majority of that is structured. Erik Zwick: And then just curious, as you seem fairly optimistic about the originations outlook. And just curious if you could provide any commentary on the pipeline in terms of the size relative to maybe 3 months ago? And also just the quality of what you're seeing in terms of structure and in yield as you look forward to future activity? Gregg Bresner: Erik, it's Gregg. Definitely more robust than we've seen this year. More activity, it's broader based. There's definitely been a pickup in M&A, which is different from the first 2 quarters. And I would say, in terms of spreads and things like that, pretty consistent with what we've done in the past. I would say we definitely -- what I would call traditional middle-market type spreads. Operator: This will now conclude our question-and-answer section. I would like to turn the call back over to Michael Reisner for closing remarks. Michael Reisner: We appreciate everyone taking time out of their day to join us, and we look forward to communicating with you early next year. Thank you, everyone. Take care. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good day, everyone. Welcome to BeOne Medicine's Q3 2025 Earnings Call Webcast. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to the company. Daniel Maller: Hello and welcome. Thanks for joining us today. I'm Dan Maller, Head of Investor Relations at BeOne Medicines. Before we begin, please note that you can find additional materials, including a replay of today's webcast and presentation on the Investor Relations section of our website, ir.beonemedicines.com. I would like to remind all participants that during this call, we may make forward-looking statements regarding, among other things, the company's future prospects and business strategy. Actual results may differ materially from those indicated in the forward-looking statements as a result of various factors, including those risks discussed in our most recent periodic report filed with the SEC. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this presentation. Reconciliations between GAAP and non-GAAP financial measures discussed on this call are provided in the appendix to our presentation, which is posted to our Investor Relations website along with the earnings release. All information in this presentation is as of the date of this presentation, and we undertake no duty to update such information unless required by law. Now turning to today's call as outlined on Slide 3. John Oyler, our Co-Founder, Chairman and CEO, will provide a business update; Aaron Rosenberg, CFO, will provide an update on our third quarter financial results and financial guidance; and Lai Wang, our Global Head of R&D, will discuss our R&D and pipeline progress. We will then open the call to questions. And joining the team for the Q&A portion of the call will be Xiaobin Wu, President and Chief Operating Officer; Matt Shaulis, our General Manager of North America; and Mark Lanasa, our Chief Medical Officer for solid tumors. I'll now pass the call over to John. John? John Oyler: Thanks, Dan, and thank you, everyone, for joining us today. The third quarter marked another strong quarter of execution. From a financial perspective, revenue reached $1.4 billion, which represents 41% year-on-year growth. GAAP earnings per ADS were $1.09, which represents growth of more than $2 over Q3 of last year. And we generated over $350 million of free cash flow during the quarter. As Aaron will touch on, we strengthened our balance sheet and ended the quarter with over $4 billion in cash. BRUKINSA has continued its momentum with sustained U.S. leadership, and it's now the #1 BTK inhibitor globally. Sonro, our next-generation BCL2 inhibitor recently received FDA breakthrough designation in relapsed/refractory mantle cell lymphoma. And we're really excited about the totality of data emerging from that molecule, some of which we're going to highlight today. BRUKINSA, Sonro and our BTK CDAC are the core elements of our leadership in B-cell malignancies, and they'll be on display next month at ASH where we'll present 47 abstracts from across our heme portfolio. The quarter also yielded multiple developments across our growing solid tumor pipeline, including clinical proof-of-concept for multiple early-stage assets, which Lai's going to discuss in more detail later. So let me start with BRUKINSA, the backbone of our heme franchise. BRUKINSA continued to perform exceptionally well in the third quarter, growing 51% and exceeding $1 billion in quarterly global revenue for the first time. As a result and also for the first time, BRUKINSA is now the global value share leader amongst the growing BTK market. This, of course, is a major milestone for BRUKINSA and for our company. As I discussed in detail on our Q2 earnings call, the commercial success of BRUKINSA is not by chance. It's the direct result of an overwhelming body of evidence that has accumulated over more than a decade. It's evidence that spans preclinical human pharmacokinetics, head-to-head clinical trials real-world data sets and patient physician preference in the market. The evidence is remarkable for both its strength as well as its consistency, and this evidence continues to build with each new piece of data, both reconfirming and further strengthening our initial therapeutic hypothesis that BRUKINSA is the best BTK inhibitor. At BeOne, we're relentlessly focused on our goal of discovering and developing innovative medicines that deliver long-term outcomes for patients. At ASH, we're presenting a 74% landmark PFS at 6 years for BRUKINSA in first-line CLL. This is from our Phase III SEQUOIA trial. We believe that these data have set the bar for what monotherapy BTK can and should be, what they should achieve in CLL. With all the caveats of cross-trial comparisons, this is double digit better than what has been reported for other single-agent BTKis at 72 months. Interestingly, this level of sustained PFS at 6 years is in the same ballpark as other recent data from BTK van fixturation regimens at only 3 years. Long-term follow-up from years 3 through 6 when patients are not on active therapy will be critically important to inform the future relevance of these regimens within the CLL treatment paradigm. And I think along those lines, what's also relevant about this year's ASH is what you're not seeing. Given what I've just said about the importance of our long-term BRUKINSA data in CLL the absence of other long-term follow-up data from many other relevant CLL trials, such as AMPLIFY with the last data cut off April 30, 2024, CAPTIVATE and ELEVATE where data hasn't been reported for a couple of years. Long-term data are the gold standard in CLL for a reason because CLL is an indolent disease, and it takes time to fully and truly understand how these regimens perform. BRUKINSA delivers the level of progression-free survival that patients and physicians should expect and should demand. We believe in the promise of fixed duration, but we also feel that the current van-based options fall far short of that promise. In our view, the current options fail to satisfy the 4 key criteria that you see on this slide, depth of response, sustained PFS, safety and convenience. Specifically, we have concerns related to the low MRD negativity rates and sustained PFS for AV combinations, the cardiac safety, uveitis and general tolerability for IV combinations. The long-term effects on the immune system and the related additional hospitalizations due to infections of obinutuzumab use and the overall treatment burden and feasibility of use with all of the van-based regimens. Our goal in fixed duration is simple. We aim to develop a more efficacious time-limited regimen that does not come with caveats or accommodations. And based on the data we've generated to date, we believe that the combination of zanu and sonro is well on its way to achieving just that. Our confidence in ZS is based on the totality of clinical data to date, but there are a couple of key aspects in the data that we find exceptionally compelling. Here, you can see the uMRD rates and the time to blood MRD from our Phase I trial. This was presented at our R&D Day in June, and we'll provide a further update on these curves at ASH. Of all the data our heme franchise is generating, these might be the most compelling to the KOLs that we meet. So let me explain. First, the combination of zanu and sonro can drive very high rates of deep response. Secondly, and perhaps more impressingly, it does so exceptionally quickly with kinetics previously unseen in other trials of drugs targeting similar mechanisms. This slide is so important that we're going to show it to you twice today, once now and once in live section. This is the type of deep response that we're looking for in a fixed duration regimen to give physicians and patients the confidence to stop therapy and to achieve positive long-term outcomes. BeOne stands out as the only company with fully owned potentially best-in-class assets across the 3 foundational MOAs and CLL, BRUKINSA, sonro and our BTK CDAC. All 3 are anchored in differentiated design hypotheses and bolstered by an ever-growing body of evidence. All 3 of the potential for the broadest utility in the class. And all 3, whether as monotherapy or in combination, represent significant opportunities for patients, physicians and for our shareholders. Together, BRUKINSA, sonro and our BTK CDA are driving the future treatment paradigm and the $12 billion and growing global CLL market. Before I close, I'd like to introduce what we're calling our development global super highway. For those of you that are newer to our story, BeOne was built different. Early on, we recognized the vast majority of the time and cost to develop and deliver a medicine was in clinical trials. We felt that such a critical component of the biopharma supply chain should be a core competency rather than something that is outsourced to a CRO. We saw the synergies that were possible by vertically integrating manufacturing with an industry-leading clinical organization. And we know from experience how hard this can be for a small company. So fast forward 15 years, and we're proud to have built a global organization of nearly 6,000 colleagues across these 2 areas: clinical development and manufacturing. And in today's hypercompetitive costly and complicated era of drug development we really believe that this global super highway is unique to BeOne, and it's critical to generating superior returns on R&D investment. To close, we're in the midst of an exciting milestone-rich period for both our heme franchise and our solid tumor pipeline. By the end of '26 we expect the initial global approval and launch of sonro and potentially pivotal data for our BTK CDAC. Our internal clinical team will be running more than 20 Phase III trials we anticipate more than 10 proof-of-concept data readouts and our research organization will advance around 10 new molecular entities into the clinic, 3 of which will be a heme and not just in CLL, but broadening our portfolio to help patients in other areas. Now I'll pass it over to Aaron to provide the financial update. Aaron Rosenberg: Thanks, John. In the third quarter, we sustained business momentum across our product portfolio with another quarter of solid execution by our global commercial teams. Product revenue reached $1.4 billion in the second quarter, representing 40% year-over-year growth. BRUKINSA global revenues eclipsed $1 billion for the first time in a quarter growing 51% driven by strong performance across all geographies. As John mentioned, BRUKINSA is now the leading BTK globally. In the U.S., we grew BRUKINSA volume by approximately 40% versus Q3 2024, driven by the quality and differentiation of our long-term clinical data across all patient types. The pricing dynamics in the United States were consistent with commentary provided last quarter with a mid-single-digit pricing benefit on a year-over-year basis. Meanwhile, TEVIMBRA reported a 17% increase reflecting continued market leadership in China, albeit in an increasingly competitive market environment. This growth was supplemented by early contributions from launch markets. Our in-licensed products also showed continued strength, growing 17% year-over-year, driven by growth of 31% from the Amgen in-licensed asset portfolio. We continue to see solid execution as we look at revenue from a geographic dimension. The U.S. remains our largest market, generating $743 million with year-over-year growth of 47%. China revenue totaled $435 million, a 17% increase supported by TEVIMBRA and BRUKINSA market leadership and growth from our in-license assets. Europe contributed $167 million, with 71% year-over growth as we continue our launch trajectory of BRUKINSA with increased share across all major markets. And rest of world markets grew 133% and driven by market expansions and new launches. Now turning to the other components of our GAAP P&L. Gross margin improved to 86% from approximately 83% in the prior year. This improvement reflects the benefit from favorable product mix, price and product cost efficiencies, offset by period costs related to repositioning of our manufacturing capacity. Operating expenses grew by 11% and totaling $1.1 billion as we are investing with discipline to support our commercial growth and rapidly advance our innovative pipeline. I thought it's worth noting that the Q3 2024 base for R&D has higher expenses for both business development milestones plus approximately $25 million in accelerated depreciation charges. Together, this has the effect of depressing the year-over-year growth rates in our Q3 2025 R&D expense, which you can observe to a degree on the non-GAAP P&L slide, which excludes depreciation. We continue to invest assertively to advance our most promising development candidates. Income tax expense totaled $22 million for the quarter. And altogether, net income reached $125 million, representing diluted earnings per ADS of $1.09. Our non-GAAP P&L includes adjustments for typical items with a full reconciliation provided in the appendix. Non-GAAP net income reached $304 million, reflecting an increase of $252 million compared to the previous year. This performance translates to diluted non-GAAP earnings per ADS of $2.65 for the third quarter. The third quarter saw a notable progress in our priority of balance sheet strength as a competitive advantage. In August, we entered into a transaction to monetize our global IMDELLTRA royalty rights, generating $885 million in cash in the quarter while allowing us to participate in the potential upside with the asset. The Royalty Pharma agreement is accounted for as a liability, and therefore, we will continue to recognize the full IMDELLTRA royalty in other revenue as it is earned while simultaneously amortizing the financing liability and interest expense, please see our 10-Q for a full description of the accounting for this transaction. And with our meaningful top line growth with margin expansion, we've seen a notable increase in free cash flow generation to $354 million in this quarter. Cash generation is the key metric of business sustainability, and we are very pleased with our progress on this dimension. All in, Q3 ending cash and cash equivalents totaled $4.1 billion, an increase of $1.3 billion versus Q2. Moving to our 2025 financial guidance. Given our continued execution, we are updating our full year revenue guidance to be between $5.1 billion and $5.3 billion. Our gross margin guidance is unchanged, remaining in the mid- to high 80% range. And we are updating our operating expense guidance to be between $4.1 billion to $4.3 billion. We remain committed to achieving positive GAAP operating income, and we expect to generate positive free cash flow for the year. Overall, we are pleased with our execution through the first 3 quarters of 2025, and we remain focused on full year delivery across all financial performance measures. Now while early and staying away from providing detailed guidance, I'd like to provide some perspectives on 2026. As you consider your models for the fourth quarter of 2025 and into the first quarter of 2026, I thought it would be useful to remind you of the seasonality patterns in the U.S. of the BTK class. This includes factors such as typical inventory increases at the end of the year, followed by normal drawdowns in January. Also, just like this year, Q1 2026 will have fewer shipment gains versus a typical 13-week quarter. This is simply the nature of the calendar, but it's something that should be considered in quarterly phasing. And while we remain committed to margin expansion across our planning horizon, the pace of improvement will be measured in the near term to ensure we are investing to maximize the value of our late-stage pipeline opportunities. We look forward to providing our detailed 2026 guidance on our Q4 earnings call in February. And with that, it seems like an excellent time to pass it over to Lai who will share more progress about our pipeline. Wang Lai: Thank you, Aaron. Hi, everyone. Thanks for joining us today. Let me start with hematology. We have 50 abstracts, including 6 orals from our hematology portfolio have been accepted for presentation at ASH this year. This is a tremendous validation of the strength and the depth of our signs. I will highlight some of those key data later in my presentation. Importantly, sonro has now received FDA breakthrough therapy designation for mental cell lymphoma. We're actively working on its first filing around the globe and our BTK integrated program has just started the Phase III head-to-head trial versus pirtobrutinib in the last refractory cell patients, a major step towards transforming the space. On the solid tumor side, our momentum continues to build. We have achieved proof-of-concept for several innovative programs, including our CDK4 inhibitor, B7-H4 ADC, PRMT5 inhibitor under GPC3x41BB bispecifics. To be noted, most of these assets have been in the clinic for less than 18 months and some less than 1 year, this is the level of efficiency and the focus we aim to deliver across the portfolio. For CDK4 we aim to initiate a Phase III trial in first-line BC in the first half of 2026. On the non- oncology side, our IRAK4 CDAC program achieved over 95%, IRAK4 [ protein ] degradation in healthy volunteers skin tissue, a clear PD proof-of-concept. We have already initiated a Phase II trial in rheumatoid arthritis. Over the past few years, especially in the last 24 months, we have dramatically increased our output from the discovery engine. In that time, we have advanced 16 new molecule entities into the clinic, including 13 from our internal research team. Among them, all molecules have already achieved clinical proof-of-concept, supporting pivotal study plan. This does not count our 4 degrade program, achieving tissue PD, POC. Across the portfolio, our programs have complete R&D-enabling studies in the medium of just 10 months, well ahead of industry benchmarks. Even more impressively, in 2024 and 2025, we have completed over 170 dose escalation cohorts with a median time of only 7 weeks. This level of speed and the precision is what defines BeOne. Our ability to move fast, execute flawlessly under turn innovation into impact. Moving on to our solid tumor portfolio. An area we are very excited about and where we feel increasingly confident in several programs advance towards registration. This confidence is built on strong evolving clinical data. First, our CDK4 inhibitor program is moving forward quickly. We plan to initiate a Phase III trial in first-line hormone receptor positive breast cancer in the first half of 2026 driven by emerging strong efficacy and the safety data from our expansion cohorts. In addition, we depriotized the Phase III development in the second-line post-CDK4/6 setting due to the evolving competitive landscape. In that context, we decided for competitive reasons to delay the disclosure of our late-line data since it is also relevant to our dose selection in frontline. Second, our B7-H4 ADC program has completed dose escalation, and we are now conducting dose optimization studies with particularly encouraging responses seen Gynecological and Endometrial breast cancers. Third, our PRMT5i Inhibitor stands out with potentially best-in-class features, including potency, selectivity and most importantly, brain penetration. Based on the emerging Phase I data, we are now accelerating this program into frontline lung and frontline pancreatic cancer. And finally, our GPC3 x 4-1BB bispecific has delivered a pleasant spikes, while seeing very exciting signals as monotherapy in its first in-human study in heavily pretreated HCC tumors. Altogether, this is a portfolio that is maturing quickly and backed by early clinical momentum, and we are incredibly energized by what's ahead. For our other solid tumor assets, we'll continue to execute and prioritize programs with the strongest potential. Our CEA ADC, EGFR x MET x MET Trispecific and the FGFR2b ADC programs are all showing encouraging early signals while continuing advancing the CDK2 Inhibitor, EGFR CDAC and the Pan-KRAS Inhibitor programs through Phase I dose aspiration studies. At the same time, based on the current data and the broad competitive landscape, we have made the strategic decision to realign the B7-H3 ADC, and Pro-IL15 programs within the portfolio. This really reflects BeOne's disciplined development strategy, focusing our resources on programs with clear differentiation and advancing them quickly to the most important value inflection point clinical POC, where we can make database decisions. This is how we continue to build a high-quality, high-velocity portfolio in solid tumors. Moving on to our hematology portfolio. Our sonro program is shaping up to be a potential best-in-class BCL2 inhibitor, offering greater efficacy improved safety and better convenience compared with the first-generation agents venetoclax. We're now in the process of filing for approval in relapsed/refractory mantle cell lymphoma globally. And then we look forward to sharing good news very soon in this space. The most critical indication for sonro is CLL. We have completed enrollment in our Phase III trial comparing the ZS fixed duration regimen versus VO earlier this year. In addition, we plan to launch another global Phase III study in the first half of 2026. Comparing ZS versus AV and mean to establish ZS as the best oral fixed duration regimen in treatment-naive CLL. And finally, in 2026, we also plan to initiate a Phase III in second-line plus multiple myeloma exploring sonro-based triplet combination. Next, a quick update on the ASH presentation for sonro. What you see on this slide are 2 selected abstracts published early this week on sonro monotherpy, starting with mantle cell lymphoma in 103 relapsed/refractory patients who had [ power ] BTK inhibitor an anti-CD20 therapy. So achieved an overall response rate of 53% with a medium progression-free survival of 6.5 months and a median duration of response of 15.8 months. These results look favorable compared to advanced historical data in a similar population even when [ Van ] was used at 3x of its clinical proven dose. On the CRL side, the table on the right shows the data from a single arm study of 100 patients or post BTK in factor and post-chemoimmunotherapy. Here, sonro achieved a 76% over response rate with 19% compete responses. Both the efficacy and the safety profile look quite favorable relative to advanced previous published data in a similar population. Altogether, this results reinforced sonros strong potential to be the best-in-class BCL2 inhibitor in hematological malignancies. In addition to the sonro monotherapy update, we are also presenting new data on the sonro combinations with Zanu under or with obinutuzumab in CLL at this year's ASH. For the ZS combination, we have more mature data as additional patients have gone through treatment. The 12 months uMRD rate has reached 92% and the most impressively with a median follow-up of 27 months to date, no patients have progressed in the 320-milligram cohort, which is truly remarkable. For the ASH presentation, we have another data cut with additional months of follow-up showing consistent results. In terms of the safety, the profile continues to show a clear advantage compared to other fixed duration regimens. And in terms of convenience, we're very optimistic that for the vast majority of patients, only 1 clinical visit during the ramp up will be required for -- after [indiscernible]. This is a meaningful improvement for both patients and the physicians. What's most exciting about this combination is the kinetics of the uMRD achievements, which John showed you earlier. As shown on the left, the medium time to uMRD with the ZS combination was only around 4 months after starting the combo and importantly, this is independent of IGHV mutation status by about 1 year of combination therapy. That's the dashed line on the graph, the vast majority of patients achieved uMRD in contrast with the IV combination on the right, the medium time to uMRD is 16 months for IGHV mutated and 10 months for unmutated patients. And at the 1-year mark of combo treatments, many still remain MRD positive. So overall, we believe that combining 2 potentially best-in-class agents, anu and sonro may provide the only true fixed duration options that delivers optimal efficacy safety and the convenience for patients with CLL in a reasonable time frame. Now the update on our BTK CDAC, BGB-16673,16673 is the most advanced program of its kind in the clinic with clear best-In-class potential. We have initiated a head-to-head Phase III trial against the pirtobrutinib in the potentially pivotal Phase II study in [indiscernible] is expected to have a data readout in the first half of 2026. We're also planning a fixed duration combination Phase III study with sonro in relapsed/refractory CLL and potentially pivotal II in Waldenström's Macroglobulinemia has been initiated. We will also show new BTK CDAC data at this year's ASH meeting. The table on that showed the CLL results published in the abstract. 16673 demonstrated an over response rate of 86.4% and with medium 18 months follow-up, the 12-month progression-free survival is now mature at 79%, a very favorable profile compared with pirtobrutinib in the similar patient population. We also reported new data in Richter's transformation on the Waldenström's Macroglobulinemia in Richter's The OR was 52% with nearly 10% complete responses. In Waldenström's, we saw 83% ORR with a 26% VGPR risk. Altogether, this data further strengthens CDAC's position as a potentially best-in-class BTK degrader across multiple B-cell malignancies. The robust clinical activity we observed is consistent with the preclinical data package with regard to the potency as shown on the left, we observed similar DC50 and DC90 values for 16673 and the [ Nurex ] molecule in head-to-head BTK-degraded assays in both human whole block cells and B-cells. And we believe 16673 holds a clear mechanistic advantage in terms of BTK mutation coverage as shown on the right, except for the A42AD mutation, 16673 can cover all other BTK mutants, whereas we observe the [ nurex ] molecule to 2 resistant hotspot at Methionine 477 and Glycerine 480 [ resumes ]. The broad mutation coverage of 1673 further reinforces its best-in-class potential. And its ability to deliver potentially more durable responses for patients. Together, sonro and 16673 highlighted the depths, quality and the momentum of our hematology portfolio advancing rapidly towards multiple late-stage milestones and the transformation opportunities in the years ahead. Finally, I'd like to share a few key milestones we are tracking for the remainder of this year and into 2026, focusing on the ones I have not mentioned earlier. First, for BRUKINSA, the Phase III in term analysis readout for the MAMRO study in treatment-naive mantle cell lymphoma has been delayed from the second half of this year to the first half of next year due to the slower-than-anticipated event rate. In addition, we are anticipating accelerated approval for sonrotoclax in relapse/refractory mantle cell lymphoma and the CRO in China early next year. Important milestones as we continue to broaden access for patients globally. Turning to our early stage pipeline. We're anticipating POCs for CDAC before the year-end and the other assets in 2026. We look forward to sharing more data in future updates. And with that, I will turn the call back to John. John Oyler: Thanks, Lai. We'll now open the call to Q&A. [Operator Instructions] Operator, please go ahead. Operator: [Operator Instructions] Our first question will come from Yaron Werber with Cowen and Company. Yaron Werber: Hopefully, you can hear me. John Oyler: Yes. Yaron Werber: Congrats, really nice quarter. I'm going to violate the rule right away. Just 2 quick questions. Number one, BRUKINSA's the global leader. You're obviously a little bit behind in Europe in terms of when you launched any sense and when new territories are coming in to accelerate that? And then secondly, Life for the CDAC data in the first half next year in CLL for the potentially support accelerated approval, can you give us a sense of what to expect there? And sort of how mature is the PFS is going to be? John Oyler: Right. So Xiaobin, do you want to start? Xiaobin Wu: Yes. In Europe, we grow for BRUKINSA are tremendously, so close to 70%. And we notified in Europe in some country like Germany, Austria, AMPLIFY launched. And we don't see much excitement among the [indiscernible] and the company may actively switch the mono acala to AMPLIFY. But so far, we have not -- we see some prescription, but not extremely a lot prescription. Therefore, the total acala in Europe, if you see the number, is flattening. Wang Lai: So regarding to the CDAC data, and this is a single-arm study, so likely to be based on the ORR as well as the DOL. So depending on the first discussion with the agency, as usually, it will be probably about 12 months after the last patient. Operator: Our next question comes from Reni Benjamin with Citizens Bank. Reni Benjamin: Congratulations on another amazing quarter. Would love to just focus on the earlier stage pipeline a little bit. You had mentioned proof-of-concept data. Can you maybe provide a little bit more color as to what you're seeing with some of these other assets? And should we be thinking that all these would likely progress to Phase III trials moving forward? And if I can sneak one in, is there a teaser you could provide regarding the 10 new molecular entities that you're filing next year? Is there a novel target that you're most excited about? John Oyler: We wish that science worked in a way where everything worked. But Lai, why don't you answer that question? Wang Lai: I'll probably refer to Mark because he is in the frontline for all this data, Mark? Mark Lanasa: Thank you, Lai. Thank you, [ Reni ] what I would say is that for all of our early programs, we established very clear criteria of what success looks like based upon the preclinical data what are we looking for in terms of PK, PD, safety and ultimately, efficacy? If you think back to the slide that Lai showed where he talked about where the different programs stand. I think you can think about that as some of those programs are meeting all of those criteria, the 4 of CDK4, PRMT5, B7-H4, GPC3, and therefore, we're actively planning acceleration to Phase III studies and program growth. Others, we continue to wait for data. And we believe that we'll have the data to make the final determination for both of the programs in the first half of '26. Xiaobin Wu: Yes. Then in terms of the new [ molecular ] entities we are going to bring to clinic next year. I'm going to use the GPC3 4-1BB as an example. To be honest, among the program we took into the clinic last year, that certainly was not the most exciting one for us based on the preclinical data. But certainly, we are very pleased with what we have seen in the clinic today. So I'm not going to say which one is the most exciting one for us in the next year, but we're certainly looking forward to bring more. Just want to emphasize one more thing. What you have seen from BeOne is really just the beginning, what you can see from our really prolific discovery engine. Operator: Next question comes from Andrew Berens with Leerink Partners. Andrew Berens: Let me give my congratulations on the progress and execution for the quarter. I think with Aaron's question, you answered one of the ones I had because Astra in their earnings release today did highlight the fixed duration AMPLIFY regimen getting traction in Europe, but it sounds like you guys have not seen a lot of that yet. So I just wanted to confirm that that's what you said. And then a question on the PRMT5 program. It's still expected by year-end. Just wondering, I know you mentioned the first-line PDAC and non-small cell lung cancer opportunity. Just wondering how you think of combination partners for those settings? Aaron Rosenberg: Yes. I confirm and the -- so Ocala market share and also the revenue in the last 3 months are pretty stable in Germany and not increasing -- of course, with AMPLIFY approval and the fixed duration of AMPLIFY will be added to the respective guideline. This may give some plus for [ Ocala ]. But overall, in Europe and also in Germany, the [ Ocala ] total data flattening. John Oyler: Mark, do you want to take the second part? Mark Lanasa: So we, as you heard, are very excited about our PRMT5 molecule. That's only been in the clinic since January of this year. But given its high potency and CNS penetration, we're now seeing objective responses across multiple tumor types, including both lung and pancreatic cancer as well as additional tumor types. And critically, given its high selectivity, we're also seeing a very favorable safety profile that we think will enable combinations, which will be key to unlocking the potential of this mechanism. And therefore, we're advancing into frontline to combine with current standards of care. We do not yet have the data, but it is our expectation that we'll be able to combine with chemotherapy and PD-1 in non-small cell lung cancer and standard of care chemotherapy in frontline pancreatic cancer, and we'll look for similar development opportunities in early lines of other tumor types with frequent MTAP deletion. Andrew Berens: Okay. Any belief that maybe combining with some of the selective agents might work in certain mutations like RAS mutations. Mark Lanasa: So we are very interested in RAS biology. Our pan-KRAS molecule is advancing through Phase I. We discussed at R&D Day a commitment to bring multiple additional RAS targeting molecules into the clinic. So certainly, in pancreatic cancer, for example, we will ultimately look to combine PRMT5 with KRAS. So again, the aspiration given potency and selectivity is that we should be able to combine with whatever is the appropriate additional therapies for that patient given the disease state and any other concurrent mutations. Operator: Our next question comes from Yigal Nochomovitz with Citigroup. Yigal Nochomovitz: Okay. Great. This one is for Lai or Mark. Maybe. Could you give a little more detail on the design of the CDK4, Phase III in terms of what you can say at this point about the control arm, the size of the study, anything on the powering? And also what are the doses that are the final contenders for that study? John Oyler: Please go ahead, Mark. Mark Lanasa: So at R&D Day, we talked about the 3 dose levels that are being explored in our expansion phase, 240, 400 and 600. We've completed enrollment of our frontline cohorts. And we're very excited with the data as they're coming in. We are seeing a high response rate that we think will justify as initiation of a Phase III study the core hypothesis with the molecule is that having a more selective CDK4 inhibitor will be superior to currently available CDK4/6 inhibitors. And therefore, we're intending a head-to-head study we're still waiting for data to make final decisions around study size and powering, but we certainly should be able to share those details in the near future as we move towards a Phase III study start by the end of the first half of next year. Yigal Nochomovitz: Okay. And then I think Lai mentioned the new Phase III ZS versus AV. I was just wondering regarding the rationale around that. I was under the impression you kind of already knew the conclusion there that ZS was better? So I'm just curious as to the rationale for that additional investment to further prove that point. John Oyler: Please go ahead. Wang Lai: Yes. Thank you for the question, and we agree with your comments. But we felt this is important to establish ZS as really the best oral fixed duration regimen. So we picked the one which likely will be approved soon by FDA, the AV regimen. We do have a lot of confidence in term for this particular study. John Oyler: Yes. I think if I just elaborate a little bit on that, we encourage everyone to look frequently at the CLL data, especially the long-term data that we've presented but still people will say, well, there's no head-to-head study against [ Ocala ] versus [indiscernible]. And still, people will discount the body and wealth of information that's there. And I think when you look at the data and you talk to the top KOLs, I think at this point, with this long-term data, it's very clear. But nonetheless, there's always someone who says there's not direct head-to-head. And I think this commercially is helpful, and it's helpful to bridge that information gap help educate people more quickly. I mean just when we're looking at that space, the long-term data, it's meaningfully different with all the cross trial comparison. As we said, it's double-digit different. look at the PFS, look at the OS data. It's impressive, but we still get that comment in a small portion of the population around the globe. So we just think, it's important to do this so we can ensure that everyone is getting the best medicine and the best regimen. So we're committed to doing it. Operator: Our next question comes from Leonid Timashev with RBC. Leonid Timashev: I just want to ask maybe on some of the commercial dynamics you're seeing outside of the early line setting in CLL and maybe more in the relapsed/refractory setting is how is BRUKINSA share holding up or growing there? And then ultimately, how do you expect the mix of a degrader BRUKINSA and covalent inhibitors to play in the future there? John Oyler: Sure. Matt, please. Matt Shaulis: Sure, happy to address that. Yes, we continue to see strong new patient start share across the lines of therapy, including in that relapse setting. And then as we've discussed in the past, we're really confident in our overall CLL franchise leadership strategy. You made reference to the multiple mechanisms that are in our portfolio. And as you've heard from John, we continue to have confidence in our BTK mono due to our head-to-head superiority with another BTK and our best-in-class profile. Including PFS, safety and tolerability in the long-term setting that John mentioned. We also see an opportunity for therapy that will include zanu plus sonro. We've spoken before about the requirements for therapy there. And we're confident in a really strong MRD PFS safety and tolerability profile, but also in the convenience that sonro can bring to that regimen. So of course, we see the future opportunity for fixed duration with zanu plus sonro. But right now, we're confident in monotherapy. Of course, when it comes to the degrader we see a clear opportunity there in later lines of therapy. I'm sure you're familiar with resistance mutations that can happen in those earlier lines, and we have the confidence to do a head-to-head superiority study for the degrader versus pure dose. So we see a strong opportunity across patient types in the cross lines of therapy in CLL. Operator: Our next question comes from Sean Laaman with Morgan Stanley. Sean Laaman: Just to go back on the CDK4 inhibitor, just to maybe throw some meat on the bones around the decision not to pursue later lines and to go for first line. And then also just to confirm, are we still going to see some data at San Antonio and what do you hope to present at that forum? Mark Lanasa: Thank you very much, Sean. Yes. So again, what we're seeing in our expansion cohorts is a very strong emerging response rate. We are waiting for data maturity. Now in the context of the strength of that data and also importantly, the context of emerging data externally, so there are a number of new agents that are leading to both fragmentation in the second-line as well as an increasing bar for success in second-line. We always view the second-line opportunity as a transitional opportunity for this molecule and the key study as the frontline study. So given this external dynamic and our strong internal data, we made the decision to deprioritize second-line and to accelerate frontline. And again, we're very much looking forward to that study. Currently, we then subsequently made the decision that we would not share the second-line data this year San Antonio. We think those data are relevant to our dose level selection for Phase III in frontline and we, therefore, will not have data for this molecule at the San Antonio, but look forward to sharing data at a future venue that will -- should we say substantiate our plans for the Phase III study in frontline. Sean Laaman: Great. And one quick follow-up just on zani plus sonro versus [V plus O]. So Phase IIIs are recruited earlier this year. What's sort of the signpost pathway or the map going forward in terms of future announcements around that trial? John Oyler: Lai, do you want to answer that, please? Wang Lai: Yes. So to me, in that particular study is a PFS events-driven studies, as you can imagine, with the control arm using the vial, it's really good therapy as well. So it would take a little bit of time to get into the PFS readout at the same time, we are also monitoring the uMRD rate, this will be something we can probably take an earlier look at. Operator: Our next question comes from Jess Fye with JPMorgan. Jessica Fye: I have one on the EGFR targeted assets. I guess what in particular makes you say that the EGFR cMET product goes in the promising bucket, whereas the EGFR CDAC is in the still exploring bucket. Is that based on clinical data? Or if not, can you just elaborate on kind of how you segment of those. John Oyler: Sure, Mark. Please go ahead. Mark Lanasa: Sure. Thank you, Jess. So we have a number of different EGFR targeted therapies that are moving forward. And as I mentioned earlier, for each program based upon the preclinical evidence, we have expectations of what we would like to see for the molecule initially in terms of PK and safety, but ultimately in terms of efficacy. So what we're seeing from the EGFR MET-MET Trispecific, though it's very early days in dose escalation is that we are seeing clinically meaningful responses with that agent. With the EGFR degrader, we continue through dose escalation. We've had some tumor regressions. We're happy with the PK and the safety profile. We simply need more data maturity. It's important to highlight that these are 2 totally different mechanisms of action, and therefore, our expectations for what we would expect from each molecule are somewhat different. Operator: Our next question comes from Clara Dong with Jefferies. Yuxi Dong: Can you hear me? John Oyler: Yes. Yuxi Dong: Congrats on the quarter. So you talked about the seasonality for the entire BTKi class. So just wonder how the seasonality dynamics differ across key regions in the U.S., Europe and the rest of the world as well. And then just looking at the time line for sonro and the BTK CDAC entering the market, sonro expected to file for MCL in the U.S. this year and BTK CDAC could have a pivotal readout next year in CRL. So is this the right understanding that potentially BTK CDAC that can be approved first in CLL in the U.S.? And how do you anticipate this influencing physician sequencing strategy across B-cell malignancies special in CLL? John Oyler: So Aaron, going to lock. Aaron Rosenberg: Great. Thanks for the questions, Clara. So as I said in my prepared remarks, I just wanted to reinforce as you think about your models, the seasonality patterns, this is really a focus in the U.S. where we typically do see inventory builds across the sector in the fourth quarter and then that unwinds to a degree in the first quarter. And then we did reference back to the same calendar issues that we experienced in '25 also in '26. Globally, you see that to a lesser effect in our business in China, Q4 is typically a relatively lighter quarter by comparison. But given the magnitude and import in terms of percentage of revenue, for BRUKINSA in the U.S., we thought it was really important to highlight as you think about rolling over your models from '25 to '26. So I can hand it over to Lai. Wang Lai: Aaron, you're correct. In terms of in the U.S. as well as probably use out of that -- CDAC is likely to get the CLL approval probably ahead of the sonro, but that's not the case in China. In China, we already filed the [ someone ] for the CLL, which we're also anticipating approval early next year. In terms of sequence of the therapy, we view that CDAC can provide a really broad coverage in terms of patients who had BTK inhibitor. As shown actually in one of the slide in today's presentation, this really covers pretty much everything except maybe one mutation. So we do believe this is probably at this moment based the level evidence is positioned very well in the later line therapies after the COVID and BTK inhibitor. Operator: Our next question comes from Michael Schmidt with Guggenheim Partners. Michael Schmidt: I just had another bigger picture question around the CLL market. As you noted in the slides, I mean it sounds like the AMPLIFY regimen has moderate uptake. But fixed duration treatment will clearly be part of the CLL treatment landscape longer term, including your own combination. And so I was just wondering how you think about how that might impact the overall size of the CLL market, the BTK inhibitor market longer term? And then just a clarification on seasonality, Aaron. I know you made some comments around inventory in stocking at the end of the year. But then when I look at guidance, it seems like the top line the higher end, the top end of the range for revenue could be achieved with almost only flat Q-on-Q growth. And so was just wondering if there's anything else going on in 4Q that we should be aware of? John Oyler: So maybe I'll start with a quick answer around that. As I laid out earlier in this long-term PFS really matters. You have 6 years of follow-up for data matters. These are cancer patients and you don't want progression there's no area outside of CLL I've seen where people talk about, let's take a regimen where you give up years of milestone PFS. You just don't see that. Whether it's van-based fixturation treatments or other BTKs or [Porto], really all options beside chemo, they look pretty decent at 2 to 3 years. And there just isn't enough time to understand the durability and the outcome for patients. BRUKINSA consistently shows best long-term patient outcomes in CLL. It's why it's the standard of care, and it's why it's the global leader. The more follow-up we show as we're doing at ASH, the more differentiated it looks. The 6-year data in CLL in first-line and second-line and in all high-risk subgroups, the story is the same, the best long-term outcomes for patients. It's 6 years follow-up, 74% PFS rate for BRUKINSA in first-line CLL. When you COVID-adjust this at 77%, our OS is 84%, 88% COVID-adjusted. In ELEVATE TN, Acalus PFS is 62%, and their OS is 76% at the same time period. In second-line and deletion 17p, it's the same story. Unparalleled median PFS from Alpine and our SEQUOIA Deletion 17P data shows that BRUKINSA works very well in high-risk patients. It's just not the case with the other options. And we're still reporting our follow-up data because it tells the story. Where is the other data? Where is the long-term data from ELEVATE? Where is it from CAPTIVATE. Where is it from AMPLIFY. It's very noticeable, it's not being reported. And with respect to [Porto] it's 18 months of follow-up in second-line CLL it's not even close to being long enough. And as we've mentioned, 2 to 3 years, you just can't differentiate yet. And I think from that perspective, we're extremely confident in both the short term. And when we talk about long term, the really exciting thing is this desire to have fixed duration treatments. It's a great thing if you can get there. And so far, it does look like SC is going to be unlike anything we've seen yet. It's too early to be sure. There's not enough long-term follow-up data for that either, but the early data looks noticeably different than anything we've seen before. So we're really, really excited about that. Now maybe I'll jump to Aaron to answer some of the other parts of that question. Aaron Rosenberg: Yes, thanks. Obviously, there's tremendous opportunity across the franchise as we think about where we're participating today in a $12 billion in growing market, whether you look at it from either a BTK space or an overall CLL space. To your question on the guidance, we did reinforce the seasonality really to make sure we support dialing in your modeling in that regard, given the history. We feel really confident on our execution over the course of the year. As you referenced, we've taken up the bottom of our range from where we started we started the year at 4.9% to 5.3%, and now we're at 5.1% to 5.3%, showing increased confidence and really the great execution from our global teams. As you said, if you annualize the current quarter run rate and you think about the next quarter, we feel that the range that we provided is certainly within our expectations. The import of the seasonality common is really specific to the United States, and we want to make sure that, that perspective is really incorporate. Thank you. Operator: There are no further questions at this time. I will turn the call over to John Oyler for closing remarks. John Oyler: All right. Thank you all. I would like to point out that a few weeks ago, BeOne celebrated our 15th anniversary as a company. It's very hard to believe that in this relatively short period of time we've been able to become one of the leading oncology companies in the world. I'd really like to think that this is because, as you heard today, were driven by scientific excellence, exceptional speed, and a relentless drive to provide the best long-term outcomes for patients. And on behalf of everyone here at BeOne, I'd really like to thank the broader oncology community including the patients, their families, the clinicians, our employees and all of you who have been with us for the journey. We truly believe that together, we are how the world stops cancer, and we're just getting started. So thank you again for your time today and your thoughtful questions. Have a great day.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the High Liner Foods Inc. Conference Call for Results of the Third Quarter of 2025. [Operator Instructions] This conference call is being recorded today, Thursday, November 6, 2025, at 10:00 a.m. Eastern Time for replay purposes. I would now like to turn the call over to Jennifer Bell, Vice President of Communications for High Liner Foods. Please go ahead. Jennifer Bell: Good morning, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the third quarter of 2025. On the call from High Liner Foods are Paul Jewer, Chief Executive Officer; Kimberly Stephens, Chief Financial Officer; and Anthony Rasetta, Chief Commercial Officer. I would like to remind listeners that we use certain non-IFRS measures and ratios when discussing our financial results as we believe these are useful in assessing the company's financial performance. These measures are fully described and reconciled to IFRS measures in our MD&A. Listeners are also reminded that certain statements made on today's call may be forward-looking statements under applicable securities laws. Management may use forward-looking statements when discussing the company's investments in acquisitions, strategy, business and markets in which the company operates as well as operating and financial performance in the future. These statements are based on assumptions that are believed to be reasonable at the time they were made and currently available information. Forward-looking statements are subject to risks and uncertainties. Actual results or events, including operating or financial results could differ materially from those anticipated in these forward-looking statements. High Liner Foods includes a thorough discussion of the risks and other factors that could cause its impacted anticipated outcomes to differ from actual outcomes in its publicly available disclosure documents, including its most recent annual MD&A and annual information form. Please note that High Liner Foods is under no obligation to update any forward-looking statements discussed today. At the close of markets yesterday, November 5, High Liner Foods reported its financial results for the third quarter ended September 27, 2025. That news release, along with the company's MD&A and unaudited condensed interim consolidated financial statements for the third quarter of 2025 have been filed on SEDAR+ and can also be found in the Investors section of the High Liner Foods website. If you'd like to receive our newsletters in news releases in the future, please visit the company's website to register. Lastly, please note that the company reports its financial results in U.S. dollars, and therefore, the results to be discussed today are also stated in U.S. dollars, unless otherwise noted. High Liner Foods' common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars. I'll now turn the call over to Paul for his opening remarks. Paul Jewer: Thanks, Jen, and thank you all for joining us on today's call to discuss our results for the third quarter. I'm joined today by our Chief Financial Officer, Kimberly Stephens; and our Chief Commercial Officer, Anthony Rasetta. Before I get started, I would like to take a moment to welcome Kimberly to our first earnings call as our newly appointed CFO. Since joining us 3 years ago, Kimberly has been essential to the success of High Liner Foods. She's a demonstrated leader with over 2 decades of financial experience and her qualifications, combined with her deep understanding of our business, position her well to step into this role. Turning now to the quarter. I will start by addressing head on that our financial results for Q3 came in below expectations for what we know our business can deliver and frankly, what we were expecting we would deliver for the third quarter. However, even in a challenging quarter, there were many bright spots as we gained [indiscernible] share, advanced innovation and progressed our strategic initiatives. Our operating momentum was unfortunately overshadowed by macro headwinds. When I spoke to you in August, I highlighted the pressures from rising raw material costs and tariffs as well as challenges associated with shifting and uncertain trade policies. These pressures persisted in the third quarter, during which we worked through difficult but constructive pricing conversations with our customers. Progress has been made but it takes time for higher pricing to flow through, particularly in retail, where pricing adjustments have a longer lead time. As a result, while some cost increases have been successfully passed through, much of the benefit is yet to fully show up in our financial results. Tariffs were a major factor this quarter but they weren't the whole story. Several macro headwinds converged at once, the accelerating inflationary environment plus rising seafood prices, particularly on cod and haddock as well as consumer price sensitivity and a prolonged slowdown in foodservice. I don't want to understate the impact of these macro headwinds. Combined, they put significant pressure on margins as reflected in our results. However, nor do I want to overstate these challenges because these are all temporary market dynamics. The results this quarter are not a reflection of the strong underlying demand for our branded and value-added frozen seafood where some of our most popular products are the fastest-growing SKUs in retail at premium and value price points. They also do not reflect the strength of our customer partnerships, which are resulting in successful promotional campaigns and consistent recognition we received from leading suppliers and operators who continue to seek out the solutions we offer. We have proven our ability to navigate more challenging market conditions in the past, and I don't doubt our ability to do so once again, particularly because in parallel, we are executing on a series of initiatives designed to strengthen our long-term growth opportunity. including innovation, which is a critical growth lever for us and an area where we have been steadily building bench strength, leadership and R&D capabilities to continue to win with near-term innovations with our current brands while exploring the potential to expand into new areas of the market. This includes our upcoming fully cooked product line that will open us up to a largely untapped market for frozen seafood in North America and remove one of the most cited barriers for seafood consumption, convenience. We are excited by the solution our fully cooked line offers. It will make it easier for operators to put seafood on the menu and consumers to choose seafood more often. You'll hear more about this from Anthony shortly. Brand integration of our 2 new brands, Mrs. Paul’s and Van de Kamp's, is going very well, and we are ahead of schedule on our integration plans, having built out our sales team, met with all key new and exciting and existing customers, advanced plans for renewed investment in both brands and continue to identify cross-selling opportunities as we leverage more of our best practices and capitalize on new retailer relationships. And we have also been executing on plans to modernize and automate our plants. During the third quarter, we completed the installation of new packaging technology. And although necessary downtime temporarily reduced efficiencies, we are realizing the benefits of this investment in terms of labor savings and plant performance. The cost of these continuous improvement initiatives across our plants is necessary to optimize efficiencies and enhance our profitability. While we continue to manage through market headwinds, we are taking the right actions to ensure this period of compression is short-lived through continuous improvement initiatives across our supply chain, prudent cost control and ongoing negotiations on pricing with our customers and suppliers. These actions, together with the investments we are making now in automation, innovation and brand positioning are essential to deliver sustainable margin expansion and profitable growth as market conditions normalize. From a capital allocation perspective, we are well positioned and a modest increase to our dividend underscores the Board's confidence in our business and our capacity to return capital to shareholders while investing in our business, balance sheet and future. With that, I will hand the call over to Kimberly to discuss our financial performance. Kimberly Stephens: Thank you, Paul, and hello, everyone. As Paul mentioned, our third quarter results were challenged due both to a combination of macroeconomic factors and a period of intentional investment in our business. We also experienced accounting impacts related to the integration of the 2 brands we recently acquired from Conagra, along with certain nonrecurring expenses and the impact of foreign exchange. Regarding our acquisition of the Conagra brands, the inventory we acquired in the transaction was recorded at fair market value, which is higher than what it cost to produce. As we sold through some of this inventory in Q3, we saw a temporary noncash impact of approximately $2.5 million on our gross margin. It's important to note that this impact is a standard outcome of purchase accounting, and it does not reflect the underlying strength of these brands. We expect margins to normalize once the acquired inventory is fully sold through by the end of the year. Looking at our financial performance for the quarter. Sales volume decreased in the third quarter by 1 million pounds or 1.8% to 55 million pounds compared to 56.8 million pounds in the third quarter of 2024, due mainly to customer and consumer pullback and uncertainty related to the global trade environment as well as the timing of the United States Department of Agriculture USDA contract. Sales increased in the third quarter by $19.7 million or 8.6% to $248.6 million compared to $228.9 million in the same period last year, driven by increased pricing, reflecting the inflationary markets. Gross profit decreased in the third quarter by $2 million or 4.1% to $46.3 million and gross profit as a percentage of net sales decreased by 250 basis points to 18.6% as compared to 21.1% in the third quarter of 2024. The decrease in gross profit is driven by the increased expenses related to the introduction of tariffs on seafood imported into the U.S. and higher raw material pricing on select species as well as targeted promotional activity and the negative impact of foreign exchange. Gross profit was also impacted by the increased cost of inventory related to the Conagra Brands acquisition, resulting in the temporary margin contraction as the company sells through this acquired inventory. Plant utilization was temporarily impacted by lower volumes during the quarter, compounded by planned downtime related to automation upgrades intended to drive further efficiency gains. Adjusted EBITDA decreased in the third quarter by $6.3 million or 29.3% to $15.2 million compared to $21.5 million in the same period in the prior year, and adjusted EBITDA as a percentage of sales decreased to 6.1% compared to 9.4%. The decrease in adjusted EBITDA reflects the decrease in gross profit previously mentioned as well as planned expenses related to the advancement of strategic initiatives and innovations across the business, along with certain corporate level costs tied to termination benefits and foreign exchange losses. Reported net income decreased in the third quarter by $13.5 million or 73.8% to $4.8 million, while diluted earnings per share decreased to $0.16 compared to $0.61 in the prior year. The decrease in net income reflects the decrease in adjusted EBITDA, as previously discussed, as well as the finance income recorded in the third quarter of 2024 as a result of the long-term debt modification as compared to the net expense in 2025. This is partially offset by lower income tax expense. Including the impact of certain nonroutine or noncash expenses that are explained in our MD&A, adjusted net income in the third quarter of 2025 decreased by $1.5 million or 26.8% to $4.1 million. Adjusted diluted earnings per share decreased $0.14 from $0.20 in 2024. With regards to cash flows from operations and the balance sheet, net cash flows from operating activities in the third quarter of 2025 decreased by $38.4 million to an outflow of $25 million compared to an inflow of $13.4 million in the same period in 2024. The decrease is primarily driven by lower cash flows from operations and unfavorable changes in nonworking capital balances, specifically an increase in inventory balances compared to a decrease in the prior year as well as higher taxes paid. Including the $21 million of intangible assets and property, plant and equipment that we acquired as a part of the Conagra Brands acquisition, capital expenditures were $34.5 million in the first 3 quarters of 2025 compared to $17.2 million in the prior year, reflecting the continued investment in our business. Net debt at the end of the third quarter of 2025 increased by $100.2 million to $333.4 million compared to $233.2 million in the end of fiscal 2024, reflecting higher bank loans and a lower cash balance, partially offset by lower long-term debt and lease liabilities at the -- as at September 27, 2025, as compared to December 28, 2024. Net debt to adjusted EBITDA was 3.5x at September 27, 2025, compared to 2.3x at the end of 2024. We expect the ratio to be above the company's long-term target of 3x by the end of the year due to the recently announced Conagra brand acquisition and the higher inventory levels due to opportunistic buying ahead of the increased raw material costs. While a lot of uncertainty remains in the market, we have a proven track record of successfully navigating short-term headwinds. As Paul mentioned, we are taking decisive actions across our business today to improve our performance, and we feel confident that these steps, combined with our balance sheet, strength and diverse global supply chain will help mitigate the short-term challenges and strengthen our position in 2026. I will now pass the call over to Anthony to discuss our operational highlights. Anthony Rasetta: Thanks, Kimberly, and hello, everyone. You've heard from Paul and Kimberly why our financial results this quarter did not reflect the underlying strength of our business. However, from my vantage point, there's a lot to feel good about in terms of the progress we are making. And that's because as I interact with our customers, distributors, suppliers and support my team in the field, I see the strength of our brand performance, the success of our promotional campaigns and the excitement from our customers as we share new innovations and solutions to make seafood consumption more convenient as a consumer, customer or foodservice operator. Turning to highlights of the quarter, starting with retail. In the U.S., we saw strong performance across our branded value-added product portfolio and market share gains driven by successful promotional activations and expanded distribution. Momentum in our premium Sea Cuisine brand accelerated, and we're proud to say that it is now the fastest-growing brand in the category. Our Tortilla Crusted Tilapia and other innovation continue to perform well in the club channel as these products provide restaurant quality seafood to consumers who are seeking value and trading down from dining outside the home. Momentum on Fisher Boy, our value-oriented product line and our Seaworthy line of Atlantic salmon products also continued as we secured new distribution for these brands amid a challenging and highly promotional environment. Shoppers continue to gravitate toward promotional pricing given the impact of high inflation, a trend we expect to continue in the coming quarters. We made good progress integrating Mrs. Paul's and Van de Kamp's brands into our business and the timing positions us to be able to leverage our in-depth expertise around optimized price, packaging and promotional strategies in time for lent. We're also preparing to launch the popular Shark Bites product in the club channel for the first time next year, benefiting from the insights and relationships we have developed as we have significantly expanded club distribution over the past few years. We are developing relationships with a new base of national retailers and are excited to leverage these new connections to expand distribution of our core portfolio in the coming quarters. In Canadian retail, the market remains highly competitive and value-driven. During the third quarter, we grew significant market share in both dollars and pounds across all major segments. This was largely driven by increased demand for our branded value-added products, including growth in our premium Pan-Sear Selects and Signature Cut brands, which provide restaurant-inspired products across species to suit a wide variety of consumer tastes. While we expect the environment in Canada to remain promotionally driven in the near term, we are focused on demonstrating our value proposition to customers and consumers to compete on overall value versus price alone. We are encouraged by our ability to gain share in the quarter, and we're prepared to balance volume and price to support profitable sales growth moving forward. As we look ahead to 2026, we believe sustainable category growth across North America will be driven by a combination of strategic promotional activity and innovation focused on premium and health-conscious meal solutions, and that's exactly where we're focused. Now turning to Foodservice, where inflation-driven headwinds continue to impact demand across the industry, contributing to lower volumes in the quarter. We also faced a tough comparison as we're lapping a meaningful amount of USDA contract manufacturing volume that we produced in Q3 last year, but did not repeat this quarter. That said, we've secured a larger USDA award that will begin supporting volumes in the fourth quarter and throughout 2026. Despite the challenging inflationary environment, our consistent execution allowed us to gain market share on volume during the quarter, and we continue to be the top value-added seafood manufacturer in the category. Our ability to lead the category is grounded in the strong partnerships we've built with major distributors. During the quarter, we were recognized by Sysco Canada as a top 10 supplier Excellence Award recipient this year with more than 500 suppliers evaluated across criteria, including sales growth, innovation, quality and service. This recognition underscores the strength of our partnership and our ongoing focus on delivering reliable value for our customers. We were also awarded the Gordon Food Service Cornerstone Partner Award in the U.S., recognizing us as a top-performing supplier partner, demonstrating excellence and delivering outstanding value to customers. In particular, the quick service restaurant channel continued to be a bright spot during the quarter given consumer continued focus on value. We were once again able to leverage partnerships with key customers to grow our market share driven by growth in value-added Pollock, a locally sourced species offering the best value and strong supply in whitefish. We also saw gains in casual dining, where our products are providing operators with consistent, easy-to-prepare solutions at the right price. Salmon, a key growth species for us, performed well and drove gains in our noncommercial sector, particularly in hospitals. While we expect the foodservice category to remain under pressure in the near term, we're monitoring price gaps, species dynamics and channel bright spots to continue the momentum in our branded value-added portfolio and drive category recovery. As Paul mentioned, there's an exciting market opportunity in the outlook for North American frozen seafood. Global demand for sustainable nutrient-rich protein is rising. However, seafood remains underdeveloped when compared to other proteins such as beef and poultry. Our goal is to grow the category by redefining how seafood shows up on the plate and create a scalable platform for long-term value creation. We are making investments now that we are confident will have long-term benefits, both in terms of our core portfolio and new innovations such as our line of fully cooked products, which have great potential. These investments are grounded in consumer insights and will serve to contemporize the category and appeal to the next generation of consumers. We're very excited to soon bring our fully cooked solutions to market as these products will allow us to deliver easy to execute and prepare solutions to untapped channels with particular focus on convenience stores and new noncommercial channels. With Q1 on the horizon, we're readying for lent by building on what we have learned from our targeted promotional and pricing strategies from the past year, leveraging what worked well and integrating exciting new product lines to drive profitable top line growth and category recovery. With that, I'll hand the call back to Paul for his concluding remarks before opening the call for Q&A. Paul Jewer: Thank you, Anthony. I echo Anthony's sentiment that our teams are executing well, and we are encouraged by the commercial momentum we are seeing across the portfolio despite the current macro pressures. Our priority is to ensure this continues hand-in-hand with appropriate pricing and cost control to regain margin strength over time. I'm confident that you'll start to see improvement in our results in the fourth quarter but unfortunately, not enough to deliver year-over-year adjusted EBITDA growth for the full year. While this is not the way we wanted to close out the year, we are acting now to support stronger performance and renewed momentum as pricing actions take hold, efficiencies build and innovation gains traction. My confidence in the long-term outlook of our business is supported by our over 125-year history as a leader in the North American frozen seafood industry, during which time we have demonstrated our ability to navigate short-term headwinds while maintaining robust free cash flow generation and a strong balance sheet. We are meaningfully investing in our business to drive profitable growth, expand the seafood category and build for the future. As category dynamics normalize, we expect the benefits of these actions to become increasingly visible in our results. With that, operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from Yochim of BMO Capital Markets. Nevan Yochim: Looking to understand the volume decline a little bit better in the quarter. If we exclude the volumes associated with your recent acquisition, how should we be thinking about the organic volume decline in the quarter? And then can you provide some detail on volume growth by retail and foodservice relative to their respective categories? Paul Jewer: Yes. So volume decline in the quarter, as we mentioned earlier, was primarily driven by the decline in our USDA business. So you see that show up in the Foodservice segment, as you mentioned, Nevan. So that really is the -- from a volume perspective, the most significant impact. Still a little softness in foodservice overall, given what we're seeing in terms of the macro environment there. Nothing we would highlight significant on the retail side. Nevan Yochim: And would you be able to parse out the benefit that you received in the quarter from your recent acquisition? Paul Jewer: Yes. Essentially, there was no net P&L benefit from the acquisition because as Kimberly identified, unfortunately, due to the PPA accounting, we weren't able to recognize about $2.5 million of margin on acquired inventory. So it was a nominal P&L impact in the third quarter related to the acquisition as a result. Nevan Yochim: Great. Understood. And then just digging into price and mix a little bit here. If my math is correct, that was around 10% this quarter. Can you parse out those 2 components between the price and the mix? And then maybe talk about your expectations for raw material price inflation as well as your ability to pass through those costs to customers in the fourth quarter? Paul Jewer: Sure. Yes. I mean the biggest impact on margins related to pricing or mix was associated with not being able to fully pass on the tariff and raw material price increases, particularly in cod and haddock quickly enough in the market. As we highlighted, that's more of a challenge in retail than foodservice but it was certainly an impact in the quarter. That impact was approximately $2 million in terms of not being able to -- that's the net impact of not being able to fully pass on the COGS in pricing. Mix would have actually been a slightly positive impact actually on margin because of the fact, as I mentioned earlier, we had lower high-volume USDA business than we had a year ago. And our branded value-added portion of our portfolio performed well. So that actually is positive from a mix perspective, but offset by the volume decline and the pricing net of COGS impact that I just referred to. Operator: Your next question comes from Luke Hannan of Canaccord Genuity. Luke Hannan: Paul, I wanted to go back to the topic of pricing. And you talked about in your prepared remarks during Q3, you had those conversations with retailers, and it's increasingly, it was more difficult to be able to pass along that price. I want to get a better understanding of the trend through Q3 and Q4. So it sounds like you've taken price not enough to fully offset the inflation that you're seeing in raw materials. But is the expectation that eventually there will be a catch-up? Or are you planning on internalizing that, we'll call it the $2 million net impact that you saw during the quarter? Is the plan that you're just going to internalize that impact going forward? Paul Jewer: No. Certainly, our plan is not to internalize that impact. And as we look at the fourth quarter, we expect a better outcome in that regard than what we had in the third. But it will still take more time to fully get it passed through. And our goal is not to have to pass it all through, right? As we also highlighted, we're working hard on efficiency opportunities in the plan and cost-saving opportunities within our business. And we don't just negotiate with our customers in terms of having to pass on price. We also, of course, negotiate with our suppliers to try to avoid where we can some of the raw material cost increases. We also are watching closely the -- what I'll call the bouncing ball on tariffs. We've seen a little bit of relief in some countries over the last number of weeks. So we'll remain hopeful that we may see a bit more relief there as we look forward. But no, I mean, what we've demonstrated over time is our ability to be able to manage margin through passing on price. It's unfortunately, sometimes like this quarter, it can take a little longer for it to materialize, but that is certainly still our intent. Luke Hannan: Okay. And then just following up on that as well. So what is the typical sort of lag when it comes to identifying or announcing that you're going to be doing a price increase before it actually takes place? And is this complicated or lengthened at all because of the holiday period? Anthony Rasetta: Luke, it's Anthony. Yes, I think as Paul mentioned, in foodservice, we price more frequently and have a quicker cycle and our overdevelopment there allows us to pass that on more quickly. We tend to do that monthly. In retail, it tends to be about 90 days that customers are looking for in terms of increase. So with the volatility in costs and tariffs, that can become a bit more challenging. And you're right, as we go into the holiday period, there can be blackout periods at times, which means that some of the pricing will hit kind of later in the first quarter. Luke Hannan: Understood. So on the price increases that you've taken thus far earlier in Q3 before there is that blackout period, has there been a discernible volumetric impact, I guess, associated with that? Really, what I'm trying to get at is the consumer, of course, is under pressure. They've withstood price increases over the course of the last year or even longer than that. But has there been a discernible difference in the volumetric impact from any price increases, more of the recent price increases that you have passed through? Anthony Rasetta: Yes. I think we're starting to see it, Luke. I think the reality of longer inventories in the marketplace and the timing of inventory hitting and the timing of pricing means that we're just starting to see some of those increases, and we are seeing typical elasticity in terms of the consumer reaction on that. So as this price passes through, we do think we'll see some volume impact and hopefully can offset it on top line revenue. And then what we're trying to do, as you would have seen in some of what we talked about on market share gains is smartly reinvesting in some promotional activity so that we can still offer consumers and customers the right value and the opportunities to buy promotionally. Luke Hannan: Okay. Last one for me, and then I'll pass the line here. Just on SG&A, it was mentioned that there was incremental investments in product innovation, specifically consultants as well. I know innovation is clearly key to helping you guys capture market share across channels, across geographies. How should we be thinking about the magnitude of that investment in innovation over the course of, we'll say, the next -- well, the near term, let's say, the next 3, 6 months or up to a year? Paul Jewer: Yes. I think there's a couple of areas where we've been investing on the strategic initiative front. One is innovation, as you've called out. The other we mentioned is investment in efficiency and productivity improvements in the plants. The impact of that in the third quarter was about $1.4 million in total of spend. We'll continue to have some of that spend certainly in our fourth quarter. But the reality is when we plan that spend, we plan to offset it with performance on the top line and margin. And unfortunately, in the third quarter, as you saw, we weren't able to offset it. But as we look to 2026, as we continue to invest in the growth of our business, our plans are to have margin performance that will allow us to cover those costs. Operator: [Operator Instructions] Your next question comes from Michael Glen of Raymond James. Michael Glen: I just want to clarify with the $2.5 million purchase price accounting, that was -- that completely flowed through the P&L within cost of goods sold in the quarter? Kimberly Stephens: Yes, it did, exactly. It is a temporary impact as we work through that inventory that we acquired in the acquisition. So we anticipate that in Q4, we'll probably see an additional $1 million as we work through and sell it all. But by the end of the year, we think we'll be past that. Michael Glen: Okay. So that would be $3.5 million in total then for the year? Kimberly Stephens: Correct. Michael Glen: Okay. And just to get some thoughts on, again, the inflation you're seeing on cod and haddock. Were the exit rates on inflation higher? Like how much higher were the exit rates on inflation versus what you saw in the quarter? I'm just trying to sense is how much additional inflation we should expect to come with the Q4. Paul Jewer: There'll be certainly a bit more on cod and haddock in Q4 as the inventory continues to flow through because that's -- we're not seeing any let up currently on pricing in either of those 2 species just given quota restrictions and therefore, supply availability. So in that case, it's more about effectively pricing for it rather than expecting or building in any anticipation of lower COGS. Michael Glen: And Paul, can you just maybe unpack like where the price inflation? Is it just simply demand related from other markets external to North America? I'm just trying to understand exactly what is driving up the price in those 2 species. Paul Jewer: Yes, sure. No, in cod and haddock, it's actually -- it's entirely supply driven. So those species come from Northern Europe, Norway, Iceland primarily. And Norway, in particular, has had lower quota for those species, particularly on cod, part of the reason that haddock has come up in cost is because haddock is a logical substitute for cod as we've seen higher cod prices. So in the case of haddock, it is a bit demand driven in that regard. We would anticipate at these price levels that we'll see some decline in global demand as we look forward. So hopefully, that will allow supply/demand to rebalance a little. And we've taken a number of actions, as you've heard us talk about before, to help mitigate that. One is we've invested in and continue to believe in farm cod. That will be a small but over time, an important contributor to offsetting some of the wild cod pressure. We're supporting the return of the Newfoundland Cod fishery and are selling that product in our Canadian foodservice business, which is a nice new source of supply for us. And of course, we've been working on promoting alternative species. And that is, in our case, Cape Hake and Southern Blue Whiting. But also the reality is important species to us like Pollock and Tilapia are also in a much more favorable price situation than cod and haddock. So we'll continue with the diversity of our portfolio to where we can drive demand to those species that are more favorably priced. Michael Glen: Okay. And I know there's -- like there is a lot to take into consideration as we look at Q4. Like when we look at that gross margin in Q3, should we just take everything into consideration and expect a similar level in Q4? I'm just trying to gauge where things might drop out. Paul Jewer: Yes. I think at this stage, what we would suggest is we would expect the decline in Q4 year-over-year on the margin front to be less than it was in Q3 because as we've talked about, we have been effective at passing on price. We've invested in some initiatives that will help us on the cost side. But the reality is it will take us until moving into 2026 to be able to get back to the EBITDA growth year-over-year that we've been focused on delivering. Michael Glen: Okay. And then my last one is just -- I just want to understand better the decision on the inventory build in the quarter. How quickly -- is there -- and I guess what I'm trying to figure out for myself, is there any raw material pricing risk with that inventory if market prices suddenly drop or if we see tariff relief, does that put some of the amounts in the inventory at risk as well? Paul Jewer: No. In fact, it would be the opposite. We feel that the investment we've made in inventory as prices have gone up and as tariffs have gone up, position us better on the margin front for 2026. And so we're not anticipating at this stage any risk associated with the higher inventory. In fact, we see it as more of an opportunity, to be honest. And you saw us have to do this when we were building inventory during supply disruptions coming out of COVID, and we were very effective then at moving through the inventory and generating good margin as we move through that inventory. So that's certainly what we'll be working towards doing in 2026 as well. Kimberly Stephens: And Michael, I would just add that the inventory balance at the end of September also includes the acquired inventory and the additional inventory we're building up for the Conagra Brands in addition to the inflationary pricing that we are seeing as well as, as Paul just mentioned, we're building up ahead of raw material prices increasing next year, so more opportunistic buying. So it's a combination of all 3. Michael Glen: And for -- are we at the peak level right now? Or should we expect more inventory build in Q4? Kimberly Stephens: We would expect more inventory in Q4 as we build towards end. And again, both on our core business as well as the acquired business that we just made. Operator: Your next question comes from Ryland Conrad of RBC Capital Markets. Ryland Conrad: Just, I guess, starting off on volumes. Is there any way you could kind of parse out the incremental volume that the Conagra brand contributed in Q3, along with maybe the size of the USDA contract last year? Paul Jewer: I don't have the USDA contract number in front of me. It would be 2 million to 3 million pounds, I think, probably closer to 3 million pounds. And that's a timing issue for us. As you probably saw, we won a USDA bid over the course of the next 12 months that will actually be larger than the previous one. So that's the timing issue. And Kimberly, maybe on the Conagra piece. Kimberly Stephens: Yes. So actually, with the Conagra Brands, we actually saw an increase of volume this quarter, so about 1.5 million of additional pounds. But again, the unfortunate part is as we work through that purchase price adjustment, it had a negative impact to the gross margin. Ryland Conrad: Okay. No, that's helpful. And then I believe last quarter, you were expecting kind of low single-digit volume growth for 2025. So are you still expecting to deliver positive growth this year? Paul Jewer: I would say that the challenge we had in Q3 makes it a little harder to get to volume growth. But as we mentioned, we are anticipating a better performance in Q4 on volume than what we delivered in Q3. So it will be, it will be tight but we're still working on delivering good volume performance in the fourth quarter. Ryland Conrad: Okay. Great. And then just on capital allocation, the kind of 3% dividend growth was below what we've seen in recent years, which I can appreciate given the current macro environment. But -- could you maybe just provide an update on capital allocation priorities? Like should we expect to see more focus on debt repayment rather than capital returns at this stage? Kimberly Stephens: Yes, absolutely. I think our priority is also to -- is always to be in that 3x range. And as I indicated earlier, we are above that. So we'll be working towards getting back to a reasonable range as we look to continue looking for M&A opportunities in the future, we need to make sure that we have that capacity. But as we do that, though, we will always balance it between returning capital to shareholders. So as you indicated, we just increased our dividend just shy of 3% this quarter as well as we will continue our share buyback program. Ryland Conrad: Okay. And then just on the CapEx guidance of $20 million to $24 million this year. It looks like you're certainly trending towards the lower end of that. So is there any step-ups we should expect to see in Q4? And then I guess, more broadly, how sustainable is that kind of CapEx envelope going forward? Kimberly Stephens: Yes. We are a little bit behind in Q3 in comparison to prior year, but we do have a plan of getting closer to total CapEx spend like we did last year. So I think we're anticipating to be anywhere around $21 million to $22 million by the end of the year. And I think as we continue into 2026, I would anticipate similar ranges anywhere between $20 million to $25 million depending on the projects that we are undertaking. Operator: There are no further questions at this time. I will now turn the call back over to Paul Jewer, President and CEO. Please continue. Paul Jewer: Thank you, operator, and thank you for joining our call today. We look forward to updating you with our results for the fourth quarter of 2025 on our next conference call in February. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Apologies for the technical difficulties, and welcome to Mativ's Third Quarter 2025 Earnings Conference Call. On the call today from Mativ are Shruti Singhal, Chief Executive Officer; Greg Weitzel, Chief Financial Officer; and Chris Kuepper, Director of Investor Relations. Today's call is being recorded and will be available for replay later this afternoon. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Chris Kuepper. Sir, you may begin. Chris Kuepper: Good morning, everyone, and thank you for joining us for Mativ's Third Quarter 2025 Earnings Call. Before we begin, I'd like to remind you that comments included in today's conference call include forward-looking statements. Actual results may differ materially from these comments for reasons shown in detail in our Securities and Exchange Commission filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Some financial metrics discussed during this call are non-GAAP financial metrics. Reconciliations of these metrics to the closest GAAP metrics are included in the appendix of the earnings release. Unless stated otherwise, financial and operational metric comparisons are to the prior year period and relate to continuing operations. The earnings release issued yesterday afternoon and the accompanying slide deck are available on our website at ir.mativ.com. With that, I'll turn the call over to Shruti. Shruti Singhal: Thanks, Chris. Good morning, everyone, and thank you for joining our call. I'm pleased to report that we delivered another quarter that exceeded our expectations with overall year-over-year improvement in our top line and bottom line results. On our last earnings call in August, we communicated our expectations for adjusted EBITDA to be 5% to 10% higher in Q3 year-over-year and for Q3 cash flow to be favorable as well versus prior year. As you saw in our Q3 earnings release, adjusted EBITDA came in 10% higher at the top end of that range, and we doubled free cash flow versus last year on a year-to-date basis. As a matter of fact, if you take both Q2 and Q3 together, this has been our strongest 6-month period since the merger on both an adjusted EBITDA and free cash flow basis, demonstrating that the decisions we made earlier this year are working and are delivering a step change to our financials at almost every level. On a consolidated basis, adjusted EBITDA of $66.8 million was up $6 million over Q3 of 2024, while sales of $513 million were up over 5% on an organic basis and 3% higher on a reported basis versus last year. This is a true testament to the strength and effectiveness of our sales force who are finding new and creative solutions to serve our customers with their unmet needs. Free cash flow came in at $66.7 million, which is $42 million higher year-over-year. Q3 free cash flow was also sequentially better by $17 million, making Q3 of 2025 now the second highest cash flow quarter since the merger. I'm very proud and energized by our global team's outstanding performance. While our demand environment continues to be challenging as tariffs and macroeconomic policies constantly change how we operate in the market, our global Mativ team continues to show resilience and a strong commitment to driving commercial and operational excellence. Thank you to the entire Mativ team for embracing these changes and executing to our strategic imperatives. Let me touch briefly on our segment results. SAS Sales continued their strong momentum from the previous quarters and were up 5% on an organic basis, the sixth consecutive quarter of year-over-year improvement in sales. SAS showed solid improvement across all categories with tapes and labels, liners and healthcare up mid-to-high single digits versus last year, and paper and packaging up low single digits. Our SAS commercial teams are driving incremental annual revenue in construction tapes with strategic distributor partners, cable tapes with an energy and telecom company, personal care liners with a global consumer goods company, and incremental holiday display features with a mass retail chain. We also saw strong incremental demand from label converters and also in our consumer tape and healthcare categories. Additionally, we are driving market share gains in cable tapes, commercial print and consumer paper, and we are realizing cross-selling opportunities across our tapes and liners businesses. SAS adjusted EBITDA for the quarter was $48.3 million, up $7 million or over 17% versus prior year, while Q3 also represented our strongest SAS adjusted EBITDA margin since the merger at 15.3%, which was up 200 basis points year-over-year. SAS EBITDA and margin performance drove the majority of the improvement in our consolidated EBITDA and margin this quarter. In our FAM segment, we marked a significant turnaround point. Q3 was the first quarter of growth in sales and adjusted EBITDA since the merger. FAM sales of $198 million increased by more than $8 million or over 4% from last year. This achievement reinforces our confidence in the effectiveness of our proven SAS go-to-market strategy across the FAM segment. We expect FAM to continue to compare favorably on a year-over-year basis in Q4 as well. While overall demand patterns continue to be mixed and challenged in the construction and automotive sectors, we saw continued pockets of growth with filtration up high single digits, driven by water, HVAC and air pollution control. While in films, we are regaining business and continue to make meaningful progress towards closing the year-over-year comparison gap. Our FAM teams have driven 20-plus percent growth in HVAC, air pollution control markets and almost 10% growth in water filtration with significant increases in customer commitments. We also achieved above-market growth for transportation filtration and erosion control as well as growth in medical films. As announced earlier this year, we have had a clear focus on three critical strategic priorities: driving enhanced commercial execution, strengthening our balance sheet, and conducting a strategic review of our portfolio. These priorities are propelling meaningful results in our operations and financial performance, allowing us to stay focused on the areas that we can control. At the same time, we are developing strategies for the prevailing macro uncertainties and have multiple actions underway to enable a more agile operating model, grow our market shares, provide growth opportunities for our employees and deliver long-term value creation for shareholders. A key component of driving enhanced commercial execution is the ability to successfully execute pricing initiatives. We are very focused on maintaining a positive price versus input cost relationship, and our Q3 results show the outcome of that effort. We have formalized our pricing efforts through the development of a pricing process that is governed by a steering committee. The regular cadence of this committee will help ensure pricing structures are in line with prevailing market dynamics as well as input and associated labor costs. Furthermore, our dedicated sales teams are continuing to expand our pipeline by working with our customers to complement current relationships with solutions that address their unmet needs, whether that is via the Mativ integration of another step in their value chain, a geographic supply chain solution or multiple Mativ category solutions across the broader enterprise. Our customers value our localized supply chain and our flexibility to partner with them how and where they go to market, and this ability is reflected in the number of long-term agreements we have been able to renew as well as incremental commitments we were able to book with existing and new customers. When it comes to strengthening our balance sheet, earlier this year, we announced a number of initiatives to reduce our cost structure and capital expenditures and optimize our working capital levels. Those actions have driven quantifiable improvements in our margin and cash flow levels over the past 2 quarters and are materially reducing our leverage. Year-to-date, we have already delivered twice the amount of free cash flow as compared to full year 2024, and we expect our leverage to continue improving over the coming months and quarters. Within our strategic portfolio review, we have executed on initiatives such as optimizing the footprint of our operations support structure and SKU rationalization. Also, over the past quarter, we have been working through an R&D optimization initiative to help allocate the right resources to our most worthwhile projects. We have prioritized our R&D projects towards those that are accretive in the near term while exceeding our ROI benchmarks. In doing so, we lowered our overall R&D spend with limited impact to our commercial pipeline, and we are working to leverage resources more effectively going forward. As part of this portfolio review, in early October, we made the strategic decision to close our Wilson, North Carolina facility. Our intent is to wind down operations over the next couple of months, transition existing customers and employees, and close the facility by the end of Q4. We expect this closure to be accretive to earnings starting in Q1 2026. We now operate a total of 34 sites across the globe versus 48 at the time of the merger, and we will continue to look at opportunities to improve the operational performance of our sites with the lessons learned from our continuous quality and process improvement initiatives. Our strategic review process is still underway with many work streams making good progress over the past 6 months since we kicked it off. It remains a key part of our focus this year, and we look forward to keeping you updated on this effort as we continue to make progress. On the operations front, we have several manufacturing, supply chain excellence and continuous improvement work streams underway. We have enhanced efficiency at multiple sites by increasing machine speeds on key production lines, all while maintaining our high standards of quality. Product quality improvements in many of our sites have also materially reduced scrap byproducts and our continuous process improvement initiatives have reduced changeover times and increased yields and machine uptimes. We will continue rolling out these improvements to other sites throughout Q4 and beyond to leverage the benefits and accelerate improvements. We at Mativ embrace safety as the #1 value. Our safety programs over the past 12 months have successfully lowered injury rates by more than 15% and further removed significant risks across our global operations. We maintain strategic alignment by working directly with each site via our operational leaders through education, guidance and support in setting safety priorities, keeping each site accountable through our safety balanced scorecard indicator. On the supply chain side, we are continuing to streamline our portfolio of products and number of SKUs, and we are cross-sourcing across the globe to minimize our tariff exposures. As a result of these actions, our continued USMCA exemptions and the recent updated tariff announcement, currently, less than 6% of our sales are subject to tariffs. We continue to mitigate and offset any new tariff impact on our business as well. Our distribution expenses have been elevated over the past 2 quarters as we are cross-sourcing certain products across the Atlantic that would otherwise be subject to tariffs. We have a set of operational improvements underway to offset our distribution expenses, which include warehouse footprint optimization, a transportation management system that is now live in several of our U.S. locations and optimized freight quote management with our spot freight providers. As you can see, there is a lot going on here at Mativ to navigate the challenging demand environment, broaden our customer base, and transform us into a more agile entity that is primed for long-term success and value creation. I'll now turn it over to Greg to provide additional color on how these initiatives have impacted our financial performance in Q3 and our expectations for the remainder of the fiscal year. Greg Weitzel: Thanks, Shruti and good morning, everyone. Consolidated net sales from continuing operations for the quarter were $513 million, up 3% compared to $498 million in the prior year on a reported basis and up $25 million or 5% on an organic basis as increases for both segments in volume mix and currency as well as SAS selling prices were partially offset by slightly unfavorable FAM selling prices. Adjusted EBITDA from continuing operations was $66.8 million, up 10% from $60.8 million in the prior year. Favorable net selling price versus input costs, higher organic volume and lower manufacturing costs represented a combined $8 million favorable impact, which was partially offset by a combined $2 million of higher distribution and SG&A costs. Price versus input cost performance turned positive for the quarter as communicated on the Q2 call and is expected to be favorable in Q4 as well. Adjusted EPS were $0.39 a share versus $0.21 a share in the prior year period. Turning to each of our segments. Net sales in our Filtration and Advanced Materials segment of $198 million were up 4% versus Q3 of 2024. The year-over-year increase was produced by higher volume mix and favorable currency translation, partially offset by lower selling prices. FAM adjusted EBITDA of $37 million increased slightly year-over-year, reflecting the effects of higher volume mix, partially offset by higher manufacturing costs. In our Sustainable and Adhesive Solutions segment, net sales of $315 million were up more than $16 million or 5% on an organic basis and increased by just over $6 million or 2% from last year on a reported basis. Organic growth was driven by higher volumes across key categories and higher selling prices across the segment, along with favorable currency translation. SAS adjusted EBITDA performance of $48 million increased 17% year-over-year from $41 million in the prior year. The year-over-year performance resulted from favorable net selling price versus input cost performance, lower manufacturing costs and lower SG&A expenses, partially offset by unfavorable mix and higher distribution costs. Turning to a few of the corporate items. Unallocated corporate adjusted EBITDA expense of $18 million increased by just under $2 million versus the prior year due to the timing of employee-related expenses. Interest expense of just under $18 million decreased slightly versus the prior year. When taking hedges into account, over 80% of our debt is at a fixed rate and matures on a staggered basis between 2027 and 2029. Other expense was $3.9 million in the current period and decreased over $8 million with the impact from losses on asset sales and unfavorable foreign currency being more prominent in the prior year period. Our tax rate was a 43% benefit in the quarter, driven by a onetime adjustment and mix of earnings. At the end of the quarter, net debt was $932 million, a reduction of more than $60 million versus last quarter and available liquidity was $517 million. Our net leverage ratio, as defined in our credit agreement has been reduced to 4.2x, and we expect to be even closer to 4x level by the end of the year. Deleveraging will continue to be our highest priority for cash flow utilization. With that in mind, as discussed on previous earnings calls, we have strategic initiatives underway to materially improve cash flow generation, and we'll continue this focus as we head into 2026. As a reminder, those initiatives are comprised of pricing actions as well as cost optimization initiatives. We are targeting $35 million to $40 million of cost savings by year-end 2026, with $15 million to $20 million realized and flowing through the P&L in 2025. We are on track to manage our capital expenditures to $40 million in 2025 and continue to work to reduce our year-end inventory levels by $20 million in 2025 versus 2024. Working capital is expected to remain a source of cash of approximately $10 million for the full year 2025. Taken together, all of these efforts and initiatives have made Q2 and Q3 of 2025, two of our highest cash flow quarters since the merger. Free cash flow for Q3 was $66 million, more than twice the amount we generated in Q3 of 2024. Our year-to-date free cash flow of $85 million is also more than twice the amount we generated year-to-date in 2024 and early realization of our expectations for the full year cash flow to double our 2024 levels. As a reminder, our Q4 cash flow levels are generally much lower due to our usual year-end seasonality, and we expect Q4 cash flow to be similar to prior year. We do, however, expect our working capital initiatives to contribute to strong free cash flow generation in 2026 and beyond. As we look ahead, we acknowledge that market demand remains uncertain with additional impacts from tariffs and macroeconomic policy in the market impacting our levels of sales and operating leverage. However, with the positive momentum we have seen through early November across key categories in FAM and SAS, combined with our strategic initiatives, we expect our Q4 adjusted EBITDA to increase by at least 10% versus last year. This step-up will be driven by a year-over-year increase in volume, particularly on the SAS side, favorable relative net selling price versus input cost, operational improvements and cost savings. For modeling purposes, for the full year 2025 on the tariff front, with all the recent announcements throughout the quarter, we are updating our guidance to now state that less than 6% of our annual sales are currently subject to tariffs. The previous guidance covered 7% of our annual sales. With that, Shruti, I'll hand it back to you for your closing remarks. Shruti Singhal: Thank you, Greg. What everyone should take away from this call is that we are proud of the progress we have made and the results we have delivered in Q3. The strength of our sales adjusted EBITDA and free cash flow performance, particularly over the past 6 months, demonstrates the effectiveness of our strategic decisions and the resilience of our business model. Our teams continue to execute with discipline and agility, driving commercial and operational excellence across both segments. While the macro environment remains dynamic, we are focused on the factors within our control, and we are taking proactive steps to position Mativ for long-term success. Our strategic priorities, as communicated last quarter, driving enhanced commercial execution, sharpening efforts to delever the balance sheet and conducting a strategic portfolio review have not changed and are front and center. Our company-wide pivot towards a higher sense of urgency and faster pace of execution are yielding measurable results and are solidifying the foundation for generating continued value for our customers, employees and shareholders. Thank you for joining us this morning. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Daniel Harriman with Sidoti. Daniel Harriman: Congrats on the quarter. I'll start out with two and then get back into the queue. But first, it's clear recently that the commercial actions within SAS are having a great effect on FAM and benefiting results there. And I'm just curious to hear more about the time line there and how long you think it will be until we see the full benefit of that commercial initiative? And then secondly, just curious, but I'm wondering if you can provide any additional updates or commentary on the ongoing portfolio review other than what you just mentioned in your prepared remarks. Shruti Singhal: Thanks, Dan, for your question and kind words. I really appreciate that. Regarding your first question on the actions against regarding FAM, we are starting to see the impact on those financials now. As you heard, year-on-year, quarter-on-quarter, we already have a 4% increase. This was the first quarter of growth in sales and adjusted EBITDA since the merger. So I'm really pleased with the progress we are making in FAM. Keep in mind that FAM is much more exposed to Europe and the automotive and transportation sectors there, which is, as you know, going through major demand challenges. But what the team has done as commercial actions, looking at our HVAC, air pollution segments as well as the water filtration segment, we have seen a great pipeline build and very good commercial execution with 20-plus percent growth in HVAC and air pollution, and 10% growth in water filtration. And we are also making meaningful progress overall in our films business towards -- and really starting to close the year-on-year comparison gap. We're regaining share back. We -- our customers for our premium segment are coming back. Our Asia business is very strong. So the change is already materializing, and we expect FAM to perform favorably in Q4 as well. In your second question regarding the strategic portfolio review. So as I said in my remarks, we are evaluating opportunities and constantly evaluate those opportunities to strengthen our go-to-market positioning. And as you know, we have been evaluating our portfolio ever since the merger, case in point, the EP divestiture about 1.5 years ago or so. I will certainly keep you updated on the progress and how we are doing. But be assured that the review is fully encompassing, meaning I talked about footprint rationalization. As a result, we closed our Wilson, North Carolina facility. That will be accretive to our EBITDA in 2026. I talked about reviewing our entire R&D portfolio. We optimized the portfolio and have repositioned our resources as well as our portfolio for near-term gains. We reduced complexity by our SKU rationalization, and we're delayering and making our business more effective and efficient. So this review remains a key part of my and the team's focus and the Board's focus, and we will absolutely keep you updated as we make further progress. Operator: Our next question comes from Massimiliano Pilato from Stifel. Massimiliano Pilato: Congrats on the quarter. And part of them have already been answered during the prepared remarks, but could you please provide more detail on the relative organic performance in terms of volumes and pricing within the subsegments? And how do you see those growth rates evolve into Q4 and 2026 and level of visibility of demand into next year? And the second question is on the closure of North Carolina facility. I would like to understand if there are any associated costs with the closure? And if you could quantify the cost improvement into Q1 '26. Shruti Singhal: Maybe I'll kick it off first. Thank you, Massi, for that question -- those questions. Regarding the demand, what we saw in Q3, for example, our cable tapes business, especially with our -- again, with the end user markets and the Big Beautiful Bill helping us there, that demand was up. We saw our commercial print segment. We -- as I mentioned, with some of the -- with the massive retail chain, we got an increase there. We -- I already touched upon the water filtration, HVAC piece with the data centers growth, talked about released liners. If you -- the personal care and hygiene segment there has seen a good demand in Q3. And we also saw in our erosion control netting business, we're rewinning some of the volume back there. So those areas and some of the segments as examples where we've seen some good improvement in demand through the Q3. And on the Wilson closure, as I said, the -- it will be accretive to our EBITDA. And regarding the cost, maybe I'll let Greg take that one. Greg Weitzel: Yes. Yes. Overall, it represents less than 1% in sales overall. At the time of the closure, there will be -- we've already recognized some non-cash impairment charges in the current financials. There will be some onetime cash costs with the closure. But overall, yes, accretive to EBITDA and accretive to margins, and we should be seeing that flow through at the beginning of 2026. Operator: Our next question comes from Lars Kjellberg with Stifel. Lars Kjellberg: Great to see the good progress you're making. I'm curious about -- I mean you have obviously the new sort of commercial approach that is driving the best price cost relationship. But at the same time, you seem to be gaining share in the market, which is quite interesting because the market is generally quite soft. So can you sort of describe the mechanics here. What is making you win share in the market given the pricing policies that is driving the margin accretion that will be of interest and how those discussions go with your customers. The other thing with all the various things you're now doing and we're starting to see clearly the benefit of margin accretion, et cetera, coming through, how should you have us look on '26 as a whole in terms of compensating for underlying inflation, et cetera? And with the progress you've seen, should we see a continuation of that towards 25 -- sorry, towards your 15% ultimate target for margins into '26 and beyond? Shruti Singhal: Thank you, Lars, for those questions. Let me take the first one. Our commercial execution, I'm really proud of what our sales force is doing. We have really prioritized and focused on our growth initiatives. We have delayered for faster decision-making. And we're really focusing -- the sales force is really focused on the growth segments, some of those which I mentioned. And while having -- we've talked about in the past about cross-selling opportunities, and these are all being well supported by our operations excellence and supply chain excellence initiatives with better lead times, better service, our on-time shipment percentages are better. So when you take that full approach, we are -- that's how we are able to win in the marketplace and maintain pricing discipline. On the -- Greg, if you want to take the... Greg Weitzel: Yes, Lars, maybe I'll try to take the question on the margins and volume. Overall, as we're heading into the fourth quarter, we're expecting -- if you take out the currency impact because we're expecting to see a positive currency tailwind in sales again. Outside of that, I'd mentioned we would expect to see SAS volumes up some. But I do think we'll see much flatter volumes in Q4 year-over-year. But with what I shared in terms of expecting the bottom line EBITDA to be up by at least 10%, yes, it does play right into the increasing margins. The path to 15%, we still believe that is -- that we're in businesses that are -- that's the right target, the 15%. But the path there is somewhat gradual. We've seen the improvement from '23 to '24 to '25. We've definitely seen the improvement here in Q2 and Q3, but it will be a gradual path to the 15%. We'd expect margins in '26. We're not providing any specific guidance at this point, but we would expect to see a continuation of that trend of the improved margins in 2026. Operator: We currently have no further questions. So I will hand back over to the management team for any closing remarks. Shruti Singhal: Thank you. First, I want to express my sincere gratitude to all the Mativ employees for their dedication and hard work in delivering our Q3 results. Thank you very much. And finally, thanks to all of you for joining us this morning for our earnings call. We look forward to staying connected in the coming months and to welcoming you to our next earnings call in February. Have a great day, everybody, and thank you for dialing in. Operator: Thank you very much, everyone, for joining. That concludes today's call. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen. Thank you for joining the Swisscom Q3 2025 results, hosted by Christoph Aeschlimann, Eugen Stermetz, and Louis Schmid. Louis, the floor is yours. Louis Schmid: Good morning, ladies and gentlemen, and welcome to Swisscom's Q3 '25 Results Presentation. My name is Louis Schmid, Head of Investor Relations. And with me are our CEO, Christoph Aeschlimann; and Eugen Stermetz, our Chief Financial Officer. Let's now move to Page #2 with the agenda of today. As you can see, our CEO starts presentation with Chapter 1 and a quick overview on the highlights, the operational and financial performances of the third quarter. Then in Chapter 2, Christoph presents the business update for Switzerland and Italy. In the second part of today's results presentation, Eugen runs you through Chapter 3 with our third quarter financials, including the confirmation of our full year guidance. With that, I would like to hand over to Christoph to start his part. Christoph? Christoph Aeschlimann: Thank you, Louis, and welcome to this Q3 2025 call from my side. And I will move directly to Page #4, showing the highlights of Q3. You can see that this quarter, again, was packed with a number of highlights. We have been able to complete to Connect service tests with the last test that we won this year, we have now won all 4 service tests highlighting our unwavering commitment to the best customer service reinforce the multi-brand play with a new Migros offering, and we are extremely proud of our new deal offering, which we -- for which we launched new additional services, advanced editions, apps and further tiers, which have been launched in the past weeks. South of the Alps in Italy, everything is going according to plan. Integration is proceeding as we have foreseen with integration costs and synergies fully in line. The highlight in Q3 in Italy was the aligned new market portfolio that we launched for the B2C and B2B market, which I will talk a bit more in detail later on in the Italian chapter. And finally, we have confirmed group guidance with revenues roughly at the lower end towards CHF 15 billion, EBITDAaL of CHF 5 billion and CapEx between CHF 3.1 billion and CHF 3.2 billion, also probably rather at the lower end of the range. Now moving to Page #5. You can see the net adds trends in Switzerland and Italy. I will start with Switzerland. Overall, the competitive environment is broadly stable with, I would say, more aggressiveness recently from Sunrise again, and we will -- we probably discuss later on also in the Q&A. On the mobile side, the net adds evolution is stable. You see with roughly a run rate around 45,000 net adds on a quarterly basis. Very pleasing results from our perspective for our mobile business and broadband and TV are slightly improving quarter-on-quarter. We're still negative net adds, but a much better run rate than we had in Q1 earlier this year. If you look at the wholesale side, we have a very pleasing result in Q3 with plus 14,000 net adds. So you can see stable or accelerating growth on the wholesale side. And overall, we have more net adds on the wholesale business than we are losing lines on our B2C. So we can at least partly compensate what we are losing on the consumer side on broadband with new access lines on the wholesale side, which is especially tilted towards fiber connectivity as we will see later on in the details. Now on the Italian side, the market remains competitive, but prices have been pretty stable in the last year. So we can see that the prices are clearly bottoming out and the market is not getting more aggressive. Now in terms of net adds evolution, we have on the mobile side, an accelerating loss, which is actually, if you look at underlying, the B2C losses are improving. So we have less losses this year, clearly better B2C business, but we have less net adds coming in on the B2B side because the TM9 government contract ramp-up is coming to an end. So let's say, net adds on B2B, so a bit less compensating the B2C decline, which leads to an overall minus 39,000 net adds on a company level. On the other side, broadband is improving, and we will see, particularly on the B2C side, things are improving very rapidly, and I will talk a bit more about that later on, but overall, quarter-over-quarter, you can already see that net adds loss has been halved -- more than half between Q1 and Q3 from minus 67,000 to minus 33,000 net adds. So -- and then overall, wholesale, also pretty stable run rate around 50,000, 45,000 net adds per quarter. So we have been able to stabilize both in the wholesale side and also compensating the losses on the broadband side. So I think pretty happy about the wholesale business in Italy. So now moving on to Page #6. You can see that Q3 revenue was slightly softer at CHF 3.7 billion, minus 1.8%, with bringing us to a year-to-date revenue of CHF 1.1 billion, which is minus 2.1%. And the EBITDAaL bridge, you can see on the right-hand side, Switzerland is pretty stable with minus CHF 5 million in quarter 3, bringing us to a total minus CHF 11 million year-to-date. And in Italy, we have the transitional year with the integration and the -- let's say, turnaround of the B2C business, and Eugen will detail the financial numbers a bit more in detail later on in the financial section. But so far, I would say, EBITDAaL is in line with expectations and in line with our full year guidance. Now I will move on to page as a business update for Switzerland and Italy and directly go to Page #8. where you can see our priorities for 2025. So pretty unchanged compared to last quarter. In Switzerland, we want to defend the Telco top line, make sure the service revenue erosion is as slow or low as possible, deliver on the cost savings. And you have seen that we have already achieved the full year cost target by end of Q3, and we want to further grow on the IT side. In Italy, it's similar priorities, but more geared towards the integration. So of course, the priority #1 is to proceed on the integration of the 2 organizations and capture the synergy potential, but at the same time, stabilizing the Telco business and reducing the service revenue erosion that we are seeing this year so that next year, we have a substantially better position, especially on the B2C side. And at the same time, we want to accelerate the energy business, selling more services beyond the core while scaling up the B2B IT and wholesale part to stabilize the overall business in Italy. And you can see now how we are doing in regards to these priorities. I'll move on to Page #9, looking into B2C Switzerland. So as I already highlighted at the beginning of the call, we are extremely proud to be the winner of all connect service tests for best shop, best app and best wireline and mobile hotline. I think this is an important achievement to test and show and demonstrate to the market that the Swisscom customer service is indeed the best customer service in the country. We're also very pleased with the evolution of the We are Family offering that we launched earlier this year. We continue to drive this offering in the market to sustain net adds on the main brand and make the main brand more appealing for family households. In this regard, we have also worked on our third brand positioning, especially with Migros before it was called M-Budget -- now we -- Migros relaunched the mobile brand under the main retailer brand, which is called Migros. So this should help generate more net adds going forward with attractive offers under a new name and a more customer-centric offering. And we have also launched a dedicated AI offering or AI chatbot for private consumers. This offering is called Swisscom -- myAI. It's a chatbot basically in a sovereign mode, where the consumer data is not used for training and respect data privacy. And so there is a free version and then a paid version at CHF 14.90, and we see quite some good traction already, at least on the utilization side of -- in the consumer space. You can see on the right-hand side, RGU and ARPU evolution, churn is at a very stable record low level of 7.7% for fixed and 6.8% for mobile ARPU on the wireline side is pretty stable, which is, I think, a very positive news. And the mobile ARPU erosion of minus CHF 1 is mainly driven by the ongoing brand shift between main brand and second brand, but the ARPUs on a brand level are actually stable as well. So moving on to B2B on Page #10. We are gradually integrating the beem offering in all our existing product portfolios. But we do see quite a lot of competition in the market, and you can see this on the ARPU box in the middle, where you see quite a heavy erosion on postpaid and average underlying product of minus CHF 3, which is basically driven by price competition in the market. And this is why it is so important that we launched the new beem offering to be able to upsell more security services and also create convergence effect on the B2B side and retain more customers with a broader product portfolio instead of competing just on price with Salt and Sunrise. So we will continue to ramp up the beem services. We have launched the new ATL campaign -- marketing campaigns in September. And so far, subscription take-up is very pleasing. We are ahead of plan, which is a good news. And we have now started enabling our partner channels so that we can -- as you know, on the SME front, a lot of sales are not driven in a direct sales mode, but more in an indirect sales mode through partner channels, and this is an important piece of the ramp-up next year. So we have started enabling all our partners to sell the beem offering, especially the higher-end editions, which are more complex to sell, but obviously are more interesting from a revenue perspective. On the IT side, quarter-on-quarter, we have -- or year-on-year between Q3 and Q4, we have -- sorry, between Q3 '24 and Q3 '25. We have a stable revenue evolution. The growth -- we were not able to materialize the growth on the IT side, suffering to some extent a bit from macro conditions in Switzerland. So there is quite a substantial slowdown in the IT market in Switzerland, also still due to the integration of Swiss Credit Suisse and UBS, which took out quite a lot of volume out of the IT market, and we can see this now in the numbers. So I think already a stable service revenue evolution is actually quite a good achievement. But we are obviously aiming to bring that back to growth starting Q4 this year, but especially also next year. I think the highlight is the new cloud platform that we delivered for the Swiss Armed Forces. This project is now nearing completion by end of the year and will be the basis for new IT services that we deliver to the Swiss Armed Forces going forward over the next years and will be a good driver of further IT revenue growth going forward. In parallel, we are also working on the profitability in our operating model, which we continue to transform to improve IT profitability. So you can see that despite having no revenue growth, we were able to increase profitability by 10%, so up CHF 3 million to CHF 35 million quarter-on-quarter, which is, I think, an excellent news, and we will continue to drive IT profitability also next year to make -- or to extract more cash flow from the IT service revenues. And also on the IT side, we have just launched a couple of weeks ago chatbot for SME. So it's basically very similar to the -- myAI for consumers, but this one is geared towards SME companies, so they can upload their own documents and use a highly secured and data private chatbot for their own company, which is quite a high demand, especially in the public sector and some other areas where people have more needs for data privacy and cannot use the, let's say, public cloud or public offering. Now on the Network and Wholesale side on Page 11, we can see that our, let's say, network rollout is continuing. We are now at a 5G plus coverage of 88%, fully on track to achieve our 90% target for the full year in 2025. And also fiber rollout is continuing. It's up plus 5%. We have now a 55% coverage with 10 Gbps connectivity across the country, also in line to achieve our full year target that we have set up for the FTTH rollout. And also on our network, we were able to win the connect fixed network test for the fifth time in a row with a record 991 points out of 1,000. And you can see that on the right-hand side that we are able to monetize also our network in better ways, especially the fiber rollout. So we are accelerating the net adds on the wholesale side. We have more market share on the lines and also plus 4% revenues. So access revenues are up by 4% from EUR 48 million to EUR 50 million on a quarterly basis. And I think what is especially interesting, you can see that the FTTH penetration on our wholesale business is increasing very rapidly [indiscernible]. It's up by 7%, and we have now nearly half of our wholesale lines, which are fiber-based, precisely 49%, and we expect this to be over 50% by the end of the year. Linked to this also, the copper phaseout is going very well. So we don't have numbers on this slide, but we already managed to decommission over 350,000 copper lines. So at the peak, we had 2 million lines in activation, and we are now standing at 1.65 million copper lines, which is already -- so we already achieved our full year phaseout target by end of Q3, which is also a very pleasing development on the network side. So if you look on Page #12, you can see that we have already achieved our full year target of CHF 50 million cost savings by the end of Q3. But I would like to put in a word of caution. We shouldn't get too excited about this because, I mean, it's great that we have achieved the full year target, but we don't expect much more cost savings to come in, in Q4. So please don't extrapolate this -- the growth we had between Q2 and Q3 further into the year, this is definitely way too optimistic. But I would say we come in at 50 plus, but not much more in Q4 to come. But you can -- but what is, I would say, the good news is that the cost initiatives continue to deliver, especially we continue to digitize our customer service. We continue to automate it. We continue to push AI everywhere. We have now launched our unified contact service platform, which is heavily AI-driven, which will continue to deliver new cost savings next year. We are experimenting with new shop formats, AI in the physical stores. We are further expanding nearshore. And of course, we are especially pushing further simplification on the network in IT and this also will continue to deliver cost savings, especially '26 and onwards. Okay. So that was it for Switzerland. I will now move on to Italy. On Page #13, you can see the highlights of the integration, which is progressing as planned and synergies are ramping up. So we have completely finalized our integrated organization, which is fully operational now. We have launched a new aligned product portfolio. So it's not a unified single product portfolio, but we essentially have exactly the same product portfolio under 2 different brands, one on the Fastweb side and one is on the Vodafone side, and we are now able to serve customers of both brands in all stores. And also, most importantly, the SIM migration is progressing in line with plan. So as you know, we have about CHF 200 million of synergies planned next year linked to the SIM migration. So we can confirm that the migration is going according to plan, and we will be -- roughly all customers will be migrated by year-end, and we are very confident to realize the planned CHF 200 million of synergies in 2026. Also, the other projects are ongoing as planned. We have already shut down the first Vodafone Group services that we have terminated and transferred to internal resources, and we are continuously working on carving out more and more services over the coming months and also IT and network consolidations have started. Now moving on to Page #14, we will have a deeper look into the B2C mobile side. So you can see that we have this joint mobile portfolio. There, you can see some screenshots in the middle. So the pricing and the features of the products are completely aligned. And we are continuously working also on improving customer treatment in the shops, but also in call center. And you can see on the right-hand side that this -- all this work is starting to pay off. The churn has significantly decreased from 20% or nearly 23% to roughly 18%, and we will continue to work on better customer service, also leading to higher NPS, and we can already see in our customer surveys that NPS on both brands is improving. So this, I think, is a good news. We can see that the value strategy that we are executing or like moving from volume to value is paying off. We are seeing an improved net adds picture. So you can see on the top right, we typically had over 100,000 negative net adds. We are now at minus 79,000, so still negative. But the outflow, which is typically high ARPU outflow has been substantially slowed down. Sales coming in is also slightly lower, but a much higher quality. So with customers really using our services. So the ARPU delta we are having between churn and net adds has been substantially decreased. And we are further working on this to close the gap and reduce service revenue erosion gradually over the next year. One other important topic on the B2C mobile side is the repositioning of ho. So we have positioned ho. as a clear attacker brand and faster than Vodafone as a clear premium brand, and we will continue to work on this brand positioning to make it clear that we have a clear dual brand strategy with a different service offering on both brands. Now moving on to Page #15. You can see that we have also launched a new fixed portfolio, which is what we call super converged, which is essentially broadband with energy services, which is an important element to drive new service revenue in Italy. So you can see that up to now, we have minus 170,000 RGUs year-to-date, which is impacted by this value strategy and front book price alignment. But transparency and customer centricity are delivering first positive results. You can see we have higher NPS. Churn has also substantially decreased to 15.8%. And you can now see that the RGU development between Q1, Q2 and Q3 is very pleasing. We are now at minus 26,000 RGUs in Q3. But actually, underlying to this, in September, we were at a 0 net adds balance. So the whole loss in Q3 is still coming from July and August, and we have now substantially achieved a stable RGU development. And we are hopeful that in Q4, we will see again a much more improved figure on the broadband net adds side, clearly showing that the strategy and turnaround is working that we are executing on the consumer side, and we will continue to push the new portfolio in the market and continue our value strategy. And I think also one maybe last word on the B2C. We -- the new product portfolio is offered at higher price points. So previously, our lowest price point on mobile was around EUR 8. Now it is at EUR 10 or EUR 9.95. And actually, we can see that the sales inflow or the gross adds are exactly the same. So we are able to sustain the sales performance despite having increased prices from -- or like the entry-level prices from EUR 8 to EUR 10. And the same we see on broadband, our sales numbers have not decreased despite having aligned prices on both sides and now executing at, let's say, increased or above increased prices than previously. So I think that's an excellent news for the Italian market that there are consumers that value quality and are willing to pay for it. Now moving on to Page #16, looking into B2B. So we keep managing also the Telco top line on the B2C side, growing with IT, cloud, security, and AI. So as mentioned at the beginning of the call, RGU net adds have slowed down a bit because we are reaching sort of the end of TM9 contract ramp-up. So we have a bit softer RGU development. But overall, I think a pleasing result on the telecom side. Also on the B2B side, we have integrated both product portfolios from Fastweb and Vodafone, offering the best of 2 worlds now to our customer. And all, let's say, corporate accounts have now been allocated to our internal sales force. Customers have been allocated in the indirect channels. This took a bit more time than on the B2C side because it's more complex to execute. And you can see also this is why we have a bit slowdown in growth on the B2B side as we still were a bit internally focused due to the merger. And you can see that the IT service revenue growth is still there at plus 1.5%, but it is a bit lower than it used to be. But here, we intend to accelerate IT growth again going forward next year as we have now finalized the integration and the sales force is, again, focused not on what is my account, but actually really selling to the market. We also have signed a new contract with Oracle to offer sovereign Oracle cloud offerings in Italy. And as in Switzerland, we have also launched already last quarter, our AI suite for SME companies in Italy, which is a sovereign AI chatbot offering for Italian SMEs. And we are very pleased that we have already been able to sell over 10,000 paying subscriptions, also showing that there is a clear market need or demand for these type of services also in Italy, and we will continue to work on this going forward. Now moving on to my last slide about Italy, Page #19. You can see also that the network rollout is continuing in Italy as well. We have now 87% 5G plus coverage, up 11% and fixed rollout or FTTH rollout is also proceeding rapidly in Italy. We now stands at 54% FTTH coverage with about half of it active and half of it passive in our footprint based on our Fastweb secondary network. We continue to drive wholesale business, both on wireline and Mobile. So on Mobile, we have essentially finished the Coop migration onto our network, and this will help us also to compensate part of the PosteMobile loss next year. And as you might have read in the press, Sky announced the new partnership between Fastweb, Vodafone and Sky. So we will continue to also provide Sky both on wireline and Mobile services, which would also help us to compensate some of the PosteMobile losses, '26 going forward. So overall, I would say, a very pleasing development on the network and wholesale side in Italy. And I will now hand over to Eugen for the detailed financial results. Eugen Stermetz: Thank you, Christoph, and good morning, everybody. I'll start as usual on Page 19 with the group overview on revenue and EBITDAaL. So let's get going with revenue. Revenue is down CHF 242 million in the group, 1/3 of which is currency. So net of currency, the number is minus CHF 153 million. Switzerland down CHF 83 million; Italy, down CHF 55 million. If we look at the quarterly dynamics, Switzerland was almost flat in Q3 after a week Q2, that's due mainly to different timing of hardware revenues this year versus prior year in the IT business. In Italy, it's a bit the other way around. If you look at the quarterly evolution, minus CHF 42 million in Q3 after roughly Q1 and Q2. So year-over-year in Q3, we only had a small contribution from IT and hardware so the Telco service revenue decline shows up in the total number. Move on to EBITDAaL. EBITDAaL is down minus CHF 191 million. We have a lot of adjustments totaling minus CHF 73 million. Net-net, this essentially boils down to integration costs in Italy on the one hand and to currency. Obviously, the gross numbers are a bit more complicated, and I'll comment the gross numbers when I get to Switzerland later on. And obviously, all the numbers as usual, you will find in the appendix to this presentation. So Switzerland, EBITDAaL almost -- if you look at the adjusted numbers, Switzerland almost stable with minus CHF 11 million year-over-year in the first 9 months, which is obviously very positive. Also the quarterly evolution is very stable indeed. On the Italian side, Italy is down minus CHF 95 million EBITDAaL. That's driven by service revenue decline in Q3, we had minus CHF 38 million after minus CHF 15 million in Q2. The minus CHF 38 million in Q3 are actually much more in line with what you would expect given the service revenue decline than what we saw in Q2. You might remember that in Q2, I flagged at the minus CHF 15 million are not necessarily sustainable. So both Switzerland and Italy, EBITDAaL are in line with our full year guidance. I move on to Page 20, CapEx and operating free cash flow in the group. So CapEx is down CHF 174 million, adjusted CHF 171 million. It's driven both by Switzerland and Italy. In both cases, the lower CapEx is due #1 to phasing with some of the capitals to come in Q4. And secondly, also in both cases, Switzerland and Italy, some higher CapEx compared to prior year tied to specific large-scale projects in the prior year. And then obviously, apart from the adjusted numbers in the adjustments, you see the integration CapEx in Italy, which starts showing up this quarter. Operating free cash flow, adjusted deposits plus CHF 53 million. In Switzerland, it's sustainable EBITDAaL, combined with lower CapEx. And in Italy, stable operating free cash flow lower EBITDAaL, but at the same time, lower CapEx, which we're obviously quite happy about. Then move on to Page 21 and dive into the Swiss picture, starting with revenue. Revenues down CHF 83 million, almost stable in Q3. If we look at the individual quarters, B2C is down CHF 29 million that sold lower service revenue and at the same time, somewhat higher handset sales that combined to the minus CHF 29 million. B2B down CHF 60 million, that's lower service revenue, but also lower hardware revenues in line with our strategy not too many low or no-margin hardware deals and somewhat higher IT service revenues in the first 9 months. If you look at the individual quarter, Q3 is a bit of an outlier with plus CHF 8 million. There actually significant hardware deliveries in connection with 1 large customer project all in line with the aforementioned strategy, but that drives actually the dynamics between Q2 and Q3, it's Q2, it was like CHF 27 million lower hardware revenues and in Q3, CHF 27 million higher hardware revenues. Wholesale growing CHF 10 million in revenue. That's essentially the growing excess services over the quarters. There are some minor fluctuations around the general trend due to these clients and roaming, so the bit more volatile elements of the wholesale business. EBITDAaL stable in Switzerland reported slightly up, adjusted slightly down. If we look at the adjustments, we have plus CHF 20 million year-over-year in adjustments positive, in particular in Q3 with plus CHF 33 million. So on the one hand, we released provisions for legal proceedings. But on the other hand, we added restructuring provisions and other provisions with a net effect of plus CHF 33 million. So if we focus on the adjusted numbers, B2C, minus CHF 10 million. B2C was able to compensate part of the service revenue decline with lower direct and indirect costs. In B2B, EBITDAal is down CHF 45 million, which is in line basically with the service revenue decline, there was not much impact of the revenue ups and downs that we saw on the upper part of this page because these revenues are there are pretty low margin IT hardware revenues, as I mentioned. So the service revenue decline shows up in the margin pretty much one-to-one. Wholesale plus CHF 11 million, in line with the revenue growth and also infrastructure and support functions, that's mainly a cost position here in EBITDAaL. So that's CHF 33 million lower costs contributing to the overall cost savings target that Christoph already mentioned. I'll move on to Page 22, deep dive into the Swiss P&L. I'll start at the bottom left with the Telco service revenue evolution decline was minus CHF 35 million in the third quarter, so slightly worse than Q2. If you look at the individual components, B2B at minus CHF 18 million is almost identical to Q2 and Q1. So not much news here. B2C is minus CHF 17 million after minus CHF 13 million in Q2. Actually, wireless in B2C is slightly better than the previous quarter due to increased net debts and also a small effect out of the Wingo price increase and the success of the We are Family! offering. The only element that is worse compared to the previous quarter is wireline ARPU. It's a combination of the phasing of the impact of targeted price increases in the prior year and somewhat stronger promotions in Q3. But all in all, very small numbers and a very stable general trend in the service revenue. Where does that leave us year-to-date? Top left of the page, year-to-date service revenue decline is CHF 92 million for the full year. This means that we will land at about minus CHF 120 million. That's slightly higher than originally guided. You remember, we talked about CHF 100 million, if you look for drivers of that more deviation in B2B, we had somewhat faster migrations of customers that we knew we would lose and the migrations came a bit faster than originally anticipated and on the B2C side, we integrated further roaming into the blue offering, so a somewhat lower roaming revenues was a bit lower demand on streaming on the wireline side. But all in all, no big surprises, no big changes by and large, as anticipated. Move on to Page 23. CapEx is down plus CHF 71 million in the first 9 months, part of which is related to nonrecurring items in the prior year. And part of that deviation will probably remain for the full year and contribute to stable free cash flows from Switzerland, all in line with our full year guidance. And finally, operating free cash flow, up CHF 60 million, adjusted a result of almost stable EBITDAaL and lower CapEx. Now I move on to Italy, Page 24, starting with revenue, down EUR 57 million in the first 9 months. In the third quarter, with a decline of EUR 44 million after a relatively stable Q1 and Q2. So what's going on? Let's look at the segments. B2C is down EUR 73 million, a combination of service revenue decline on the one hand, but higher energy revenues on the other hand. The quarterly evolution is pretty stable. B2B is stable in the first 9 months. So a combination of Telco service revenue compensated by higher IT service revenues and energy revenues. However, in Q3, you see the minus EUR 25 million. So there was a more pronounced Telco service revenue decline compared to prior year than in the first 2 quarters. And at the same time, with growth in IT service revenues and lower hardware revenues in Q3. I'll talk about the reasons for the service revenue decline when I get it on the next page. And finally, wholesale, up EUR 18 million, steady growth, both in wireless and wireline, and there were some decline in non-core revenues. So what you see here is the net of these 2 elements. EBITDAal down minus EUR 148 million reported adjusted minus EUR 99 million. In the adjustment, you have about EUR 40 million of integration cost as the main driver of the adjustments year-over-year in the first 9 months. So if you look at the individual components, contribution margin B2C down EUR 90 million. This is reflecting the impact of the service revenue decline of minus 17 -- sorry, minus EUR 117 million on the one hand and a small positive contribution from the additional margin from the energy business. However, importantly, if you look at the quarterly evolution, Q3 minus EUR 20 million after minus EUR 35 million in the first 2 quarters. This is for the first time that actually the lower mobile COGS show up, and this is obviously very positive and very pleasing because, as Christoph already mentioned, the migration of our mobile customers onto our own network is in full swing and already for the first time shows up as lower COGS in the contribution margin of B2C. B2B contribution margin down EUR 23 million. So that's the margin impact of the Telco service revenue decline and some positive margin from the IT and energy business compensating that. Wholesale, plus EUR 19 million margin -- sorry, the revenue improvement showing up also in the margin. So overall, the minus EUR 99 million adjusted are fully in line with the EBITDAal guidance we gave at the beginning of the year. If we deep dive into the P&L on Page 25, starting with -- also here with the service revenue decline, bottom left. So we had minus EUR 66 million in the third quarter, minus EUR 39 million B2C, minus EUR 27 million B2B, first, B2C. B2C is fairly stable over the quarters, which is very good. Obviously, the operating improvements that Christoph mentioned don't show up yet in the year-over-year numbers, which look backwards, but we are confident they will show up in the next year. Now what's happening in B2B. In B2B, we had EUR 27 million in Q3 after a very small service revenue decline in Q1 and Q2. It's all down to the wireline revenue. So wireline, we had significant onetime revenues in Q3 and Q4 in the prior year related to some large-scale public administration projects. So the effect that we see here in Q3 on B2B wireline is one that we will also see in Q4 again that, that might even accelerate. As I said, it's a tough comparison because we actually had increasing B2B wireline revenues quarter-over-quarter in the prior year, if you look at the pro forma numbers, and this is all due to these large projects with one-off revenues. So full year -- or sorry, year-to-date, that leaves us with minus EUR 166 million year-to-date. So it's clear that the full year service revenue decline will be well above EUR 200 million in 2025. What changed, if you remember, we had an original guidance of EUR 100 million to EUR 200 million already said in the second quarter that we are trending towards the upper end of that guidance. So we will be above that in the full year. What changed is mainly the outlook -- on B2B, we originally expected to be able to replicate these large-scale projects that we had in Q3 and Q4, and this is now not the case. There is no other structural driver we see at this moment. Is there an impact on the EBITDAal guidance? No. The direct and indirect costs we anticipate for the full year are lower than we had originally anticipated in the guidance. So the EBITDAal guidance for Italy is fully confirmed despite this deviation. I move on to Page 26. CapEx in Italy, EUR 83 million below the prior year. That's partly phasing between the quarters, but also partly due to large projects in the prior year. So a part of the deviation is likely to remain for the full year. On the adjustments, you see the integration costs showing up. We had integration CapEx of EUR 53 million so far. There is still a lot to come in Q4, but maybe not the full EUR 150 million of CapEx integration costs that we guided for at the beginning of the year. So CapEx Italy is clearly trending towards the lower end of the guidance. And finally, operating free cash flow in Italy adjusted is stable at minus EUR 2 million with EBITDAal below prior year, but so it's CapEx. Page 27, quick update on synergies and integration costs. We confirm the EUR 60 million synergy target for the full year and the plus EUR 36 million, which we had in the first 9 months is fully in line with this expectation. You remember that the synergies are backloaded due to the importance of the MVNO synergy that kicks in, in Q3 and Q4 and then ramps up to the full run rate next year, as Christoph mentioned before. We also confirm the integration cost target of approximately EUR 200 million. We have in the books EUR 93 million so far, EUR 40 million OpEx, EUR 53 million CapEx. So in the end, there might be some shift from CapEx to OpEx versus the original split of EUR 50 million OpEx and EUR 150 million CapEx, but the overall number of EUR 200 million for the full year, we confirm. Page 28, free cash flow, stable versus prior year. We are comparing to the reported numbers here, not pro forma, so stable versus prior year, plus CHF 23 million, driven by higher operating free cash flow compared to reported last year, plus CHF 116 million on the one hand. And on the other hand, higher interest paid, CHF 127 million, obviously due to the acquisition and all the other deviations on that page are quite minor. So I move on to Page 29, net income. Net income is down CHF 295 million year-over-year with 2 main drivers. One is the higher interest expense, obviously, due to the acquisition. And secondly, there is a lower EBIT, which is almost entirely driven by the amortization of intangibles out of the purchase price allocation of the acquisition, and we also had somewhat lower tax expense this year compared to prior year. So I come to the final page, Page 30 on the guidance. We do confirm the guidance similar to Q2 with 2 comments. Number one, based on the numbers we have seen, it should have become clear that on revenue in Switzerland and Italy and by implication of the group, we trend towards the lower end of the guided range. And we may even undershoot slightly, but if we do so with no impact on EBITDAal guidance and operating free cash flow guidance. And in a similar vein, as mentioned before, CapEx Italy looks like it will land at the lower end of the guidance or even slightly below and also impacting the group number. Last but not least, we confirm the guidance for the dividend of CHF 26. And with that, I hand back to the operator. Operator: [Operator Instructions] Polo Tang: It's Polo Tang at UBS. I just have 3 questions. The first question is just on Swiss price rises. So you recently increased prices on Wingo by CHF 1 a month. But what impact did this have on NPS and churn? And would you consider further price rises on the Wingo brand? My second question is, what is your view on the CHmobile launch by Sunrise? Do you see it as disruptive to the market? And my third question is just about Italian mobile pricing. So you increased your front book price rises. So you increased your front book prices from EUR 8 to more than EUR 10 in September. I appreciate it will take time for these price rises to feed through the subscriber base. But do you think Italian Telco revenues can reach stabilization at some point in 2026? Christoph Aeschlimann: Thank you, Polo. So I'll take the question. So on the Swiss price rises, actually, we were very positively pleased by the execution of the price rise with Wingo. We have seen absolutely no impact on NPS and churn. I think it demonstrates that Wingo is a very strong brand with a very attractive service offering. We executed it as a more-for-more price increase. So we included 5G access with the plus CHF 1, but it was, let's say, good news that it didn't impact NPS and churn on the Wingo brand. And so I will not comment about further price increases, but it is obviously something that we are looking into to see if there is further room to improve revenue and positioning of the brand. But now, let's say, it's also linked to your second question, so CHmobile. Honestly, I don't expect a huge impact from this brand going forward. We already have a lot of low-value brand in the market. It's -- I don't really understand the move from Sunrise because it goes contrary to what they actually talk about moving to a value-based strategy. And at the end, honestly, I think everybody will just end up with the same number of RGUs, but with slightly lower revenues. So it's not really a good news for the market because it kind of creates more downward pressure in the market, especially if you look at the mid -- not really -- I'm not so worried about the premium segment. But if you look at the mid market piece. Obviously, the more routed the brand basis in the lower-end budget segment, the more downward pressure you have also in the mid segment. But we will see a bit how this evolves now over time. But it's clearly, let's say, not a move that goes into, let's say, a price rebound direction in the Swiss market. So we will see also a bit how it's going with the Black Friday promotions in the coming weeks. And then we'll be -- we will see over the next year if there is any impact from this CHmobile brand. Now on the Italian side, the goal is definitely to stabilize service revenue both in B2C and B2B in the midterm. This will take some time, but we are working very hard on it. And actually, price increases, we executed price increases twice. So first, we went to EUR 9 and now to EUR 10. So we have quite a good view on at least the EUR 9 move, which didn't impact sales numbers so far. And I think also now the front book prices, I think, are at a good level. And we are actually executing what we call back book, front book alignment now. So all the back book customers, which are below our front book prices, we are now elevating them onto the front book level to have a completely in-line portfolio. This is currently being executed over the next weeks, and we have started a couple of weeks ago. And so far, numbers look okay as well. And we feel it's an important action so that all customers are actually treated in a transparent and fair way and everybody pays what we are now selling on the front book side. And this will obviously also help us improve service revenue next year going forward as this is a price increase for a couple or like a part of the customer base. Operator: So at the moment, we have one more question. [Operator Instructions] And now I will open the line for the next question. Joshua Mills: It's Josh Mills at BNP Paribas. I had a couple of questions, please. The first was just related to the Swiss service revenue trend. So you said in your comments that part of the reason that you saw a deterioration from 2.4% to 2.6% negative growth this quarter was you had a bit more migration to some of the B2B packages and also some more roaming revenues dropping out as you move to the blue bundles. So it sounds like this is a revenue headwind you've been anticipating, but just one that's coming through a bit earlier than expected. If that's the case, do you think that you'll start to see an improvement in service revenue trends into the end of this year and into 2026? Or are there other factors to consider which mean that we might see a continuation of the service revenue declines? That's the first question. And then the second question, was just around the cost cutting that you lay out on Slide 12. I think you're making it clear not to extrapolate the same level of savings into 2020 -- sorry, into Q4 as you saw in Q3, but where -- why is it that these savings are coming in quicker than expected? And why would there not be more upside to the CHF 50 million target you laid out at the start of the year? Eugen Stermetz: Okay. Thanks, Josh. So I'll take the first question. So maybe I was not super clear in my presentation, so I'll try to repeat. There is -- there is 2 different elements to talk about. So the one I've talked about first is the Q3 service revenue decline compared to Q2 because it looks like a bit of an acceleration. Now actually, on B2B, there is no acceleration whatsoever. So it's minus CHF 18 million after minus CHF 18 million in Q2. The only change is the -- only change is in -- B2C minus CHF 17 million versus the minus CHF 13 million. And there, I commented that wireless is actually slightly better, so the difference that you see between the 2 quarters comes from wireline ARPU because of some targeted price increases we had in the prior year that the impact of which is now trading out and some strong promotions in Q3. So B2B doesn't play a role in this quarter-over-quarter evolution. It's merely B2C. And here, it's wireline ARPU, nothing else. Okay. So that's the one element. Then I talked about the full year outlook, where I said about that CHF 120 million service revenue decline is what we expect and compare that to the roughly CHF 100 million service revenue decline we guided for at the start of the year. And here, actually, there is a B2B element in that deviation, because we lost some customers in B2B wireline on the corporate side, which we were really new at the start of the year. And the -- but the migration of their locations went a bit faster than we anticipated than this led to a slightly higher service revenue decline on the B2B side than anticipated. So that's a B2B. There is no Q-over-Q B2B story. Now having said that, these are all super small numbers, just to be clear. So we guided for about CHF 100 million, which you can't read anywhere you like, but you could always think CHF 120 million, we just wanted to be super transparent while we expect the roughly CHF 120 million now. Is there any impact out of these small changes that I'm commenting here on the midterm outlook? No, I would not read too much into it. Obviously, we are going to talk about the our service revenue decline expectation for '26 in February, but we don't see any fundamental shift. I just tried to explain the change from about CHF 100 million to CHF 120 million on the one hand and try to explain the super small change from minus CHF 13 million to minus CHF 17 million on the B2C side between Q2 and Q3. So I hope I was clear now the second time if not, feel free to follow up. Then on the cost savings side, I always -- I'm repeating myself on that topic. The cost savings do not come in steadily quarter-over-quarter in the same number. That's not realistic. The numbers we are talking about is at the moment, an annual impact of CHF 50 million plus, which is not a huge number, given the overall cost base we have. So small changes in quarters can drive a lot of the change. So it's always important to look at the final year figure, what we achieved for the full year. And I would not read too much into quarterly fluctuation. Joshua Mills: It's very helpful. I mean, just to follow up on the first answer. Should we read that as you don't see any big change in trends to service revenue development and declines in '26 versus the current run rate? Is that what you meant to change? Eugen Stermetz: Yes. I mean you're repeating that. No, I think I was clear. We don't see any structural changes out of the things we commented on -- so you can take -- draw your own conclusions when it comes to 2026 and we didn't guide for '26 in February. Operator: So there's one more question, and I will open the line for the next question. Robert Grindle: Yes. That's Robert Grindle from Deutsche Bank. I saw you bought a B2B video services company in August, the deal is yet to complete, I believe. Is this part of a wider push into security? Could you also provide B2C security products like one of your competitors? And do you see other adjacent opportunities in the market? And my second question is, how would you describe the mood of the typical Swiss enterprise at the moment? You had all that trade talk volatility during the summer. Has that effect sort of evened out now? Or are enterprise customers still holding back on their ICT projects? Christoph Aeschlimann: Thank you, Robert. So I think the B2B video merger you're alluding to is a really small acquisition that I think we did last year, if I'm not mistaken. I think now we have separated it out to an other entity, and we merge with some of our existing capabilities on the Swisscom Broadcast side. But it's really, let's say, a minor business. We're talking about sort of a very low double-digit millions. So it's not substantially impacting really our overall numbers in Switzerland. But Swisscom Broadcast, which is one of our subsidiaries, is actually quite active in sort of the whole surveillance aspect with cameras, but also drone surveillance which is, let's say, a growing area. So we do see some opportunities for growth on that side. But sort of it's growing, but not in a way that it would meaningfully impact our overall Swiss numbers yes, unfortunately. And of course, we -- I mean, there are a number of other adjacencies. I think the most important ones are really sort of AI-related opportunities on the B2B side. So we are pushing very heavily in providing AI consultancy, AI infrastructure services, AI chatbot really trying to monetize the AI implementation in the B2B space. I think that's one important adjacency and the second one is really all around security, which is driven by our traditional security offerings, but also the beem offering, which is completely integrated connectivity and security offering, where we really want to monetize and capitalize on the opportunity of the growing cybersecurity needs of B2B customers. And I think those should provide also meaningful numbers going forward. Now having said that, the general mood of B2B in Switzerland is a bit damp, I would say. So Switzerland is quite heavily impacted by the tariff situation with the U.S. So especially on the machinery and industrial side, it's quite gloomy, I would say. And customers are heavily saving money. Obviously, not all sectors are impacted in the same way, more domestic services companies are not impacted. And also on that side, we are okay. But the more export-oriented industries are quite heavily impacted, so overall, I would say there is a slowdown on the B2B side. It's not like to worry about. I think it's not that bad, but it's not helping us create more growth on the IT side as many companies are now scaling back a bit on their investment envelopes. Operator: So since we have no more questions left, I will hand over back to Louis for the concluding comments. Louis Schmid: Thank you very much. And with that, I would like to conclude today's conference call. In case of any follow-up questions, do not hesitate to contact us from the IR team. Speak to you soon, and have a nice day. Thank you.
Operator: Hello, everyone, and thank you for joining the N-able Third Quarter 2025 Earnings Call. My name is [ Lucy ], and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Griffin Gyr of Investor Relations to begin. Please go ahead. Griffin Gyr: Thanks, operator, and welcome, everyone, to N-able's Third Quarter 2025 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.enable.com. There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website. And now I will turn the call over to John. John Pagliuca: Thank you, Griffin, and thank you all for joining us today. We delivered strong third quarter results, reflecting robust demand for cybersecurity and the rising strategic relevance of N-able. Third quarter ARR was $528 million, up 14% year-over-year, and adjusted EBITDA margin was 31% Quarterly gross and net retention both increased year-over-year and quarter-over-quarter, underscoring the momentum and traction we are seeing in the business. We also expanded our security capabilities and further scaled our channel-first go-to-market motion, key pillars of our long-term growth strategy. Another quarter of growth, profitability and superb execution. Our performance stands out in a fast-changing technology landscape. AI is intensifying the speed, sophistication and scale of threats, and the adversary has never been more dangerous. Businesses need help adapting and N-able is rising to the challenge. Leveraging proprietary data from our 11 million IT assets, we are embedding innovative AI capabilities across our platform, arming organizations with the cutting-edge solutions they need to defend themselves in today's cyber battleground. Today, we will take a closer look at our recent progress and discuss how N-able is positioning itself to lead in an evolving cybersecurity environment. The digital state of operations for small and mid-market businesses is rapidly changing. The accessibility of AI tools to both the knowledge worker and the threat actor alike has created a new digital normal for organizations of all sizes. Today's workforce operates across hybrid systems, multi-cloud environments, SaaS applications and increasingly AI-driven processes. At the same time, as our digital infrastructure grows increasingly vital to business operations, AI-powered threats are putting those systems under greater pressure. This is driving a paradigm shift in how businesses must think about cybersecurity. In this new environment, security isn't just a line item, it's table stakes and the foundation of business resilience. N-able's end-to-end cyber resilience platform is purpose-built for this new world. Delivering protection and performance, our platform spans 3 vectors: Unified endpoint management or UEM, security operations and data protection. It enables visibility across every endpoint, intelligence to help stop threats before they strike and data recovery at rapid speed. We deliver coverage across the entire attack life cycle. We believe this breadth sets us apart from most cybersecurity competitors who take a siloed incomplete approach. For small and mid-market businesses who often face enterprise-level threats without enterprise-level resources, our end-to-end value is paramount. Our platform is designed to keep their entire business resilient. Our recently published N-able 2025 Annual Threat Report comprehensively assesses the ever-changing threat landscape. One key takeaway, AI is helping fuel scalable, low effort attacks that exploit common gaps in visibility and response. We identified a surge in detected threats against SMBs over the past year as they increasingly invest in the proper security tools to monitor their environments and mitigate risk. Broader industry data supports that AI is helping increase the scale of cyber attacks, with McKinsey reporting a 1,200% increase in phishing attacks since 2022 and the rise of generative AI. AI is also increasing the potency of attacks. Cyber criminals are leveraging generative AI to better mimic real-world people and messages, making phishing and ransomware harder to detect and more believable. Further exacerbating the challenge, SMB economics make them a prime target. Ransom demands are often calibrated to just under the cyber insurance deductible and the breach of a smaller firm is less likely to trigger a wider scale investigation than an incident at a Fortune 500 company. Insurance regulations are adapting to these changing paradigms and implementing tighter security standards for businesses. This is driving deal activity for N-able. One of our largest sales this quarter was to a prospective customer looking to supplement their on-premise backups with cloud-based data copies to stay in line with NIST 2 data redundancy standards. With quick deployment, compelling TCO and easy scalability, our cloud-first data protection solution perfectly met their need. While AI is still in the early innings, the impact on cybersecurity is evident. Threats are turbocharged, IT is more complex, regulations are tightening, and data is increasingly important. For N-able, the implications are clear. We believe AI is making our mission more critical and our opportunity larger. As AI drives demand for cybersecurity, we are also embedding AI both in-house and across our platform. Data is gold in the AI era. And with the telemetry from over 11 million IT assets and a solution that spans the IT security stack, we have the critical data needed to create and deliver AI solutions. We believe this scale, breadth, and data ownership are a powerful moat. Let's look at how we are using AI today and build to use it even more effectively for Mara. This quarter, we established an industry standard by sponsoring CANI, a framework for shared AI language across organizations and vendors. This is a market-first initiative that establishes consistent v capability for use across MSP and IT ecosystems to help drive seamless AI automation and my server behavior, enabling customers to harness AI effectively for enhanced cyber resilience. We are empowering AI agents to interpret and act on commands with precision across multiple different systems. This addresses one of the biggest challenges in IT management, fragmented and inconsistent terminology across businesses. By introducing these standards, N-able isn't just participating in the AI evolution. We are taking a role in building the field and writing the playbook for how AI operates for our customers. In UEM, we are making meaningful strides to use the power of AI to automate key workflows. Our developer portal acts as a customer's AI assistant, helping users leverage AI to operate more effectively and efficiently. We are seeing particular success in driving automated script generation and API integrations, cutting hours of manual work to minutes. Building on our momentum, we are pushing to extend our capabilities further. We are developing AI agents that IT and security teams will be able to use across their operations. This supports our larger vision of delivering near-autonomous IT. The opportunity is significant. IT and security teams everywhere are washing complexity and are often burdened by tedious repetitive work, managing endpoints, resolving tickets, implementing policies, maintaining compliance, securing data, and more. We are aiming to transform this paradigm. Our vision is resonating, underscored by the fact that our largest deal this quarter was driven by our UEM solution, representing an ARR win of nearly $0.5 million. And our UEM leadership continues to be recognized in industry media and press. We are delighted to win the MSP RMM platform Award for CRN's 2025 annual report card, a recognition based directly on feedback from our customers. Our security operations solution is also at the forefront of AI and innovation. It starts with our vendor-agnostic technology that ingests data from the endpoint, network, cloud, identity layer, and SaaS applications. This delivers the necessary bird's-eye view of customers' IT environments. Our AI-powered technology stack then serves as the orchestration layer, transforming raw data into actionable insights for security teams and automating threat response. These orchestration capabilities position N-able as an active threat neutralizer and real-time decision-maker, and our approach is working. Our AI-powered SOC is analyzing billions of security events a month, adding hundreds of businesses a month, and driving meaningful ARR growth for N-able. We're solving a major market pain point. Operating even a small SOC team can cost millions annually. N-able is democratizing security by delivering advanced AI SOC capabilities at a fraction of the cost, and we're not stopping here. The next frontier is near autonomous cyber defense, and N-able is building toward that reality today. We are also utilizing AI in our data protection solution. Our recovery testing capability uses AI to provide proof of recoverability without requiring customers to fully initiate a backup test, saving them significant time and reducing operational burden. This supports our broader value proposition to ensure data is always protected and recoverable. Looking ahead, we plan to introduce AI-based scanning of backup data that will continuously monitor data flows and flag unusual patterns, further enhancing our ability to detect threats before they cause harm. While data is gold, it is not sufficient for AI leadership. Trust and distribution are also key, and both are areas where N-able has strong advantages. As it relates to trust, cybersecurity is not an area where we believe businesses will experiment with self-created or nonspecialized options. The cost of a single mistake is simply too painful to trust a homegrown model or a company that only does security part-time. We are a trusted security provider. Distribution is also important. Our base of over 0.5 million businesses allows us to efficiently test and ultimately deliver AI solutions. And with healthy cash flow margins, we have a sustainable business model that allows us to invest in our business to compete in the dynamically changing AI world. These are all big advantages over competitors, still searching for product market fit and sustainable, profitable business models. Embedding AI into our platform unlocks meaningful value from automating technician workflows to detecting and preventing more threats to enabling new services. AI raises the ceiling for the value we can deliver to customers. We are leaning into the opportunity as we see a clear path to how developing AI-powered solutions allows us to competitively differentiate and take share in the vast and growing cybersecurity market. Our channel-led approach is also key to our strategy to capitalize on the AI world. Businesses face challenges in managing cybersecurity and IT themselves. According to the September COPTiA report, tech unemployment is at just 3%, and with the skill sets needed to stay ahead rapidly evolving, keeping pace is a challenge. That's why businesses turn to the channel for help with cybersecurity and IT. Whether fully outsourcing to a managed service provider or working with a value-added reseller to guide vendor selection, the channel provides expertise and scale to SMB and mid-market businesses. We see the arrival of AI as an accelerator for businesses using the channel. With deep roots in the MSP community and growing investment in VARs, we believe our go-to-market strategy is aligned with the market opportunity created by AI and cybersecurity trends. We've talked a lot about AI today. I'll leave you with this. AI expands the scope of software and what N-able can do for our customers. It elevates the need for cybersecurity and expands our opportunity. There has never been a more exciting time for N-able, and we are creating that future now. Let's now talk more about our progress this quarter. Our growth strategy rests on 3 key elements: first, driving security success; second, scaling our go-to-market; and third, boosting customer expansion. We saw progress across all 3. We will first look at our efforts to drive security success. The market need is clear. Our efforts align with the significant opportunity and our broader ambition to set a new standard in cyber resilience for small and mid-market businesses. In data protection, we advanced our powerful solution with the launch of Anomaly Detection as a Service. These new capabilities are designed to detect unauthorized access with backup environments and proactively flag indicators of compromise. Unlike traditional backup solutions that focus solely on restoration, our approach helps prevent data loss before it occurs. This marks a strategic shift from reactive defense to proactive resilience. We believe we are ahead of the competition in this regard, and we are excited about the impact for our customers. More broadly, we deliver the simplicity, power and affordability our customers crave, and our data protection vision is resonating. In fact, a customer recently shared that they went from spending 60 hours a week managing backups to just 1 hour a week after adopting our solution. The numbers reflect what our customers are telling us. Our data protection solution once again led our net new ARR growth in the quarter. In security operations and UEM, we continued our strong pace of innovation with new threat detection capabilities and powerful integrations. Our latest enhancements strengthen endpoint visibility and accelerate incident response, helping customers reduce dwell time and improve overall security posture. Let's now turn to our go-to-market progress. N-able is scaling with purpose. Anchored in a channel-first model that continues to prove its strength, nearly all of our businesses flow through the channel, and we're investing to deepen those relationships and expand our reach with a strong focus on further engaging the reseller channel. This reseller motion is building momentum. We initiated it with a geo-specific approach, starting in the U.K. and plan to expand in other regions. We're already well established in North America via the Adlumin acquisition, and this deliberate expansion strategy is designed to maximize impact and efficiency. One powerful proof point, we now have active relationships with a sizable number of the top 25 U.K. partners for CRN 2025 listing, up from virtually no presence at the beginning of the year. We believe this traction underscores the strength of our model and the effectiveness of our targeted approach. We continue to see strength upmarket. A standout example this quarter was a 70,000 device win, firmly validating our investments in mid-market expansion and ability to win large deals. We saw another proof point with the reseller-driven UEM mid-market win, where we displaced and consolidated 3 separate competitors across multiple categories, including remote access, endpoint management and privileged access. Our ability to meet complex requirements, including on-premise deployment and a road map to CMMC readiness and FedRAMP compliance was key to winning this business. We're elevating our message to match this momentum and showcase the full strength of our platform. We just hosted our first annual Cyber Resilience Summit, where we brought together hundreds of industry leaders and practitioners and discussed the hard problems facing our customers. One clear takeaway, cyber resilience is business resilience. Cybersecurity is no longer just an IT concern, it's a business imperative. Speaking clearly about business resilience isn't just marketing and messaging. We're helping partners translate cyber resilience into tangible business outcomes. A great example is our new executive summary report feature. This highly requested capability enables customers to clearly communicate protection outcomes to internal and external stakeholders, delivering transparency, accountability and peace of mind. The final pillar of our growth strategy is customer expansion, deepening relationships by delivering more value across our platform. A powerful example this quarter came from a long-standing customer, a respected regional MSP in the Southwest of the United States that utilizes our UEM, EDR and data protection solutions. Just days before a major attack deadline, a large CPA client of theirs experienced a targeted cyberattack at 2:00 a.m., exploiting a vulnerability in their environment. While the attack caused damage, it was quickly contained. Thanks to the lay of defense provided by N-able, including our data protection solution, they were back up and running by lunchtime. What could have been a multi-week outage and potential extension event for their business was resolved in hours, demonstrating the real-world impact of our cyber resilience platform. These are the moments of truth in what N-able is all about. In the aftermath, our customer reinforced its defenses by making our MDR a standard nonnegotiable service for its clients, closing the loop on true end-to-end cyber business resilience. This type of outcome is driving stronger customer loyalty and deeper adoption. In fact, 43% of new UEM wins this quarter included an additional solution, demonstrating that our end-to-end cyber resilience platform is resonating. Further, the largest deal this quarter, which I mentioned earlier, was a cross-sell to a security operations mid-market customer, validating our cross-sell success. And we're seeing the results in our metrics. Both gross and net retention improved year-over-year and quarter-over-quarter, underscoring the value customers seeing in expanding with N-able. As we continue to deliver outcomes like these, we're confident in our ability to grow with our customers, helping them stay protected, resilient and ready for whatever comes next. With that, I'll turn it over to Tim and then circle back for closing remarks. Tim? Tim OBrien: Thank you, John, and thank you all for joining us today. Our strategy remains disciplined, delivering scalable cyber resilience for small and mid-market businesses throughout our expanded channel ledge approach. This quarter's performance reflects that focus, strong top line growth, quality margins, healthy free cash flow and considerable operational progress. We believe infusing AI into our cyber resilience platform further positions us for long-term success. We also executed on our share repurchase program, underscoring our confidence in the long-term value of the N-able business. Reviewing the quarter, ARR performance was a standout highlight. Constant currency year-over-year ARR growth accelerated for the second consecutive quarter. When adjusting for currency impact, net new ARR dollar growth in Q3 was our best performance year-to-date. These results demonstrate the strength of our business and validate our strategy and operational execution. We are executing with precision and investing with purpose to lead in a fast-changing cybersecurity environment. Let's now discuss our results for the third quarter and our outlook for the fourth quarter and full year. For our third quarter results, total ARR was $528.1 million, growing at 14% year-over-year on a reported basis and 13% on a constant currency basis. Total revenue was $131.7 million, $3.7 million above the high end of our guidance, representing approximately 13% year-over-year growth on a reported basis and 12% on a constant currency basis. Subscription revenue was $130.5 million, representing approximately 13% year-over-year growth on a reported basis and 12% on a constant currency basis. We ended the quarter with 2,611 customers that contributed $50,000 or more of ARR, which is up approximately 15% year-over-year. Customers over $50,000 of ARR now represent approximately 61% of our total ARR, up from approximately 57% a year ago. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 102% on a reported basis. On a constant currency basis, dollar-based net revenue retention was 102%, up from the previous quarter. Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. Third quarter gross margin was 81.1% compared to 83.7% in the same period in 2024. Third quarter adjusted EBITDA was $41.4 million, 4 million above the high end of our guidance, representing approximately 31.4% adjusted EBITDA margin. Unlevered free cash flow was $22.6 million in the third quarter. CapEx, inclusive of $2.8 million of capitalized software development costs, was $9.4 million or 7.2% of revenue. Non-GAAP earnings per share was $0.13 in the quarter based on 188.4 million weighted average diluted shares. We ended the quarter with approximately $101 million of cash and an outstanding loan principal balance of approximately $336 million, representing net leverage of approximately 1.5x. Approximately 45% of our revenue was outside of North America in the quarter. Turning to our financial outlook. Our guidance accounts for the following elements. In regards to FX rates, we are assuming rates of 1.13 for the euro and 1.29 for the pound for the remainder of 2025, along with updates to other currencies. Also, as a reminder, we acquired Adlumin in the fourth quarter of last year. As such, Adlumin is on a like-for-like basis in our year-over-year ARR growth and our expected fourth quarter ARR growth rate reflects the natural impact of lapping that acquisition. Additionally, as part of our deferred payment deal structure, we anticipate executing a planned cash installment payment of approximately $50 million in the fourth quarter. We also experienced slight seasonality in results due to 606 revenue recognition dynamics. Given this dynamic as it relates to profit margin, we believe our full year EBITDA margin guide better represents our overall operating profile than our fourth quarter guidance. We continue to expect strong ARR performance and adjusting for currency, our guided net new ARR dollar growth in the fourth quarter is slightly higher than our average quarterly year-to-date results. Also, while we are not giving guidance for 2026, we do want to provide some brief commentary on expectations. We remain committed to returning adjusted EBITDA margin to 30% in FY '26. That said, we remain focused on balancing profitability with growth. The AI wave is now and with structural advantages that position us favorably, we believe it's critical to invest appropriately to realize the opportunity at hand. With that in mind, for the fourth quarter of 2025, we expect total revenue in the range of $126.5 million to $127.5 million, representing approximately 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. We expect fourth quarter adjusted EBITDA in the range of $33.6 million to $34.6 million, representing an adjusted EBITDA margin of approximately 27%. For the full year 2025, we are raising our total revenue outlook to approximately $507.7 million to $508.7 million, representing approximately 9% year-over-year growth on a reported basis and 8% on a constant currency basis. We are raising our full year ARR outlook to $530 million to $531 million, representing 10% year-over-year growth or 8% on a constant currency basis. As a reminder, our full year ARR outlook is on a like-for-like basis as Adlumin was included in our year-end 2024 ARR. We are raising our adjusted EBITDA outlook and expect full year adjusted EBITDA of $148.2 million to $149.2 million, representing 29% adjusted EBITDA margin. We reiterate that we expect CapEx, which includes capitalized software development costs, will be approximately 6% of total revenue for 2025. We also expect our unlevered free cash flow to be in line with previous guidance of approximately $96 million to $98 million. We expect total weighted average diluted shares outstanding of approximately 188 million to 189 million for the fourth quarter and the full year. Finally, we expect our non-GAAP tax rate to be approximately 23% for the fourth quarter and 21% for the full year. Now I will turn it to John for closing remarks. John Pagliuca: Thank you, Tim. Cybersecurity is entering a transformative period, one that demands and become a core part of the company's overall business strategy. With our scale, platform breadth, and data ownership, we are positioned to excel in this new era. AI-driven threats demand AI-driven defense and enable us delivering the cyber resilience solutions that we believe will redefine the standard for small and mid-market businesses. And with that, operator, we will open the line for questions. Operator: [Operator Instructions]. The first question comes from Matt Hedberg of RBC Capital Markets. Unknown Analyst: It's [ Dan Bergstrom ] for Matt Hedberg. ARR revenue both accelerated quarter-over-quarter on a constant currency basis for several quarters now. Could you talk to some of the keys behind that building momentum? What's really been maybe the incremental the last several quarters? And then maybe with guidance for the fourth quarter here, the FX impact and Lumen anniversarying, I think it's the case, but should we still be thinking of more growth in the second half than the first half? Tim OBrien: Thanks for the question. Yes, as it relates to the acceleration that we've seen through the year, it really boils back to executing on, I would say, probably a couple of key components of the strategy. One, on executing around the thesis of the Albumin acquisition, one on cross-selling that into the base of customers that we have, as well as continuing to push that product through the mid-market via the channel partners that came along with that acquisition. And then two, broadening our channel presence as well via bringing on new disties and resellers to kind of access the mid-market with the broader portfolio as well. So we've been bearing fruit from both of those kind of strategic initiatives internally that have driven some of that acceleration that we've seen through the year. And then unpacking the Q4, so FX is weighing a bit into the equation. We still are expecting more growth in the second half of the year than the first half of the year. Q3 was our best quarter of the year from a sequential ARR growth, excluding any currency impact. We expect Q4 to be above average for the year as well. So we are expecting more ARR growth overall in the second half of the year than we are in the first half of the year for sure. That still holds, and that's what the guide reflects. Unknown Analyst: That's great and helpful. And then on NRR, trends up year-over-year, quarter-over-quarter, same as last quarter. So that was nice to see. Maybe talk to some of the trends around the metric there. How confident are you that maybe it bottomed in the first quarter there and could be building at this point? Tim OBrien: Yes. I would say confidence is high that it bottomed in the first quarter and has continued to build as we've gone through the year. I think that runs back to the execution that we've seen around the Adlumin acquisition and successfully being able to cross-sell that into our MSP customer base, and driving NRR up as well. Part of the NRR drive also is that GRR has been improving as we've gone through the year as well just from a gross retention standpoint, we've been making steady progress there as we've been going through calendar '25 here. We've been able to renew our longer-term contract at a rate around 90%. That's continued to progress and perform and start to contribute to the GRR story, which fuels NRR at the end of the day. So those are some of the key drivers. Trends have been positive on both fronts, as John spoke to. John Pagliuca: Yes. And XDR is still in early innings, right? So, our penetration rates have been climbing. But as we're really just beginning to get into our base and selling into that base, that's a nice ASP per device offering that is essential for more and more of these MSPs and mid-market businesses. So, as we continue to go into that base, that gives us some confidence that we should continue to see that expand part of the NRR continue to climb. And then looking forward, we have some nice add-ons as we go through both on our data protection part and other parts of the business that should lend itself to additional SKUs, and we've done a good job continuing to increase our revenue per device type of thing. So that's all, giving us confidence in a strong NRR as we look forward. Operator: The next question comes from Mike Cikos of Needham & Company. Matthew Calitri: This is Matt Calitri on for Mike Cikos over at Needham. Sticking on the ARR guidance, the sequential [indiscernible] on a constant currency basis that is implied here, how much of that is based off of lapping the [indiscernible] contribution compared to conservative or conservatism? And what other factors are you considering there? Tim OBrien: Yes. We quantified the impact of the Adlumin acquisition in the 4% to 5% range. So it's primarily all related to lapping the Adlumin acquisition. And just unpacking the sequential part of ARR growth for Q4 on the surface due to some FX dynamics, it's looking lower than in what it is ex currency. So, just additional color, there is that Q4 sequential growth from a guide perspective, ex currency, it would be about $10 million higher if you assume the same rates as Q3, just as an example. So Q3, if you look at some of the euro and pound rates, they were some of the highest they were in the month of September year-to-date. So that's most of the impact as it relates to Q4. Matthew Calitri: Very helpful. And great to see the launches of Cat-MIP and Anomaly Detection as a Service. Are these offerings that MSPs were specifically asking for? And do you view anomaly detection more as an upsell lever for existing Cove deployments or as a key piece to get customers over the finish line on the initial adoption? Tim OBrien: So both. And so the really cool part about the anomaly detection is it really helps us transition our Cove data protection to not just the recovery, but actually part of the detection spots, where we are reaching out to both MSPs and mid-market companies and actually detecting threats and breaches earlier than some of their MDR, XDR alerts have been, right? So often the threat after the bad guy will go after the backups. And if we see anything there, we put honeypots in. So if they're going after there or if there's any type of other anomaly, we're alerting the MSP or the internal IT department. So it's a great way for us to demonstrate higher value. It will help us with our win rate. It will help us get into even larger accounts, and we'll be able to monetize that directly. On Cat-MIP, not to be confused with Cat-MIP, this is really a standard, right? So the big thing here is that more and more of our customers are asking about our AI road map and our AI strategy. And so we're able to do a couple of things. We're able to demonstrate proof because a lot of our offerings, as we mentioned in the script, are AI-infused today, and that's why we're able to do these things at scale and democratize the technology that we have. But with Cat-MIP, we're really giving that confidence to the MSP that we're leading this wave, right? That creates a standard. So if you think about APIs or just to use the analogy of more of like a connector, it standardizes the connections, both for other vendors and for MSPs. So that now an MSP with an approved MCP agent, now it can connect to these servers in a way that's more secure, but it gains a lot more efficiency. So it's just another way that we're helping these MSPs drive the efficiency. And this just will begin to start the wave of both innovation, but also monetization for N-able and for the MSPs. Operator: The next question comes from [ Joe Vandrick ] of Scotiabank. Unknown Analyst: Maybe one for John and then one for Tim. John, it's been almost a year since the Adlumin acquisition. Can you talk a little bit about how that business is performing relative to your initial expectations? And then what are any key learnings about the market or the business that you've had after operating it for a year? John Pagliuca: Sure. So look, I'd say the acquisition thesis overall is very much holding true. It's -- the story is resonating with our MSPs with the small shops, with the large shops. And one, the fact that it's endpoint agnostic or just agnostic in general that it can ingest all of this different data from different firewalls, from different cloud offerings from different endpoints in EDRs, it really is a perfect fit in my estimation for the MSP community because we know they have a hybrid world. And so we're scaling this really nicely. As we mentioned, we're adding hundreds of end customers at the SMB level. And because of the AI technology, we're able to scale it and not necessarily have the same linear type of cost. So we're really -- I'm impressed with the level of scale that the offering has and the demand is here and now, right? This was very much a greenfield space for the broader MSP market, and that's turning over. MSPs know that they need to have this kind of technology. The very, very, very large shops might have the ability to go and build their own SOC, but that's for the far -- that's for the very few and very large. And so the story is resonating. It also gives us another way to cross-sell other bits, right? The fact that we can push and pull data from our UEM and Cove, we're now able to really convey a complete end-to-end cyber resiliency story. And that end-to-end complete cyber resiliency story, it's resonating with the MSPs. But frankly, it's resonating with our VARs as well, and we're building this VAR network. And a VAR might have an MDR shop or an XDR shop, a VAR might have a backup company, but we're right now the only shop that can actually go to a value-added reseller and walk them through the UEM, which is really a security endpoint management console, the Cove data protection on the backup and the recovery and XDR. And it's really resonating with the VARs because now they have a story to tell their mid-market, their CISOs and their CIOs. And so we're quite pleased with the acquisition. We're continuing to invest both in the R&D and the sales and marketing, and we're really excited for how this thing will continue to develop and be a bigger part of N-able. Unknown Analyst: That's super helpful. And Tim, one for you. I know 2025 has been somewhat of an investment year. It sounds like maybe a new priority is to invest a little bit more heavily in AI. So is that -- I guess, should we think about -- and you mentioned the commitment to 30% EBITDA margins in 2026. So should we think about those 30% EBITDA margins as a floor? And I guess, how are you thinking about the investment in AI? John Pagliuca: Yes. So this is John. I mean, look, so the -- we are investing in AI. And by the way, this is not new to N-able, right? We've been investing in machine learning for quite some time with generative AI and now with Agentic AI. So it's part of the mix, right? It's going to continue to shift to be a bigger part of the mix. But the interesting thing there, we mentioned a couple of quarters ago, we've been investing in lower-cost sites. We stood up a site in India earlier this year. This gives us the ability to add bandwidth and high-level skill with not the same level of cost. And so that was all part of the thinking. And so we mentioned the 30%. We always like to run the business rule of . We look at AI as a tremendous opportunity for us, not in the distant future, but more in the short term and midterm. And so we want to make sure that we're realizing that opportunity. we have this interesting competitive advantage in the fact that we have the data. And we have the data and these MSPs will look to us again to continue to be their control center. And the fact that we can now pull the data from our UEM, our data protection and XDR in an AI world, in an automated world where they can -- the MSPs themselves can build agents so that they can do their jobs more efficiently and more effectively, that's the opportunity we want to capture, and we're going to begin capturing it. And we have some waves. We'll be introducing Agentic agents inside of our products in the short term here, which will also help with the efficiency and then that will open up another avenue for monetization, both again for N-able and our customers. So I think 30% is a good number, and we'll continue to evaluate that as we go through. And we're also continuing to invest in go-to-market. And so the business will scale. Tim and I look at this on a quarterly basis. And I think 30% is a good number that as we scale, we should be able to drive more of an accretive profile as the business continues to scale. But our focus right now is to realize some of that opportunity that we believe is here and now. Operator: We currently have no further questions. So I'd like to hand back to John for any closing remarks. John Pagliuca: Thank you all for joining us today, and thank you for your ongoing interest in N-able. We'll see you in a quarter. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines.
Santiago Donato: Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the First Quarter 2026 Results Conference Call. First of all, I would like to remind you that both audio and a slideshow may be accessed through company's Investor Relations website at www.irsa.com.ar by clicking on the banner webcast link. The following presentation and the earnings release are also available for download on the company website. After management remarks there will be a question-and-answer session for analyst and investors. If you want to make a question, please use the chat. Before we begin, I would like to remind you that this call is being recorded, and the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's earnings release regarding forward-looking statements. I will now turn the call over to Mr. Matias Gaivironski, CFO. Matias Gaivironsky: Good morning, everybody. So we are starting the fiscal year 2026 with good results. We closed the quarter with a gain of ARS 163.4 million compared with a loss last year of ARS 143.6 million. That was mainly driven by the gain of fair value of our investment properties and also the good results from the rental segment. Regarding our malls, there was a growth in revenues and occupancy that we will see later, and despite the decline in tenant sales during the first quarter, that was 7% Third, there was a busy quarter regarding acquisitions. There was an acquisition of a new mall, Al Oeste Shopping mall in Haedo. We paid $9 million for that, and we will see later the details of the transaction. Also it was a stable quarter for rents and occupancy in our office portfolio and good progress in the ongoing developments, mainly Distrito Diagonal, the shopping mall in La Plata and Ramblas del Plata that Jorge will explain later. And also, we started the distribution of a new dividend that our shareholders meeting approved in October. So we started the distribution. It's a payment of around 10% of dividend yield. So with this, I would like to introduce Santiago Donato, our IRO, to continue the presentation. Santiago Donato: Thank you, Matias. Here, we move to the shopping mall segment. As we can see here, we increased the GLA on the year due to the acquisition of Terrazas de Mayo. And now we are going to add -- well, probably after the development that we have to do in Al Oeste, we are going to incorporate our 17th shopping mall. So we are growing and increasing the portfolio, reaching an occupancy of almost 98%. So very, very, very high levels of occupancy. Regarding the business, continues to be in a good phase. Revenues and EBITDA of the segment increased by 6% and 4%, respectively, despite this 7% decrease in the quarter -- in the first quarter of 2026 compared to the first quarter of 2025. And this is because we have most of our revenues linked to fixed structure. With the elections outcome, we are expecting more stability and continuity of this economic policy. So we expect consumer confidence to gradually improve as well as our activity in our malls. We are seeing a lot of more interest of international brands wanting to come to Argentina and to our malls. We have some of them already under construction works. So we think that the evolution of the economic activity and the consumption in Argentina should be positive and recover in the next -- in the upcoming quarters. This quarter was particularly weak in terms of sales due to the elections, the volatility and higher rates, and tighter monetary conditions due to all the electoral process. But now we have a clearer picture of the model and the conditions coming forward. Moving to next page, here we have the office segments. This is quite stable, no greater news. Stock still at the level of 58,000 square meters of GLA, mostly A+ and A. We have only one building, which is B category. And we are reconverting into the workplace by IRSA, another format and that targets start-ups and all the entrepreneur world. We are very happy with that performance of Philips building. But the rest are all A+ and A buildings, which are stable in rents in levels of $25 per square meter per month and reached again 100% occupancy. That's been in those levels top, say, for the last 4 quarters. Moving to hotels, our last rental segment, continue to show a decline in revenues and occupancy, consistent with the trend observed in the last year due to the appreciation of the FX of the peso compared to the dollar. Even though the last quarter, there was a real depreciation of the FX, it is too early to anticipate a sustained recovery in the hotels activity or business. And additionally, the hotel -- they show -- as you can see in the picture, reduced its occupancy from 67% last year to 52% due to a really weak winter period. There was no snow, and we have lower visits in our Llao Llao Hotel and in the city of Bariloche, in the Patagonia, Argentina. The average hotel portfolio is at 58% and the average rate per room at levels of $230 with slight lower margins in the segment. I will now turn the call to Jorge Cruces, our CIO, for all the real estate chapter. Jorge Cruces: Good morning. We are pleased to announce the acquisition of our 17th shopping mall, Al Oeste Shopping. It's located in Moron District, that's west Greater Buenos Aires. It has approximately 32,000 square meters of GLA, including 46 stores, food courts, 14 cinema screens, 5 padel courts and over a 1,000 parking spaces. Purchase price is $9 million, of which $4.5 million has already been paid, while the remaining balance will be settled in 4 annual installments. Currently, the mall is operating way below its full potential. As part of our strategic development plan for the province of Buenos Aires, we intend to reposition the asset as an outlet center and relaunch it throughout next year. The first phase of the transformation will focus on the 20,000 square meters of GLA of the ground floor. We're planning to invest approximately $7 million in this stage, while the remaining area will be developed in a later phase. With this acquisition, the company's shopping mall portfolio now reaches 390,000 square meters of GLA. Southeast of Buenos Aires in the city of La Plata, we are making great progress on our upcoming 18th shopping center, Distrito Diagonal. This new development will add 22,000 square meters of GLA to our shopping portfolio, strengthening even further our presence in strategic urban locations. The mall's opening is estimated for May 2027. The growth projected in the coming years totals over 458,000 square meters of GLA, representing an expansion of our portfolio of more than 1/3 altogether. We have acquired through an auction what used to be the Israelita Hospital, an emblematic property located in the neighborhood of Flores in the city of Buenos Aires. We intend to reverse this iconic property into a mixed-use concept. The land plot has around 8,850 square meters and an existing built area of approximately 17,000 square meters. The purchase price was $6.8 million, which has been fully paid. In Uruguay, at the Distrito Calcagno, a new land-swap agreement was signed last week for $9.3 million. Casa FOA is being held in Uruguay for the first time ever. Casa FOA is an annual exhibition of architecture and interior design, and it's being held in the Distrito Calcagno. The opening event was attended by the President of Uruguay, the Mayor of Canelones, and Mr. Eduardo Elsztain. We believe this exposure could be a gamechanger for the Distrito Calcagno. Ramblas del Plata. We decided to expand the initial sales stage, so 20 lots are now being commercialized. That's around 164 sellable square meters. To date, we've sold 2 lots and swapped another 11 and the combined value of these deals stands at $81 million, covering 110 sellable square meters to be developed. Regarding construction works, the overall progress of Phase A currently stands at 15%. Construction is advancing according to schedule with the execution of road works, sewers, drainages and the recovery of the water body of central bay. We are undergoing the environmental review and expect to schedule the public hearing for the second phase by the end of this year. Now I'll give back the floor to our CFO, Mr. Matias Gaivironski. Thank you. Matias Gaivironsky: Thank you, Jorge. So going to Page 12, we can see what happened with the evolution of the FX and inflation that has an impact in our numbers. So this quarter was higher devaluation than inflation, because of the opposite of what happened last year. That generates a positive result for our investment properties that I will explain in the next pages. About our adjusted EBITDA, we see a decline in the total number of 7.5%. The rental segment are increasing by 3.5%, 4% is in shopping malls, 16% is in the offices. This is mainly related to higher occupancy and when we convert the number -- the dollar numbers into pesos with a higher devaluation than inflation, we have better numbers in pesos terms and the decline of 22% in the hotels that Santi explained before. In terms of margins, we maintain probably similar margins than last year. In the following page, we can see the big difference in the change in the fair value of our investment properties. That is the valuation in pesos term. When we value in dollar terms, all the portfolio, the numbers are exactly the same. So this is more related to converting those dollars into pesos and adjusted by inflation that this generate this big difference. But in real or in dollar terms, that is the way that we -- all real estate in Argentina is valued, that numbers remain stable. So finally, the last 2 numbers that affect the net income line are the net financial results that here we can see a decline in the numbers. This is related to the devaluation, the real devaluation, we have to convert into pesos, all our dollar-denominated debt. So that generates a loss this quarter compared with a gain last year that because it was an appreciation of the peso. So this is the most important part of the net financial results. In terms of the interest paid, we have a little decrease compared with the previous year. About the income tax, here, we are recognizing the deferred tax that is -- that we have to recognize every time that we have an appreciation of the fair value of the investment properties, we have to adjust the deferred tax by the 35% of what was the increase in the value. Last year, we have the opposite. Every time that you have a decrease on impairment in the investment properties, you recognize a gain in the income tax. So with those drivers, we finished the quarter with a ARS 163 billion gain compared with the loss last year of ARS 139.2 billion. The next page, when we see the numbers in dollar terms, this is the evolution of the rental EBITDA. We finished the quarter with $51 million. So if we multiply this by 4, it's not the way that we -- that it works, but that gives you an idea of where we will be for the fiscal year 2026. So finally, on Page 17, the evolution of our net debt. There was no news in terms of our debt. The only news is related to the dividend payment. So the net debt increased a little because of the distribution. Here, we included on a pro forma basis after the dividend distribution. So net debt today stands at $308 million, that is 1.6x EBITDA, less than 9% in LTV and more than 11x coverage ratio. So still very conservative our debt position, even after paying this dividend that we can see in the next page. So there was a distribution of ARS 173.8 million. That is roughly the blue chip swap today, $116 million with a dividend yield of 10%. We started the payment or we paid in the local market on November 4. And for our GDS holders will take some days. So probably we will have the record date established probably in the next, I would say, 5 to 7 days. So, with this, we finished the formal presentation. Now we open the line to receive your questions. Santiago Donato: Well, now it's time for the Q&A session. If you have a question, please use the chat. We're going to take the questions in the order we receive them. Here we have the first questions. If the company is entering a period of higher investment, higher CapEx, why was it decided to distribute such a large dividend? Has something changed? Matias Gaivironsky: Good question. Well, first of all, we are not changing the strategy. It's true that compared with the previous year, it's starting to accelerate the process of new investment acquisition development. So we, probably for the next year, we have a CapEx of around $75 million that we plan to spend. So this is without any new acquisition. But the company has a strong cash generation. Today, we are generating like $180 million or $190 million of cash. And our debt was too low. So the company will start to pay taxes this year again. We used to have a tax credit for many years. So now we will start to pay taxes again. And it's not the most efficient capital structure to have that low leverage. So for that reason, we had before the payment, a cash position very strong. So after paying this $120 million of dividends, we still have $180 million of cash. So we feel comfortable that with that $180 million plus the cash generation of every year, we have enough money to finance the projects. So we still feel very, very comfortable with the debt structure and the capital structure. If we need to finance new acquisitions, we will see the way to finance, but with the cash position that we have that give us a lot of room to keep doing things in Argentina. Santiago Donato: Here, I have a second questions related to Ramblas del Plata. What are the medium-term time lines for the projects? When will the construction of the first buildings begin? When is the park's construction expected to be completed? Jorge Cruces: Well, we have 3 stages in Ramblas. As I said before, part of the second stage is becoming like part of the first stage. The first stage is bigger than before. But then again, we do -- we still have 3 phases, and we're working on the first phase. That first phase of infrastructure we'll be finishing most of it for next year. That's when we have to give the plots to the developers who are going to be making those buildings, and they're going to be starting next year. And these phases also has to do with the parks. Every time we finish the phase, we're going to be finishing that part of the park also. So answering the question, we will be finishing Phase 1 next year, and that's when the first of the buildings are going to be beginning its construction. Santiago Donato: Thank you. Here, I have another one related to the exercise of the warrants of Cresud and [ Alto ], here we are in IRSA, Matias can explain both. If we're going to update the ratios after the dividend, I think has to do with that. Matias Gaivironsky: Its related to dividends, the question? Santiago Donato: No, to warrants, but if we're going to -- Matias Gaivironsky: The cost of the dividend. Santiago Donato: Yeah, I imagine we're going to -- Matias Gaivironsky: Okay. Yes. As you know, the warrants outstanding has a clause that every time that we pay dividends, we have to adjust the strike price and the ratio of that warrant. So yes, probably in the next days, we will announce the new ratios. The next window to exercise the warrant is next week, so before that. Santiago Donato: 2017 to '25 of -- Matias Gaivironsky: Before that we will announce the ratios. Santiago Donato: We give some more minutes if there is any additional questions, you can use the chat. Okay. With this, we can conclude the presentation and the Q&A. I will now turn the call to Matias Gaivironski for his closing remarks. Matias Gaivironsky: Thank you, Santi. So, we are starting this year with a lot of optimism. The last quarter was a little volatile because of all the political environment and noise because of the elections. Now that it is much more clear the direction of Argentina, at least for the next years, so we see that with a lot of optimism. So we hope to see much more normal environment and much easier to take decisions for many, many companies in Argentina. So we see that with a lot of optimism. And about our plans, we will continue with all our development projects and Ramblas del Plata, the commercialization. So we are very optimistic about just -- to show more transactions in the coming months. And regarding consumption and the operation of our malls, we expect with more confidence from the people, our malls will keep receiving all the consumption and flow of people inside of our shopping malls. So with this, we finished the presentation. We hope to see you in the next quarter. Thank you very much. Have a nice day. Bye-bye. Jorge Cruces: Bye-bye.
Operator: Hello, and welcome to Clear Channel Outdoor Holdings, Inc. Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Also, as a reminder, this conference call is being recorded today. If you have any objections, please disconnect at this time. It's now my pleasure to turn the call over to Laura Kiernan, VP of Investor Relations. Laura, please go ahead. Laura Kiernan: Good morning, and thank you for joining our call. On the call today are Scott Wells, our CEO; and David Sailer, our CFO. They will provide an overview of the third quarter 2025 operating performance of Clear Channel Outdoor Holdings, Inc. We recommend that you download the third quarter 2025 earnings presentation located in the Financial Information section of our Investor Relations website and review the presentation during this call. After an introduction and review of our results, we will open the line for questions. Before we begin, I would like to remind everyone that during this call, we will make forward-looking statements regarding the company, including statements about its future financial performance and its strategic goals. All forward-looking statements involve risks and uncertainties, and there can be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations. Please review the statements of risk contained in our earnings press release and on our filings with the SEC. During today's call, we will also refer to certain measures that do not conform to generally accepted accounting principles. We provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of the earnings presentation. When reviewing the earnings presentation, it is important to reiterate that all European and Latin American operations are reported as discontinued operations for all periods presented. This includes our current business in Spain, our former business in Brazil, which was sold on October 1, our former businesses in Mexico, Chile and Peru, which were sold on February 5; and our former Europe North segment, which was sold on March 31. Our reported consolidated results include the America and Airport segments and Singapore. Also, please note that the information provided on this call speaks only to management's views as of today, November 6, 2025, and may no longer be accurate at the time of replay. Please see Slide 4 in the earnings presentation, and I will now turn the call over to Scott. Scott Wells: Good morning, everyone, and thank you for taking the time to join us today. Many thanks to those of you who were able to participate in our Investor Day in September. We hope you came away with a clear understanding of our vision, strategy and financial goals as we center all our efforts on accelerating our revenue growth in the U.S., increasing our cash generation and reducing debt. Turning to our results. On a consolidated basis, we generated revenue of $405.6 million, representing a year-over-year increase of 8.1%. This was driven by record third quarter revenue levels in both segments. Our Americas segment grew 5.9% with our 18th consecutive quarter of year-over-year local revenue growth, and Airports delivered another great quarter with 16.1% year-over-year revenue growth. We saw growth in key markets, including New York and San Francisco, in national and local sales channels and in digital and programmatic sales. Categories that continue to perform well across the company include banking, legal services and technology, including AI. We remain on track to achieve our financial guidance for the year as we benefit from our focus on customer centricity, accelerating technology capabilities and sales execution and further strengthening our balance sheet. Our transition into a U.S.-focused company has improved our risk profile while allowing us to focus our management team on a range of initiatives to drive more business across our platform while pursuing operating efficiencies through our zero-based budgeting effort. In addition to our financial results, we announced some important milestones during and shortly after the third quarter as we continue simplifying and derisking our company. On September 7, we entered into an agreement to sell our business in Spain to Atres Media for approximately $135 million. On October 1, we closed the sale of our business in Brazil for $15 million. Once the Spanish sale closes, we will have completed international divestitures worth nearly $900 million. We also continue to derisk our capital structure and extend our debt maturity profile with the August debt refinancing. We continue to strategically reinvest in our business and our digital conversion plan remains key as we leverage our reach, data analytics capabilities and verticalized sales teams to expand our presence in the broader advertising market and gain share. Last quarter, I spoke about the success we were having with pharma driven by our advances in technology, analytics and our go-to-market strategy. This quarter, I would like to share another example of how we are leveraging the power of our out-of-home scale to serve brands in major cities like New York with global events like the recent U.S. Open tennis tournament. For this year's tournament, we executed multiple campaigns for national advertisers looking to connect with the massive and highly attractive audience attending the U.S. Open. We delivered an unmatched advertising platform covering thousands of tennis fans throughout their journey from our inventory in the New York airports as they arrived to our newly expanded New York roadside inventory as they travel to and from the city and finally, through our high-profile inventory in and around city field, adjacent to the U.S. open venue. Our business is increasingly surrounding live events with powerful advertising displays in dynamic and integrated ways. This is also a great example of how we're performing on our expanded New York inventory, and I'm pleased to announce that we're ahead of our internal projections for these assets. They are on track to be cash flow positive in year 1. We've lapped the fixed cost site lease headwind and expect to see accelerating growth as we've now fully incorporated them into our network. Diving deeper into our airports platform to show the power of our inventory, a recent study by Nielsen Scarborough found that airports media is the perfect canvas on which to tell a brand story. According to the study, among frequent flyers who noticed airport advertising, 82% read the ads, 61% recalled seeing them and 57% took action after viewing an ad, a clear demonstration of the impact of this medium. Additionally, the study shows that experiential marketing works well in airport settings and in-person brand experiences are highly appealing with 89% of frequent flyers wanting to sample food or beverages and 62% interested in trying new products they had seen advertised in airports. As we execute on our revenue-driving initiatives, we are also on track to deliver a further reduction in our corporate costs. This is enabled by a combination of direct savings related to the sale of our international businesses as well as the additional efficiency opportunities stemming from our zero-based budgeting efforts, as I previously noted. We are on track to deliver the $50 million in corporate cost savings announced during our Investor Day. To sum it up, our business remains healthy in the fourth quarter, and we are on track to deliver on our financial guidance for the year. We now have 90% of our Q4 revenue guidance under contract and our business pipeline remains strong. In addition, we remain on track in pursuing the multiyear goals we discussed at Investor Day of 6% to 8% adjusted EBITDA growth, $200 million in AFFO and net leverage of 7 to 8x by the end of 2028. So the future looks bright for our company as we actively pursue what we believe is a substantial opportunity to unlock shareholder value as a U.S. focused organization and leader in our space. And with that, I will turn the call over to Dave for the financial review. David Sailer: Thanks, Scott. On to Slide 5 for an overview of our results. The amounts I refer to are for the third quarter of 2025 and the percent changes are the third quarter 2025 compared to the third quarter of 2024, unless otherwise noted. Our results this quarter continued the steady trend we've seen all year with solid revenue growth and strong liquidity, positioning us well to achieve our year-end guidance. Consolidated revenue for the quarter was $405.6 million, an 8.1% increase, in line with our guidance. The increase was driven in part by strong digital revenue and growth across all sales channels. Adjusted EBITDA for the quarter was $132.5 million, up 9.5% and AFFO was $30.5 million, up 62.5%, both within our expectations. On to Slide 6 for the Americas segment third quarter results. America revenue was $310 million, up 5.9%, in line with guidance. The increase reflected growth across both print and digital revenue with continued benefit from the MTA Roadside billboard contract and improvements in the San Francisco Bay Area. Mobile sales were up 5.7% and national sales were up 6.1% on a comparable basis. Segment adjusted EBITDA was $133.4 million, up 3.9% with a segment adjusted EBITDA margin of 43.1%. Please see Slide 7 for a review of the third quarter results for Airports. Airports delivered another great quarter with revenue of $95.6 million, up 16.1%, in line with guidance. The increase was driven by digital revenue up 37.4% and strong performance in national sales, which grew 25.2%. Mobile sales were up 3% on a comparable basis. Segment adjusted EBITDA was $21.9 million, up 29.2% with a segment adjusted EBITDA margin of 22.9%. Moving on to Slide 8. CapEx totaled $13.2 million in the third quarter, down 25.9%, driven by lower digital spend and reduced contractual spend on shelters. Now on to Slide 9. We ended the quarter with liquidity of $366 million, which includes $155 million of cash and $211 million available under the revolvers. Following the amendments of our revolving credit facilities in the second quarter, which extended maturities through June 2030, we completed a $2.05 billion senior secured note offering in August, refinancing $2 billion of existing notes and increasing our weighted average time to maturity to 4.8 years at the time of the refinancing. Through this refinancing and our second quarter debt buybacks, we have maintained essentially flat annualized cash interest, and this does not include interest savings of approximately $28 million from the prepayment of the CCIBV term loans. Now on to Slide 10 and our guidance for the fourth quarter and full year of 2025. For the fourth quarter, we expect consolidated revenue to be within $441 million to $456 million, representing a 3% to 7% increase over the same period in the prior year. We expect America revenue to be within $322 million to $332 million, representing a 4% to 7% increase over the same period in the prior year and Airports revenue to be within $119 million to $124 million, representing a 3% to 7% increase over the same period in the prior year. Given our year-to-date performance and our outlook for the fourth quarter, we've tightened our consolidated full year revenue guidance range. We now expect consolidated revenue to be within $1.584 billion to $1.599 billion for the year, representing a 5% to 6% increase over the prior year. We continue to expect full year adjusted EBITDA to be within $490 million to $505 million, up 3% to 6% from last year, and we now expect full year AFFO to be within $85 million to $95 million, up 45% to 62% from last year. And we continue to expect full year CapEx to be within $60 million to $70 million. And following our recent capital markets transactions, we continue to anticipate future annualized cash interest of approximately $390 million, assuming no additional activity. As we discussed during Investor Day, we are powering our cash flow flywheel, including growing revenue, expanding margins, increasing AFFO and reducing debt. Through this meaningful debt reduction, we are actively converting enterprise value from debt to equity. And now let me turn the call back to Scott before we take your questions. Scott Wells: Thanks, Dave. To summarize, we believe we are at a pivotal moment with industry trends in our favor, irreplaceable premium inventory and strong digital capabilities that together create real growth opportunities. The disruption in search and linear TV ad markets makes this the most exciting ad market in which we've operated. As the last mass visual medium with increasing analytic firepower, our industry is poised to gain share if we do the things we need to do. I believe we are doing those things and excited about the opportunities that lie ahead. To that end, I want to thank our company-wide team for their continued dedication and hard work as we pursue this great opportunity. We are confident in our ability to achieve our near-term guidance and long-term goals, including sustainable top line growth, expanded margins and meaningful deleveraging in line with what we discussed on our Investor Day. For those of you who don't recall, we described adjusted EBITDA growth of approximately $115 million by year-end 2028 and applied our then current multiple, yielding value creation of roughly $1.3 billion. We added to that further debt paydown of about $400 million in the same time frame. Taken together, we see this as an opportunity for value creation of approximately $1.7 billion for shareholders based on the plan we laid out with further upside if we realize some of the discontinuities we discussed or see improvement in our valuation multiple. With a streamlined business and a growing digital portfolio, we expect to enter 2026 from a position of strength. And now we welcome your questions. Operator? Operator: [Operator Instructions] Our first question is from Aaron Watts from Deutsche Bank. Aaron Watts: A couple of questions for me. I wanted to start with one on the ad environment for both the billboard and airports unit. Can you provide a bit more detail around how advertiser behavior to close out the year is setting the stage for early '26? And I know we've all been waiting for some stronger tailwinds from the ad market. Curious if you feel that momentum building. Scott Wells: Thanks, Aaron. This is always a tough question to answer from our little quarter of the world. But we really like what we're seeing in the marketplace right now. The year has built how we expected it would. And if you go back to our earlier earnings calls, we sort of described how we thought it would build, and it very much has had momentum build. And has had good strength. We've seen it both in local and in national and probably relative to kind of prior quarters in our book, national has probably been better than what it has been in the last couple of years, and we see that continuing into 2026. I don't know how much I generalize that to the total ad market because I don't have visibility. And I do think the things we called out on Investor Day around disruption in search and disruption in linear TV are providing us some tailwinds. We certainly are hearing from advertisers that we're picking up some share as a result of those disruptions. Aaron Watts: Okay. That's helpful. And then if I could ask one more. There was a report about interest in the company from a third party. We've also seen public comments from your shareholders encouraging consideration of strategic alternatives. Can you provide us with an update on where all that stands? And has any of this changed how you and the Board are thinking about the strategic future of the company? Scott Wells: Aaron, we're a public company. You know the rules on this as well as I do. So I'm not going to be able to comment on market speculation. Aaron Watts: Okay. Fair enough. If I could squeeze one last one in, maybe for Dave. You ended third quarter with around $150 million of cash held in the U.S., assuming Spain closes as expected, you'll have further liquidity coming in. Remind us what minimum amount of cash you would like to keep on hand day-to-day and how you're thinking about priorities for allocation of that excess cash above the minimum over the near-term horizon. David Sailer: Sure. Thanks for the question. Look, now that we're a U.S. focused business, I've mentioned this in the past. We're probably targeting between $50 million and $75 million of a minimum amount of cash. I think, allows us to weather the seasonality of our business. We have stronger cash generation in the second half of the year. But we're looking to deploy cash in a disciplined way, prioritizing our near-term debt as we look forward. But prioritizing the paydown of debt, as we mentioned before, is a priority for the business, in addition to obviously investing in the business as well. Operator: Our next question is from David Karnovsky from JPMorgan. David Karnovsky: Scott, you noted in the release strength in the Northern California market for billboard and airport. I was hoping to just drill in more. Maybe you could speak to what's improved, where you're seeing that incremental demand? And then just as a follow-up, just with the government shutdown, any impact here either due to government as a category or maybe looking ahead, just the potential for air traffic reductions and what that could mean to the airports business? Scott Wells: Sure. Thanks, David. On NORCAL, there are a few things that have been going San Francisco's way of late. And I think number one is that the city reputation has bounced back, and that has caused broader advertiser interest in the market. A couple of years ago, we suffered as the kind of reputation of where San Francisco was degraded. We're now benefiting from a lot of changes that the city has made cleaning itself up and making progress, and that has helped. I think the second thing and from a dollar level, this might actually be bigger, but it's just kind of one vertical, but it's the tech vertical and specifically AI has been absolutely focused on out-of-home as a vehicle to promote the companies that are emerging in that space, both the big ones and smaller ones. So whenever you have a geographic area with finite inventory where there's a lot of competition to get the word out, that is good. We are a supply and demand business, and this is something that we're benefiting from both in the road side and in airports. So we're very happy about the direction San Francisco is moving in right now. On your second point about government shutdowns, we have not seen anything disrupting things to date. Obviously, we are watching it very closely, but we really have not seen a drop in air traffic. The delays have been episodic and around the system, but have not, at this point, driven any dialogue. So, really nothing to report on that. Probably for us, the government shutdown impacts us more in our Washington, Baltimore market, where just that is not an area that advertisers are necessarily prioritizing much because commercial activity is somewhat diminished in that area. But honestly, it's not enough for us to see in the numbers at this point. Anyway, I'm just saying that, that would be more where I would look at our portfolio for an impact of it. Operator: Our next question is from Lance Vitanza from TD Cowen. Lance Vitanza: Nice job on the quarter. On the Americas, you mentioned strength in San Francisco and New York, but not in L.A. And I'm wondering if you could give an update on the prospects for, I guess, entertainment as a national category, but also L.A. as a local market. And then actually, I'll just throw in auto insurance as a national category, too. I'd be curious to know how those 3 are shaping up. Scott Wells: Great. Okay. Lance, that's a broad field. Let me deal with L.A. first. We'll come back to insurance. This has been a tough year in L.A. starting with the fires in January and all of the movement in the entertainment space. Entertainment is being cultivated by lots of different cities around the country and around the world, frankly, for production. And I think we've all seen the articles exploring how entertainment is "moving out of L.Aâ€. I think L.A. would still very much assert itself as the entertainment capital of the world. But that obviously is something that is coveted and that other people are impacting. And we have not seen the entertainment vertical. It's been kind of a laggard all year for us. I don't think that makes us think that that's a permanent condition, but L.A. is going through a phase like many cities go through. I mean we just talked about San Francisco with David a minute ago. The outlook in 2023 was very bleak. And here we are 2 years later, and it's a shining star. And I think I'm a big believer in L.A. I'm a big believer in L.A. bouncing itself back. And as the entertainment industry evolves and as the rebuilding starts to take hold, which has taken longer, I think, than any of us would have hoped, I think you're going to see L.A. reassert itself and get itself moving in the right direction again. I do have a lot of faith that Los Angelinos are going to burnish their city and get it moving in the right direction. But it has been a laggard for us this year. We're looking forward to talking about its renaissance though soon. In auto insurance, that's a brighter picture. That market, and you and I have talked about this a lot in the last couple of years. They were a really big category for us pre-COVID. Post-COVID, they had shrunk quite a lot. And we're seeing auto insurance come back and the activity that I'm seeing heading into 2026 makes me feel like this is going to have some durability. So I'm hopeful that we'll be talking about auto insurance as a success story for us here over the next couple of years. It's moved in the right direction. It will be a grower for us this year, but I think there's still plenty of upside to that vertical for us. Lance Vitanza: If I could pivot to New York, and you've talked a bit about that in the prepared remarks, but I'm concerned about New York City going forward and perhaps falling into a sort of a San Francisco style slide. And so I'm just wondering if you could just clarify relative to, I guess, OUTFRONT is really the big competitor. Are you more or less exposed to the New York City marketplace in terms of like revenue contribution relative to other areas? Scott Wells: So I don't know their numbers off the top of my head, but I would guess that they are more exposed than we because MTA Subway is a bigger contract than the Port Authority and airports, and they probably have, of the other assets sprinkling around probably somewhat more. But you need to talk to them about what percentage of their revenue it is. For us, it's an increased percentage as a result of the roadside contract MTA that we picked up a year ago. But we very much believe that New Yorkers have grit and that they're going to navigate the uncertainty that the most recent election lays out just fine. So we feel good about New York. We feel good about New York as a cultural and commercial center for the country and for, frankly, the world. So I appreciate your concern, but we feel good about New York's prospects. Lance Vitanza: One last one, if I could, regarding the Spain sale. If I recall, this is your second attempt at selling the asset. And so I'm wondering if there's anything in particular that makes you more comfortable that this transaction ultimately gets approved, whereas the last one, if I recall, got blown up by the regulators. Scott Wells: Your recollection is correct. The first attempted sale was to a direct competitor in the marketplace. This sale is to someone who does not participate in the out-of-home space. They are a media company, but they don't participate in out-of-home. It's in the regulators' hands, Lance, but I can assure you, we did a lot of diligence on that as we were evaluating the process, and we're hopeful that this will be something that is acceptable to the regulator. Operator: Our next question is from [ Avi ] Steiner from JPMorgan. Avi Steiner: A fair bit has already been asked. Maybe 1 or 2 things here. Political was a minor bump in the past from a revenue perspective, but I couldn't help notice more political advertising on billboards, at least on my commute than in recent memory, both from candidates and also new prediction market betting sites. And I was wondering if, a, that was helpful at all into the November election. I'm not looking for specific guidance. And is that potential upside as you kind of think into next year? Scott Wells: Thanks, Avi. And I appreciate that you're noting billboards and other outdoor advertising on your commute. You're like many of the commuters out there. We -- political is down this year as a result of a presidential year. So to your specific question, it was not a contributor, particularly to our Q3 results. I do think we have been working as have our competitors for years to get political campaigns to use out-of-home more. The U.S. is probably uniquely for our -- particularly state and federal elections, a smaller user of out-of-home than other geographies around the world, which it should not be. That doesn't make a lot of sense. Politicians, the world overuse out-of-home with a lot of success and U.S. politicians take a page out of that playbook. So that's my advertisement. But look, I think that 2026 it won't be like a presidential year, but I do think that there's some prospect of some uplift from it, not something that I think is going to make or break our year, but this is a category we'd like to see spend more with us. Avi Steiner: Great. And one last one for me. This was a slower tuck-in acquisition year for, I would say, most of the industry. And as you look into '26, do you think there might be more opportunities to kind of, at the margin, bolster the portfolio? And if so, I'm curious where you think seller expectations might be among maybe the smaller operators. Scott Wells: Thanks, Avi. Yes, look, expectations are always high among the smaller operators on what payment is due and things like that. It's always hard to call what the macro M&A market is going to be like. Obviously, our participation in that market is always pretty limited just given our balance sheet. We are very targeted. Obviously, one of the things we have talked about in our creative commercial solutions is partnering with the people to be able to do some of that, and that may be something that changes our participation in it. But I think with M&A in this space, it's a question of the operators being comfortable that they're selling into a good environment. And I think the environment is solid. So it was a quiet year in 2025, but I would not be surprised if we saw a little bit more activity I don't think that we've had an environment that people's expectations should be wildly out of the realm, but that's probably a positive in terms of being likely to get activity done, but don't really have a deeply informed view of that. Operator: Our next question is from Daniel Osley from Wells Fargo. Daniel Osley: So you recently launched your new in-campaign measurement solution and some of your peers have also released new measurement tools as well. So taking a step back, can you speak to the progress you're seeing in addressing out-of-home's historical measurement challenges? Any early feedback you've gotten from advertisers? And are there any updates on GeoPath? Scott Wells: Great. Thanks, Daniel, and thanks for noticing all of the activity and measurement in our space. I think it's exciting and it's a positive for the industry. On the in-flight insights to which you refer, feedback from advertisers has been positive. We've sold a number of campaigns with it, and it's definitely driving a lot of dialogue right now. So I'm optimistic that, that's going to be something that's a good tool in our toolbox. To your broader question about GeoPath, there is an industry effort going on where the Boards of the [ OAAA ] and Geopath have brought in an industry expert to help us develop a viewpoint on what next-generation outdoor measurement should be. And that effort is ongoing. It's going smoothly. It's in the stage now where vendors are being solicited and an architecture is being framed out. And I would expect that's something that Q1 of next year, we're going to get to a point where we have a sense of what investment is required and we can have the industry conversation about how we actually make that happen. It's not at a point that we can say it's going to happen in exactly one form or another, but I'm encouraged by the enthusiasm every part of the out-of-home community has, the buy side and the sell side for taking a hard look at this. I think everybody recognizes that a better quality currency that everybody can be very, very confident in would be a positive development. Daniel Osley: That's helpful. And as a quick follow-up, to the extent that you've started conversations with advertisers on term renewals, can you speak to how those conversations are going and how any price increases are coming in compared to prior years? Scott Wells: Great. Yes. No, thanks, Daniel. You remember our calendar well. For other folks, we always talk about our upfront, our version of an upfront happening kind of between October and February. So we're kind of a quarter of a way in-ish to the time frame on that. And we're encouraged. The early dialogue has been positive. We're seeing solid increases as we do the renewals and there are definitely some very positive developments in terms of people looking to expand their footprint. So touch wood, it's off to a good start, Daniel. Operator: Our final question is from Pat Sholl from Barrington Research. Patrick Sholl: With the CapEx guidance that you provided, to the extent that we get, I guess, a favorable resolution of the tariff issue, would you look to accelerate that in the coming years? Scott Wells: Look, from a tariff standpoint, there's been a little bit of an effect from a company standpoint. We're seeing an increase in steel. But overall, that really has not had really any impact from a CapEx standpoint and what we're going to invest in the business. You probably noticed our CapEx was down in the third quarter, and that's really more on timing of when we're putting digital in the ground. So not really a huge impact. We also had some shelter that we had to do last year, which we did not this year, which is really driving CapEx being down year-over-year. Airports is pretty consistent year-over-year third quarter last year to this year. But overall, going back from a tariff standpoint, I think the team, we've managed that pretty well. We'll see where that goes into next year, but that really hasn't been part of the decision-making process from a CapEx standpoint. Patrick Sholl: Okay. And then I guess with the sales process in Brazil largely, all the international markets largely complete, do you have like an update on just like the expense reduction expectations for on the corporate side or like any additional cost takeouts on that? Or is that largely complete? Scott Wells: No. It's very similar to what we talked about during Investor Day when we were a global company with all our business units in Europe and Latin America and the U.S., we had corporate expenses roughly in the $135 million range. We mentioned on Investor Day, we went through the process that we're going to take $50 million of cost out, which would leave you in the mid-80s range from a corporate expense standpoint. During that call, we had line of sight to roughly $40 million of that $50 million. We're working on that, and we'll get to that run rate sometime in 2026. So I think that's all on track from that standpoint. very similar to what we talked about during Investor Day. Operator: There are no more questions. So I'll now turn the call back over to Scott Wells for any closing remarks. Scott Wells: Thank you. And I'd like to thank all of our listeners again for taking the time to listen to our call. Like we said before, this is an exciting time in our industry and for our company. I wanted to end by reiterating what we've tried to make clear in each of our investor updates. Our Board, consistent with its fiduciary duties, is open to all avenues to create long-term shareholder value. The Board and company are actively working with advisers to evaluate a range of available pathways to do so. We can't guarantee that any particular outcome will be achieved, and we plan to make an update only if and when there's something concrete to report. But make no mistake, this is an effort about which the Board is very serious. Thanks again for joining our call.
Operator: Welcome to MACOM's Fourth Fiscal Quarter 2025 Conference Call. This call is being recorded today, Thursday, November 6, 2025. [Operator Instructions] I will now turn the call over to Mr. Steve Ferranti, MACOM's Vice President of Corporate Development and Investor Relations. Mr. Ferranti, please go ahead. Stephen Ferranti: Thank you, Olivia. Good morning, and welcome to our call today to discuss MACOM's fourth quarter and year-end financial results for fiscal year 2025. I would like to remind everyone that our discussion today will contain forward-looking statements, which are subject to certain risks and uncertainties as defined in the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. For a more detailed discussion of the risks and uncertainties that could result in those differences, we refer you to MACOM's filings with the SEC. Management's statements during this call will also include discussion of certain adjusted non-GAAP financial information. A reconciliation of GAAP to adjusted non-GAAP results is provided in the company's press release and related Form 8-K, which was filed with the SEC today. With that, I'll turn over the call to Steve Daly, President and CEO of MACOM. Stephen Daly: Thank you, and good morning. I will begin today's call with a general company update. After that, Jack Kober, our Chief Financial Officer, will review our Q4 and full year results for fiscal 2025. When Jack is finished, I will provide revenue and earnings guidance for the first quarter of fiscal 2026, and then we will be happy to take some questions. Revenue for the fourth quarter of fiscal 2025 was $261.2 million and adjusted EPS was $0.94 per diluted share. For the full year, FY '25 revenue was $967 million, more than a 32% increase year-over-year, and EPS was $3.47, more than a 35% increase year-over-year. We generated $193 million in free cash flow, and we finished the year with approximately $786 million in cash and short-term investments on our balance sheet. Q4 book-to-bill ratio was just over 1.0:1. In our turns business, or orders booked and shipped within the quarter was 14.5% of total revenue. For the full fiscal year 2025, our book-to-bill was 1.1:1, and our current backlog remains at a record level. Turning to our recent booking trends and end markets. Q4 revenue performance by end market was as expected, with Industrial & Defense at $115.6 million, Telecom at $66 million and Data Center at $79.6 million. For the quarter, I&D was up approximately 7% sequentially. Data Center was up approximately 5% sequentially and Telecom was slightly down sequentially. Both I&D and Data Center revenues were annual and quarterly records. A few years ago, we set a goal to achieve $1 billion in annual revenues, and I'm pleased to report that with our Q1 '26 guidance, we expect to achieve this goal based on trailing 12-month performance. Congratulations to all our employees as we near this milestone and more importantly, for building upon our strong foundation to enable continued growth and improved profitability. New products are the lifeblood of future growth. In FY '25, we launched over 200 new products, which was a record. In addition, we executed numerous custom design projects across our 3 core markets. Our ability to provide competitive new products in a timely manner ultimately drives our financial performance. Metrics show our new product introductions or products less than 3 years old as a group have outpaced MACOM's overall revenue growth and are accretive to MACOM's gross margins. We continue to focus on technology and product differentiation across our portfolio, which often leads us to the development of IC products that operate at the highest frequency, highest power or highest data rates. The secular growth trends across our end markets, coupled with our expertise in IC design and manufacturing are driving an increased number of revenue opportunities. To capitalize on this, we have been increasing R&D spending, hiring more engineers and acquiring companies that have specialized complementary design capabilities. In keeping with this trend, over the next couple of months, we plan to open 2 additional IC design centers, one in Southern California and the other in Central Europe, where we were able to secure specialized talent and teams. Hiring best-in-class engineers with complementary skills will help enable us to increase our SAM and execute on the growth opportunities ahead. I'll note that we prioritize recruiting designers with advanced silicon design expertise and experience. On Tuesday, we announced an agreement with HRL or Hughes Research Laboratories to transfer their 40-nanometer GaN on Silicon Carbide process known as T3L to MACOM. As part of this agreement, MACOM will be an exclusive licensee with rights to manufacture the T3L process. T3L is an industry-leading high-frequency GaN on Silicon Carbide process, and it was developed with DARPA, DoD and HRL funding. T3L was engineered to achieve exceptional high-power performance at very high frequencies. HRL recently completed long-term reliability studies and qualified the process, and it is now ready to transition to production. The T3L 40-nanometer process perfectly complements our existing GaN portfolio because it allows us to address applications at higher frequencies than our 140-nanometer GaN process. We anticipate that licensing this technology will also accelerate our ability to launch other sub-100-nanometer GaN processes, including 90-nanometer. We believe this transaction is a win-win because HRL, primarily a research organization, will be able to commercialize the process technology they spent years developing and MACOM can industrialize and ramp the process into production. Many of our mutual customers in the defense and space markets want to see T3L process in production -- in a production wafer fab in order to address their volume needs. This strategic transaction supports one of our core tenets, which is to produce the industry's highest frequency semiconductors. We believe this part of the GaN MMIC market is growing, and we are seeing new requirements at Q,V,E and W-band driven by both commercial and defense applications. We believe the T3L process will help us capture significant market share over time. And finally, related to GaN on Silicon Carbide, over the past few quarters, we were awarded several new and add-on development programs for advanced GaN on Silicon Carbide process technologies. Across the DoD agencies, MACOM is recognized as a leader in developing advanced compound semiconductors and our pipeline of funded technology development contracts is growing. I'll note, in the defense, radar and electronic warfare markets, our GaN-based components and products experienced over 50% year-over-year revenue growth. This growth leverages our high-power GaN portfolio, where we maintain a competitive position in low and mid-band applications. Our goal is to expand into the higher frequency airborne radar market, where we believe share gain opportunities exist. To support this strategy, we recently upgraded the RTP Fab's G28V5 150-nanometer GaN on Silicon Carbide process to include atomic layer deposition passivation or ALD. ALD is a hermetic coating process that enables MMIC products to pass moisture and HASS tests. This process is one of the most reliable and rugged processes in the market, and it is ideal for ground-based radar systems and SATCOM links and is now ready for airborne radars. Across the defense market, the trend for new systems is toward higher frequencies, higher power levels, wider bandwidth and higher levels of integrations, factors that all play to MACOM's strengths. We collaborate with most major U.S. defense contractors across a wide range of applications. For example, we have been collaborating with a customer that produces a drone defense system, and we look forward to their expected production ramp-up in 2026, utilizing our high-power GaN technology. We also continue to build new relationships with major European defense contractors who are increasingly focused on securing a European supply of critical semiconductors for their systems. We believe our manufacturing facility in France can play an important role in enabling MACOM to win market share with these customers. Generally speaking, the industrial markets are stable and beginning to improve, although we do not expect significant growth in the near term compared to the data center, defense, 5G and SATCOM sectors. Within the telecom end market, satellite-based broadband access and direct-to-sell opportunities remain robust with numerous LEO networks in the planning or development stages. These networks typically use microwave or millimeter wave frequencies and free space optics or FSO communications for satellite to satellite or satellite to ground communication links. In some cases, the satellite transmitters require analog microwave linearization to boost the transmitted signal and improve link margin. I'll note the number of LEO constellations continues to grow and more companies compete to provide commercial data, voice and video communications by satellite or defense intelligence and functionality. Almost a dozen different companies are now planning to launch LEO constellations supporting direct-to-cell or direct-to-device communications. Again, these LEO constellations have many areas where MACOM can contribute, including direct-to-device links operating at UHF or S-band, backhaul links operating at Ka, Q, V and E-band, high-speed optical links transferring data within the satellite and free space optics for satellite-to-satellite communications and gateway linearization for high-power transmitters. Depending on the customer preferences and capabilities, we position ourselves to support them at any level in the supply chain from foundry services, custom IC design, standard products and even full module and subsystem design and manufacturing. Demand from our cable TV infrastructure market is also improving. Cable networks are in the early days of a transition from DOCSIS 3.1 to DOCSIS 4.0. We've spent the last 2 years releasing new products and working with customers on design wins to support this upgrade. We are beginning to see new orders on our DOCSIS 4.0 products. Our portfolio today includes amplifiers, baluns, couplers and filters for line amplifiers and nodes in these new deployments. We expect the cable TV market to be one of the contributors to our Telecom revenue growth in fiscal year '26. We continue to see strong demand from our Data Center portfolio, particularly within 800G and 1.6T applications. We expect the ramp of 1.6T optical solutions to continue to support both scale-up and scale-out interconnects, and we believe demand is growing rapidly. Within these solutions, MACOM provides drivers and TIAs that support EML and silicon photonic architectures. In addition, over the course of FY '26, we expect year-on-year demand for our photonics semiconductor products to significantly increase. As an example, we are pleased with the growing traction of our 200-gig per lane photodetector products that support advanced 800 and 1.6T optical connectivity. MACOM's 200-gig PD has industry-leading sensitivity and dark current performance, enabling our customers to achieve better manufacturing margin and optical receiver sensitivity performance. We believe we have had a breakthrough where our cloud customers and their supply chain recognize the strategic value of MACOM's proprietary indium phosphide technology and high-volume manufacturing capabilities to produce photonic products. We are pleased to have PD design wins at all major module manufacturers supporting 800G and/or 1.6T applications. A few quarters ago, we initiated a transfer of the 200-gig PD process from our smaller Michigan fab to our larger Massachusetts fab to ensure we could support the forecasted demand. Today, our Ann Arbor fab is approaching maximum capacity and our Massachusetts fab is qualified and ramping volume production. In addition to our focus on ramping PDs, we have intensified our CW laser development efforts as customers and the industry look for strategic suppliers that have CW laser technology and high-volume manufacturing capabilities. We also see a steady adoption of single-mode LPO 100-gig per lane solutions. Today, we have multiple customers in production and we expect to transition more customers into production in fiscal '26. Additionally, we continue to support new architectures, including near-packaged optics or NPO, utilizing non-retimed LPO solutions. As data centers continue to disaggregate memory and compute, we believe the adoption of PCIe 6 solutions will create an opportunity for MACOM. At this year's ECOC trade show in September, we demonstrated our latest linear optical PCIe chipset consisting of a VCSEL driver and TIA that support sideband data streams over fiber. We also continue to expand our portfolio in the area of electrical high-speed connectivity. As data speeds move to 200-gig per lane and beyond, copper-based solutions such as direct attach cables begin to reach their functional limit. MACOM provides a family of linear equalizer products that can help extend the reach of copper interconnects at 1.6T. Over the course of FY '26, as 1.6T deployments expand, we believe these solutions will be of interest to some of the major cloud vendors who are deploying next-generation solutions. Additionally, we are seeing opportunities for these products in backplane applications to enhance onboard signal integrity. As we turn our attention to FY '26, our priorities include: first, taking full advantage of the data center growth opportunity and servicing our customers with differentiated solutions. This includes expanding our portfolio into new product areas such as PDs and lasers where we can add value. In the near term, we will seek to increase market share in 800G and 1.6T high-speed analog solutions, expand our customer base for linear equalizers and PCIe solutions, ramp photonic products and support customer LPO launches. We will also continue the design work to establish a leadership position in 300 and 400-gig per lane connectivity ICs for future 1.6T and 3.2T systems. Second, we will seek to expand our market share in 5G applications by leveraging our new and improved GaN4 process. Our next-generation base station products will be updated with in-sourced IPD and matching circuits to: one, improve performance; and two, lower our manufacturing costs. Third, extending our leadership in A&D and winning market share in microwave and optical RF over fiber applications across all major accounts in the U.S. and working to expand our business across Europe and support new defense and space programs like IRIS2. Fourth, continue to develop advanced semiconductor technologies for high-frequency MMICs, high-power diodes and high-speed optical semiconductors. Our goal in FY '26 is to make meaningful progress on hot-via flip-chip, bump technologies like copper pillar to enable MACOM to lead the industry in advanced chip scale package solutions. Fifth, carefully managing our capital expenses and prioritizing investments that, one, expand our existing manufacturing capabilities; and two, support new technology developments. As an example, we intend to purchase and install a modern MOCVD epi reactor in our European Semiconductor Center, or MESC. This reactor will support our 6-inch production transition and the growing volumes of GaN on Silicon and other gas processes. In summary, our strategy is to build a diversified semiconductor portfolio that enables MACOM to capture a larger share of the markets we serve. Our strong organizational foundation, along with our speed and agility, help us win opportunities and ultimately beat our competitors that are often larger and have more resources. Jack will now provide a more detailed review of our financial results. John Kober: Thank you, Steve, and good morning, everyone. Before getting into our fourth quarter results, I would like to summarize a few items regarding our full fiscal year, which ended on October 3, 2025. We achieved record revenue of $967 million, which grew more than 32% over fiscal 2024. Our annual adjusted operating margin grew by 140 basis points to 25.4%. Adjusted earnings per share grew by more than 35% to $3.47. Cash flow from operations continued to strengthen and increased by 45% to $235.4 million. We refinanced and extended the maturity of the majority of our convertible note debt at favorable rates. Our workforce, which now totals approximately 2,000 employees, grew by 17% over the past year as we have expanded our research and development and production employees to support our growing business. Now on to fourth quarter results as well as some additional commentary on the full fiscal year 2025 and outlook on fiscal year 2026. Q4 revenue again reached record levels with strong financial performance across all 3 end markets and record revenue across Data Center and Industrial & Defense. This sustains a trend of consistent revenue growth, improving operating income and ongoing cash generation. Fiscal Q4 revenue was a new quarterly record of $261.2 million, up 3.6% sequentially and up 30.1% year-over-year, driven by growth across all 3 of our end markets. Our overall book-to-bill for Q4 was 1:1. On a geographic basis, revenue from U.S. domestic customers represented approximately 43% of our fiscal Q4 results. Our full fiscal year 2025 U.S.-based revenue was approximately 44%. Adjusted gross profit for fiscal Q4 was $149.1 million or 57.1% of revenue. Through the hard work and our dedicated operations team, we have continued to increase capacity and improve yields, and we expect to see ongoing incremental progress across all 4 of our fab operations. I'll note, we are seeing an improvement in product demand across our internal fabs, which is driving higher production volumes and associated utilization. As a result, we expect sequential quarterly gross margin improvements of between 25 to 50 basis points as we move through fiscal 2026. These gross margin improvements include any offsets to cost increases, such as gold and other precious metals, depreciation and labor costs. Total adjusted operating expense for our fourth quarter was $82.1 million, consisting of research and development expense of $55.6 million and selling, general and administrative expenses of $26.6 million. The sequential increase in adjusted operating expenses compared to Q3 was primarily driven by ongoing R&D investments and employee-related costs. As we continue to grow our revenue, we will remain very focused on managing our OpEx. Depreciation expense for fiscal Q4 2025 was $8.7 million compared to $6.9 million in Q3 2025. The increase was primarily due to taking control of the RTP Fab during the quarter. As a reminder, since we have taken control of the RTP Fab, we have shifted from purchasing wafers from a third party to manufacturing wafers, resulting in MACOM now incurring all of the associated manufacturing costs, including labor, facilities and depreciation, to mention a few. Adjusted operating income in fiscal Q4 was $67 million, up 5.5% sequentially from $63.5 million in fiscal Q3 2025 and up 32.1% year-over-year. For fiscal Q4, we had adjusted net interest income of $6.6 million, a net decrease of $200,000 sequentially from $6.8 million in Q3, primarily driven by lower interest rates and interest expense associated with new leases. Our adjusted income tax rate in fiscal Q4 was 3% and resulted in an expense of approximately $2.2 million. As of October 3, 2025, our deferred tax asset balances, which includes R&D tax credits, were $208 million as compared to $212 million at the end of fiscal 2024. We anticipate further utilizing our deferred tax asset balances through fiscal 2026 and beyond, helping to keep our cash tax payments relatively low over these periods. We expect our adjusted income tax rate to remain at 3% as we enter fiscal 2026. Depending on the jurisdictional mix of our income, we expect the U.S. government's recent tax legislation to support a low to mid-single-digit adjusted tax rate for the next few fiscal years. Fiscal Q4 adjusted net income increased approximately 4.7% to $71.4 million compared to $68.2 million in fiscal Q3 2025. Adjusted earnings per fully diluted share was $0.94, utilizing a share count of 76.2 million shares compared to $0.90 of adjusted earnings per share in fiscal Q3 2025. Our team continues to optimize the business' performance, which has resulted in sequential increases in our adjusted operating income and EPS over the past 9 quarters. Before moving on to balance sheet items, I would like to note that during the fourth fiscal quarter, in connection with the RTP Fab transfer, we recorded a $10.1 million gain on acquired assets, which is recorded below operating income on our income statement. This gain, which has been excluded from our adjusted operating results, primarily represents the difference between the fair value of inventory we received from the prior fab owner on July 25, 2025 as compared to the estimated value we established in December 2023 at the time of the RF business acquisition. Now on to operational balance sheet and cash flow items. Our Q4 accounts receivable balance was $148.6 million, up from $129.5 million in fiscal Q3 2025. The increase in our accounts receivable balance was driven by revenue growth as well as the timing of customer shipments and payments. Our day sales outstanding averaged 52 days as compared to our previous quarter at 47 days. Inventories were $237.8 million at quarter end, up sequentially from $215.4 million, largely driven by additional work-in-process inventory at the RTP Fab as well as higher balances to support anticipated future demand across the business. Inventory turns decreased to 1.9x from 2.0x in the preceding quarter. Our fiscal Q4 cash flow from operations was approximately $69.6 million, up $9.2 million sequentially and an increase of more than $7.3 million over fiscal Q4 2024. The sequential increase was primarily due to increased net income combined with fluctuations in working capital. Capital expenditures totaled $20.2 million for fiscal Q4, up $11.5 million sequentially. The major driver of this increase was the anticipated purchase of $12 million of surplus equipment at the RTP Fab from the previous owner. We anticipate that the installation of this and other equipment will allow us to expand our RTP Fab capacity and capabilities by up to 30% over the next 12 to 18 months. Our fiscal year 2025 CapEx was $42.6 million, and we estimate fiscal year 2026 CapEx to be $50 million to $55 million as we upgrade and enhance our production equipment, facilities and expand capacity where needed. Next, moving on to other balance sheet items. Cash, cash equivalents and short-term investments for the fourth fiscal quarter were $786 million, up $50.7 million from Q3. We are in a net cash position of more than $285 million as of October 3, 2025, when comparing our cash and short-term investments to the book value of our convertible notes. Over the next couple of quarters, we anticipate paying off the $161 million of principal value of our remaining March 2026 notes as they become due under the terms of the original agreement from 2021. And finally, I'd like to recognize that the results we have achieved during fiscal year 2025 would not have been possible without the contributions from the entire MACOM team. We remain committed to investing in our employees through annual merit increases, promotions, bonuses and stock awards as well as offering competitive healthcare, retirement and other benefits. I will now turn the conversation back over to Steve. Stephen Daly: Thank you, Jack. MACOM expects revenue in fiscal Q1 ending January 2, 2026, to be in the range of $265 million to $273 million. Adjusted gross margin is expected to be in the range of 56.5% to 58.5%, and adjusted earnings per share is expected to be between $0.98 and $1.02, based on 76.6 million fully diluted shares. We expect sequential revenue growth in all our end markets. Data center will lead with approximately 5% sequential growth, followed by Telecom and Industrial & Defense with low single-digit sequential growth. As Jack mentioned, we expect to see increased operating leverage over the course of fiscal '26, through a combination of top line growth and improving gross margins due to increased fab utilization and launching more profitable products. We will maintain operating discipline even as we continue to invest in the growth of the business. Given our talented and experienced team, our core technologies and the secular growth trends in our market, we are confident we will achieve our goals. I would now like to ask the operator to take any questions. Operator: [Operator Instructions] Our first question coming from the line of Tom O'Malley with Barclays. Kyle Bleustein: This is Kyle Bleustein on for Tom O'Malley. I just wanted to start off with the Telecom business. I think through earnings, you've seen a couple of companies point to traditional telecom being better. So I just wanted to kind of get your sense of how you think about that business through the fiscal year kind of the biggest pull factors you're seeing there? Stephen Daly: Thank you for the question. The 2 main pull factors for MACOM this year will be 5G continuing to grow, and that's a core business for MACOM. And second would be the satellite communications and LEO business. If you're referring to the RF-related telecom part of the market, if you're talking about the metro long-haul piece, we are seeing continued growth in that business, and we expect that trend to continue during the year. Kyle Bleustein: And then just for my follow-up, last quarter, I think you talked about broadening some of the ACC engagements. Can we kind of get an update on how that's been progressing over the past 90 days? Have you seen any of those engagements turn into the customers? And just how we should kind of think about that business through the next fiscal year? Stephen Daly: Yes, we continue to be engaged across the industry with all different product lines, including the chipset we put inside the ACC product line. I would say, generally speaking, we have great engagements with the major hyperscalers, and we're certainly excited about some of the potential within that product set. And we'll see how that plays out as we move into the course of the year. We don't generally comment on, let's say, pre-revenue topics. We would always talk about our successes retrospectively, and that would be our approach here as well. Operator: Our next question coming from the line of David Williams with the Benchmark Company. David Williams: Congrats on the $1 billion run rate. Maybe first, just kind of the transition and the demand pull between the 100G and 200-gig that next-gen kind of solution, how are you seeing that? And maybe are the demand trends developing as you would have expected or maybe accelerated a bit? Stephen Daly: Thank you for the question. So our core 100G business, last year, was very stable and actually grew quite nicely. And as we look out into our fiscal '26, we would expect the 100G growth trend to continue. However, the massive growth is really at the higher data rates. So that would be 200 gig per lane servicing primarily 1.6T. And we are very early in the cycle of the rollout of those interconnects. And so that is one of the fastest-growing parts of our Data Center business. It was last year, and we believe it will be as well again in fiscal '26. David Williams: Great. And then just maybe on some of the new capabilities you talked about the acquisition in the quarter, just any color there around the magnitude of that and really the capabilities you think that brings. And you talked about some of them. But just any additional color, I think, would be helpful. Stephen Daly: Yes. You were referring to the HRL IP license agreement. Is that right? David Williams: Yes, yes, I'm sorry. That's correct. Stephen Daly: Yes. So thank you for the question. Very interesting technology, as I highlighted in the script, it very much complements what we're doing with our -- what we call our GSIC140 process, which we launched a couple of years ago. And we're continuing to improve that process even today. The HRL technology was a combination of U.S. government and HRL funding to really develop a technology that would be able to operate at higher power levels at the highest frequency. So this is a technology that really begins to shine above 40 gigahertz. And why we felt this transaction would be important is it allows us to service the higher-frequency SATCOM bands, which are becoming more and more critical for the LEO constellations. And there will be a transition from, what I would consider, pHEMT gas technology at these frequencies to GaN technology, and we will be leading that transition. And the reason why you would want to make that transition is a GaN amplifier on this process will have a higher power density, almost 2x what pHEMT can do, and you'll also get 10 points of higher efficiency on that particular amplifier. So there's a compelling reasons why we believe the LEO constellations will -- and our customers will want to adopt this technology as soon as it's ready in our fab. Operator: Our next question coming from the line of Harsh Kumar with Piper Sandler. Harsh Kumar: Congratulations on some great results. Steve, if I look at your guidance, I think there's a little bit of a step-up in growth. Just at a broad level, I mean you talked about multiple drivers. But if I had to be specifically ask you about what is driving the step-up in growth, how would you characterize that? And I have a follow-up. Stephen Daly: Are you referring to Q1 specifically or in general? Harsh Kumar: Yes, yes, the December quarter. Stephen Daly: Well, I think it's, first and foremost, driven by the continued rollout of 1.6T and 800-gig platforms across various customers with various products. That is absolutely driving the growth. And then I would say the other factor is we're seeing a little bit of a bounce back in Telecom. As you know, going Q3 to Q4, it was sequentially down a little bit, really due to the timing of orders and also just continued strength in our Defense business. And then the other thing I'll add, as we really are at the beginning of our fiscal '26, our October bookings were one of the best months we've had in years. And so we're really excited to start the year with a strong backlog and a lot of momentum. Harsh Kumar: Fair enough. And Steve, you talked a lot about satellite on this call, something you haven't done. You've talked about -- you mentioned satellite, but not to this extent. And you talked a lot about LEO satellites. I guess, could you help us understand the timing of some of these new products, the scale? Where is the business at today? And how big could it be? And also, I was wondering, part 2, the standard question LPO, you started shipping seems like -- could you help us size that market for 2026? Stephen Daly: Yes. Thanks, Harsh. So I would say that the current LEO business is included in the Telecom numbers that we're currently reporting. We don't particularly want to break out that particular submarket within Telecom. So I would say, the timing is now, and it's -- we're ramping. And the LEO business that we have is expected to grow over the next 12 to 18 months. How big could it be? It can be hundreds of millions of dollars in size. This is not a small market, it's a large market. As I mentioned, we support this business at the chip level, the module level and even the subsystem level. And when we talk about LEO constellations, I also have to highlight it includes not only the payload on the satellite, but it also includes the ground gateways and the terminals, which also have very high value-added products. In terms of the LPO question you mentioned -- you asked, we talked about having one customer in production on our last conference call. I can tell you, that number has tripled. So now we have 3 and growing. And so we would expect that number to continue to increase as the industry adopts LPO. We don't necessarily want to size the market. It really depends on what the customers do in terms of their deployments, and that's a very difficult number to put out there. We have our own internal models. But we would rather -- we're sure that there's error associated with those estimates. I will say that our competitive advantage with LPO shines very well because there's no DSP. So the landscape and the competitive dynamics change quite dramatically when you remove the DSP. And then the other thing I'll just highlight, the LPO solutions today are running at 100-gig per lane. Operator: Our next question coming from the line of Karl Ackerman with BNP Paribas. Karl Ackerman: Steve, you spoke of record backlog, but does that include a record backlog for datacom products such as TIAs, drivers and PDs? And as you address that, can you quantify the level of order visibility with your customers, perhaps in terms of quarters as you seek to add capacity to fulfill this customer demand? Stephen Daly: Yes. Thank you. We don't really break the backlog out by product line or market per se. But you can imagine that coming off of a year where we had 50% year-over-year growth in the data center, and there's a lot of momentum that the data center backlog is growing nicely. Some of our other end-markets like defense, they typically have longer lead times and manufacturing cycle time. So we typically would build backlog with our defense customers at the beginning of the year. So overall, a healthy backlog, and we really can't break it out any further than that. Karl Ackerman: Got it. That's fair. Jack, perhaps one for you, if I may. Just on the RF business, any updated thoughts on the timing of yield enhancements and operational performance? Would you anticipate this business going to be margin neutral once these yield enhancements are complete perhaps before you add the planned 30% of wafer capacity? John Kober: Yes, I think what you're referring to, Karl, is some of the gross margin improvements, and we talked about it in our prepared remarks, the sequential improvements that we expect to see on a quarterly basis of anywhere from 25 to 50 basis points. As we've also discussed, we've completed the RTP Fab conveyance. So that's part of the MACOM portfolio. And through a combination of enhancements to our gross profits and cost reductions and yield improvements across all of MACOM, including facilities like Lowell and our other 2 fab manufacturing locations, are going to be helping to contribute to some of those gross margin improvements that we had talked about earlier. So it's more of a global effort that we have as opposed to being focused on any one area of the business. Operator: Our next question coming from the line of Tore Svanberg with Stifel. Tore Svanberg: And let me add my congrats on the record results. Steve, I know you typically don't guide more than a quarter out, but just so many irons in the fire here across all 3 segments. So directionally, how should we think about growth in the 3 segments next year, especially also in light of the more than 40% growth in both Data Center and Telecom this year? Stephen Daly: Thank you for the question, Tore. As you know, we don't typically give full-year guidance. But I'd be happy to make some general comments on our expectations for 2026. And maybe before I do so, I think there's some important trends to highlight, and I think you mentioned a few. Number one, we had very strong growth year-over-year, 32% growth on the top line. And that really represented the 4 out of 6 years in a row, we've had double-digit growth and we're excited about that. Our CAGR over the last 6 years has been in the mid-teens, and we're pleased with that type of performance. As we think about '26, we have various scenarios, we have our base case scenarios and our improved or best case scenarios. But if I just focus on the base case for a minute, we would certainly expect double-digit growth with no less than mid-teens on the top line. We believe the growth will be driven by the Data Center business. It will have -- it will be our strongest market, then followed by Industrial & Defense and Telecom. And it will be a year where you begin to see leverage on -- of our business model and improved operating income and earnings growth. So we're very excited about that as well. Tore Svanberg: Great. And as my follow-up, it sounds like you turned about 14%, 15% of the revenue this quarter. I'm just curious, given the strong momentum, the order rates, are you starting to see some tightness, whether that's with your own fabs or lead times starting to stretch? Because obviously, the growth momentum seems to be accelerating. So I just want to make sure that everything is on track as far as capacity is concerned. Stephen Daly: Yes. Well, we're growing as quickly as we are. There's always stress points throughout our operations and supply chain, and we have an outstanding team that can manage those tactical and strategic issues quite well. So we're very pleased with the team's performance, and we're able to get the things we need and have the capacity available. I highlighted as an example with our 200-gig per lane photodetector. We recognized last year that we were going to have some very strong growth in the next 24 months. And so we took actions to move that product to our large Lowell facility here, where we have really unlimited manufacturing capability to produce PDs to support the industry. So we're taking those steps. A lot of those things you see behind the scenes, where we're making sure we have a front-end, back-end test capacity in place, there's always areas where we need to do more and pinch points. And the team is managing those very well. So yes, it's always a challenge in a high-growth environment, but I think we have it under control. Operator: Our next question coming from the line of Blayne Curtis with Jefferies. Blayne Curtis: I want to ask you, I mean, obviously, very strong comments about growth in fiscal '26. The book-to-bill just over 1, I guess, I think you said maybe there's some function with the Defense business. But I'm just kind of curious, is that the case across all 3 segments? Is there something that's down? Or is that just timing-wise and if that should improve? Stephen Daly: Yes. We track the book-to-bill for each of our markets and submarkets and customers on a very granular level. And every quarter, it's a different setup. And so over the long term, is really what matters. And over fiscal year '25, our book-to-bill ratio was 1.1, to be clear. And that's a very strong number. And we started fiscal '26 in October with one of our best Octobers in as long as I can remember. So we're not -- you have to read through the noise. I wouldn't get too fixated on any particular quarter's book-to-bill. And if you remember a few years ago, we had a quarter where we had 0.5 book-to-bill, and we survived that quite nicely. But -- so that's the nature of the business. Some of our markets are a little volatile. Some of them have different timing of orders, and customers have different schedules, and we just try to blend it all together and report the results. Blayne Curtis: And then I wanted to ask on the gross margin, the 25 to 50 basis points improvement. Obviously, you took over the Wolfspeed fab, and there was some lifting to do there. Maybe you could just talk about the contribution from those improvements versus just what it looks like overall, volumes are going up as well. Stephen Daly: Yes. Thanks for that. And I'll just highlight on a go-forward basis, we don't really want to talk about the gross margins by fab. I think that our business is too complicated than that. I know, before the closing of the fab and during the transition, we were very transparent about the puts and the takes on the RTP site specifically. But now that it's in the MACOM tent and we're changing so many things, including the mix, the customer base, the focus, as I highlighted as an example, we took one of the RTP 150-nanometer GaN on Silicon Carbide processes and we upgraded it by adding an ALD covering and now that's going to open up a new market segment and that will lead to great things; so there's just a lot of moving parts at each one of the fabs. And to get fixated on any particular fabs, near-term performance is -- could be limiting. So I think we take a broader approach and we're not really going to be discussing gross margins by fab because that could be a tell on the profitability of those associated products, which we don't want to disclose. Now the other thing I'll highlight is a big part of our business uses external fabs. And we are working with the leading fabs across the U.S., Europe and Asia to support a lot of our high-speed business, primarily data center centric, as well as various test -- very high-performance test chips or products for broadcast video or other high-speed trading-type chips that are very high-speed matrices that are used in high-speed trading. So we have a lot of high-end chips that we externally source from 4 to 5 different fabs, depending on the technology. And that -- those product lines also contribute quite nicely to our business and can also affect the overall corporate gross margins. Jack, I don't know whether you want to add to that? John Kober: I think just maybe just providing a little bit more color in terms of RTP, right, when we had talked about it last quarter, we had only had it for 2 weeks. So it came in line with our expectations. It allowed us to also derisk the business in terms of being able to take control of that business. So the team has done a fantastic job with everything that's going on there. Operator: And our next question coming from the line of Sean O'Loughlin with TD Cowen. Sean O'Loughlin: Like my peers, I'll congratulate you on the excellent results. I wanted to ask -- two of your, I guess, I'll call them sort of competitors announced a merger last week, a question that we've gotten from investors is whether you anticipate much changing on the competitive landscape following that merger. Obviously, you don't compete in the handset market, but maybe as you think about those companies' respective broad markets businesses coming together, does that change much? Or is it too early to say with any certainty? Stephen Daly: Yes. Thank you for the question, and congratulations to both companies. And you're right, we're not in the handset business, so it shouldn't affect us. Neither companies are customers or suppliers to us, so there's no sort of impact there. So we don't really see a direct impact. We have noticed that each of those companies is closing down their fabs, and I imagine over the course of time, there'll be some restructuring. And so it's possible that, that could create an opportunity for us to maybe win some more sockets or hire some great talent. So we'll see how it goes. And we again, congratulate both companies on that deal. Sean O'Loughlin: Great. And then as a follow-up, I wanted to ask an AI question that is actually not about the data center market, if you can believe that. But in telecom, one of the themes that our colleagues on the comm infrastructure side of the house have been exploring is the potential impact of some of these deployments and the data center builds on access and long-haul networks as bandwidth increases either due to distributed training or more 2-way inference traffic. Are you -- I guess, put simply, are you seeing that at all? Or do you anticipate that in the future? And then maybe how should we be thinking about the puts and takes of those trends as it relates to MACOM? Stephen Daly: Well, we have very good relations with the major RAN manufacturers that are deploying 5G and working on 6G. We also have a very strong understanding of the front-haul network itself because that's a big part of our business. And we're very, very strong with RF over fiber. And in some future generations, there may be more RF over fiber directly to the radio. And so all of these things would contribute to moving high-speed data or large blocks of data faster. And so we are definitely working with customers and trying to keep up with their investigations of different architectures like the ones you mentioned. So we do have -- again, I think the key point here is that trend would most likely be a long-term trend, and we think we have the right technology, given the highest speed, highest data rate, highest frequency. A lot of these applications might also deploy very high frequencies. And so we think we're in a good spot to take advantage of that. Operator: And our next question coming from the line of William Stein with Truist Securities. William Stein: And also congratulations on the strong results and outlook and perhaps especially on the fiscal '26 commentary, which sounds good. Steve, I was hoping that you might reflect on the one hand, relatively light comments about the industrial end market performance, while on the other hand, gross margin sounds like they're going to be tracking better consistently over the coming year. I've historically sort of associated these 2 things together that a lull in the industrial end market has been sort of a weight on gross margins. Is that still the case? Is that part of the thinking behind expanding gross margins next year or recovery in that market? And if any other details you could provide around that thinking, would be helpful. Stephen Daly: Yes. And I think you're thinking about it the right way. And historically, we've had a lot of our industrial revenue was internal fab centric. And that's because it would be servicing markets like test and measurement or medical markets where they use a nonmagnetic high-voltage diodes, which we have a very strong position in the market on, as well as factory automation and other wireless platforms. And so as that market improves, that benefits the loading and can have a benefit on the gross margins. Generally speaking, I would -- with that said, generally speaking, as we look into '26, we think there will be some positive trends in industrial, but more importantly, stronger trends in defense, And that will also be a tailwind on our gross margins. William Stein: That's helpful. Maybe as a follow-up, can you maybe help us understand the diversification in the data center end market? And maybe explore a little bit where the design wins come from. Are they more from module makers, from semiconductor suppliers, from the cloud service providers? And maybe give us an idea of the diversification and the types of customers that you're actually getting design wins from and transacting with. Stephen Daly: Thank you for the question. We address to the back half of your question, all 3 of those customer categories. So that would be the module manufacturers or cable manufacturers, semiconductor companies and the cloud or the hyperscalers directly. So we engage in all of those categories. And so when you take that and add that all up, you'll see that there's a lot of mix of what those different companies would want in terms of product for MACOM. As we look at the market, we break it up into really 3 segments, it would be the multi-mode market itself, which is generally short reach; single mode, which is medium, long reach; and then metro long-haul and coherent. And so as we look down and service these different companies in those different categories you mentioned, depending on what they're focused on, we'll try to be a merchant supplier and sell them chips. It might be a driver, it might be a laser, it might be a photodetector or TIA. And so that is -- there's about a half a dozen primary product lines, let's say, that we service the data center with, and that's how we go to market. Operator: Our next question coming from the line of Peter Pang with JPMorgan. All right. I will go on to the next person in queue, next person in the Q&Q coming from the line of Tim Savageaux with Northland Capital Markets. Timothy Savageaux: Okay, just made it. Congrats on the results. And indeed, we've seen some pretty positive results across this AI optical landscape thus far this week, even with a lot of references to step-function accelerations and demands, I think, both inside and outside the data center. And I think maybe that marries up well with your very strong October bookings commentary, I think. I guess the question is, in that environment, so you're guiding data center to high 20s growth, maybe 28% growth in Q1; and I guess given this environment that we're seeing and what seems to be a bit of a tidal wave of demand, is that type of growth rate sustainable for the year in fiscal '26? Or can it even increase? Stephen Daly: Yes, I think it can increase. And we have a base case, and then we have our sort of best case. And we're setting guidance on it, I would say, our base case are more conservative which even provides strong sequential growth coming off of a very strong Q4. And so we would expect that to continue. There are scenarios, as we model our fiscal '26, where our data center can actually really outperform and have very strong performance similar to last year. But we're not forecasting that now. We know a lot of things have to happen, including various ramps have to occur and things of that nature. So we're not forecasting that sort of super strong growth. We're going to start the year and look at our backlog and plan accordingly. But you're correct, and those trends are there, and it's primarily around 1.6T. That's where the volume is, that's where the demand is, that's where the shortage of supply in some key technologies is. And quite frankly, that's where MACOM can be a strategic partner. Operator: Our next question coming from the line of Quinn Bolton with Needham & Company. Quinn Bolton: I guess maybe, Steve, just coming out of the ECOC optical show a few weeks back, there was some chatter about market share shifts in the TIA and the driver side at 800-gig and 1.6T modules. I just wonder if you could address how do you feel about your relative share position across TIAs drivers? Have you seen any shifts? Do you feel like you're still pretty well holding share or maybe even taking share? But any commentary just how you're doing in the PMDs for optical modules at 800 and 1.6T? Stephen Daly: Thank you for the question. I think we're doing well. I think we have differentiated product, and it's a very competitive landscape. So you have to earn every socket based on performance, timing, price and I think we're bringing our best game to the market. Quinn Bolton: So holding share? Stephen Daly: I'm not going to comment on particular product lines, whether we're gaining or losing market share. Operator: And there are no further questions at this time. I will now turn the call back over to Mr. Steve Daly for any closing remarks. Stephen Daly: Thank you. In closing, Jack and I would like to thank the entire MACOM team for their continued dedication, which made our FY '25 results possible. We will continue to work as a team to meet our customers' needs and execute our strategic plan as we start fiscal year '26. Thank you very much, and have a nice day. Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good morning, and welcome to the Viatris Q3 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Bill Szablewski, Head of Capital Markets. Please go ahead. William Szablewski: Good morning, everyone. Welcome to our Q3 2025 earnings call. With us today is our CEO, Scott Smith; CFO, Doretta Mistras; Chief R&D Officer, Philippe Martin; and Chief Commercial Officer, Corinne Le Goff. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2025 and various strategic initiatives. These statements are subject to risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures. When discussing 2025 actual or reported results, we will be making certain comparisons to 2024 actual or reported results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the proportionate results from the divestitures that closed in 2024 from the 2024 period. We may refer to those as changes on an operational basis. When comparing our 2025 actual reported results to our expectations, we're making comparisons to our 2025 financial guidance. With that, I'll hand the call over to our CEO, Scott Smith. Scott Smith: Good morning, everyone. We delivered another strong quarter by focusing on our 2025 strategic priorities, driving strong commercial execution, advancing our pipeline, returning capital to shareholders through dividends and share repurchases, pursuing in-market business development opportunities and advancing our enterprise-wide strategic review to identify opportunities to deliver meaningful net cost savings, a portion of which we anticipate reinvesting in the business to fund future growth. Our fundamentals remain solid, giving us good momentum as we head into year-end, momentum we expect to carry into 2026. Before we dive into the details of the quarter, let me provide an update on our strategic review. For context, the work we've done over the past 5 years, strengthening our balance sheet, divesting noncore assets and investing in innovation has set the stage for the strategic review as a natural next step in our evolution. We've made significant progress since we announced the initiative in February. We continue to perform a detailed analysis of the totality of our business. As part of our analysis to date, we've identified areas for potential operating efficiencies, including our commercial sales and marketing model and product mix, our R&D, medical and regulatory activities, our sourcing, manufacturing and supply chain, including inventory optimization and how our corporate functions provide support. Looking to the future, we envision a company that delivers sustained profitable growth by focusing on 3 key areas: a global generics business that will continue to evolve towards more profitable, higher-margin complex products, an established brands business that will be strengthened by continuing to add brands that leverage our global capabilities, and an innovative brands business that will be expanded by building a portfolio of late-stage or in-market growth assets sourced both internally and externally. We anticipate being able to deliver meaningful net cost savings over a multiyear period while also being able to reinvest a portion of the savings back into the business to fund future growth opportunities. We look forward to sharing more details, including quantification of the net cost savings and reinvestment opportunities at our planned investor event in the first quarter of 2026. Now let me share a few highlights from the quarter. This quarter's commercial performance was strong across our portfolio, particularly in Europe, emerging markets and the Greater China region. We delivered 1% operational revenue growth, excluding Indore, in line with our expectations, reflecting continued execution across our businesses, primarily driven by the benefit from foreign exchange and supported by our strong operational performance, we are raising our full year guidance range across certain key financial metrics, including total revenues, adjusted EBITDA and adjusted EPS. At our Indore facility, our initial remediation activities are substantially complete. We recently met with the FDA to review progress and discuss potential timing for reinspection. While timing remains at the discretion of the agency, we have built and continue to build operational redundancies by requalifying other sites and adding third-party vendors for products originally manufactured at Indore. Importantly, we continue to make progress on advancing our pipeline. Here are some of the highlights. We are excited about our fast-acting meloxicam. The acute pain market in the U.S. is significant, and we believe we can offer a differentiated alternative for patients seeking non-opioid pain relief. We expect to submit our NDA by the end of the year and are already working on our go-to-market strategy. Our low-dose estrogen weekly patch is now under FDA review following the filing of our NDA late in Q3 with a decision expected in mid-2026 and a launch soon thereafter. For sotagliflozin, we've already made filings in multiple markets around the world and expect to file in more countries by the end of the year. For selatogrel and cenerimod, Phase III enrollment for both programs is progressing well. In addition, we've initiated a Phase III program investigating cenerimod for the treatment of lupus nephritis with enrollment of our first patient anticipated by the end of the year. We continue to view both selatogrel and cenerimod as transformational treatments with blockbuster potential and are beginning to plan for commercialization. We are excited about our recent acquisition of Aculys Pharma in Japan, adding 2 innovative CNS assets, pitolisant and spydia to our portfolio. This strengthens our presence in Japan, a strategically important market for us and leverages our CNS infrastructure and expertise. Business development and M&A remain key strategic levers to accelerate growth, enhance shareholder value and create meaningful impact for patients. Through regional business development, we continue to pursue opportunities to strengthen our generics and established brands portfolios while building our presence in innovative brands that can benefit from our global scale, capabilities and infrastructure. In parallel, we are evaluating targeted strategic M&A opportunities, particularly in the U.S., focused on commercial stage accretive transactions designed to expand our business and further enhance the company's long-term growth profile. We're balancing investment in growth with return of capital to shareholders through dividends and share repurchases. Year-to-date, we've returned more than $920 million to shareholders, including $500 million in share repurchases. This puts us firmly on track to return over $1 billion in capital for the year. Overall, we're very encouraged by the progress we're making, taking bold actions that are intended to strengthen our foundation, expand our capabilities and position Viatris for long-term profitable growth. We believe we're building a company that's more agile, more innovative and better aligned with the opportunities for tomorrow. Now I'll turn it over to Philippe. Philippe Martin: Thank you, Scott. We've had another strong quarter progressing our entire R&D pipeline globally and securing product approval in key markets worldwide. Our late-stage programs are advancing at a very strong pace, beginning with our fast-acting meloxicam. Over the past 2 months, we've participated in the American Society of Anesthesiology and the PAINWeek Medical conferences, generating strong enthusiasm among the pain health care community on our Phase III data. Several important data points from our presentations and KOL discussion underscore the product's distinct clinical profile. First, its pharmacokinetic profile and the speed of onset. This is demonstrated by faster Tmax and higher Cmax compared with Mobic. Specifically, fast-acting meloxicam achieved a Tmax of approximately 45 minutes versus approximately 4 hours for Mobic. Second, its strong and sustained analgesic efficacy with statistically significant pain relief over 48 hours versus placebo, confirming durable pain control in both soft tissue and bony surgical models. In post-hoc analysis, fast-acting meloxicam showed greater overall pain relief over 48 hours and faster pain relief than its opioid comparator, tramadol, across both surgical models. And third, its opioid-sparing effect as demonstrated by a significant reduction in opioid use, and a significantly higher number of opioid-free patients compared to placebo, indicating significantly reduced reliance on opioids for pain management. Our goal, subject to FDA agreement, is to include a reduction in opioid use as part of the product label. We anticipate submitting an NDA by year-end through the 505(b)(2) pathway, bearing any unforeseen delays related to the U.S. government shutdown. Turning to MR-141 in presbyopia. We plan to submit an sNDA by year-end. For MR-142 in dim light disturbances, the second Phase III study is well on its way with full recruitment and top line results expected in the first half of 2026. Our NDA for our low-dose estrogen weekly patch for contraception was submitted in late Q3 ahead of the government shutdown. Approval is expected by mid-2026. In addition, our next-generation norelgestromin-only patch is currently in Phase III with results expected in 2027. We've also submitted additional regulatory application in recent months for sotagliflozin in Canada, Australia and New Zealand with filings in Mexico and Malaysia expected by year-end. Recent data presented at the ESC Congress further highlights sotagliflozin's early benefit in reducing heart failure-related outcomes when initiated before discharge following a hospitalization for heart failure. Compared with selective SGLT2 inhibitor trials, the benefit observed with sotagliflozin in the SOLOIST study cohort distinctly differentiates sotagliflozin with the class. Particularly when it comes to reducing cardiovascular death, worsening heart failure and all-cause mortality. Consistent with this dual SGLT1 and SGLT2 inhibition, sotagliflozin is the first SGLT inhibitor to demonstrate a significant reduction in MI and stroke. In Japan, we have several near-term opportunities as we continue to steadily and strategically build our innovative pipeline. Our JNDA for effexor for general anxiety disorder currently under review by the PMDA is progressing well with approval anticipated in the first half of 2026. The Japanese Phase III data supporting this submission was recently published in the Journal of Psychiatry and Clinical Neurosciences. The recent addition of pitolisant aligns with our strategy to acquire derisked assets supported by positive Phase III data. Pitolisant with its well-established profile has made a meaningful impact for patients in the U.S. and Europe. It is approved for treating excessive daytime sleepiness or cataplexy in adult patients with narcolepsy in the U.S. and Europe. Additionally, it is approved for excessive daytime sleepiness associated with obstructive sleep apnea in Europe. We remain on track to submit 2 JNDAs for OSAS and narcolepsy during Q4 this year. Our Phase III trial of Nefecon for the treatment of IgA nephropathy is fully enrolled with results expected early next year. IgA nephropathy represents a significant unmet medical need in Japan with limited treatment options available. Our Phase II trial of tyrvaya for dry eye disease in Japanese patients was consistent with the global Phase III results. We expect to initiate the Phase II trial in Japan in the very near future. Turning to our complex generics pipeline. We've continued to secure approval for many of our generic products globally. We expect to receive FDA approval soon for octreotide. This will mark our fourth injectable FDA approval this year, joining iron sucrose, paclitaxel and liposomal amphotericin B, underscoring our strategy to expand the generics portfolio with technically complex, high-value products. And finally, let's cover the progress we've made with selatogrel and cenerimod. Selatogrel enrollment continues to accelerate, now approaching 1,000 patients per month, keeping us on track to complete enrollment next year. At the recent ICC Great Wall of China and ESC Congresses, KOLs emphasize the risk associated with patient delay in symptom recognition and the need for early intervention, reinforcing the potential of selatogrel's novel approach in providing early, rapid self-administered treatment for suspected MI. For cenerimod in SLE, patient enrollment in OPUS-2 will close this month, followed shortly by OPUS-1. We anticipate our Phase III readout around year-end 2026. Recent insights from KOL interaction at ACR highlighted the importance of the S1P access in the pathogenesis of SLE and continue to validate cenerimod's differentiated mechanism of action, which acts on B and T cells as well as antigen-presenting cells and dampens both innate and adaptive immunity. In addition, cenerimod's mechanism of action is also highly relevant to lupus nephritis, and we've, therefore, initiated a Phase III program in this indication. Our first patient enroll is anticipated by year-end with full enrollment expected around the end of 2027. Phase III study is the most inclusive lupus nephritis study so far, inclusive of patients with active histological lupus nephritis Class III, IV and V, with eGFR down to 15 milliliter per minute and with a broad background therapy with or without antimalarial or Benlysta. In closing, we've made significant strides advancing our pipeline. We are seeing the results of focused execution and scientific discipline as well as meaningful scientific engagement across our entire R&D pipeline from generics to established brands and innovative assets. Now I'll turn the call over to Corinne. Corinne Le Goff: Thank you, Philippe. Our portfolio strategy is taking shape, fueled by the positive pipeline momentum we have seen this year. Today, I'll highlight a few of the more significant near-term commercial opportunities. As we shared last quarter, we remain excited about our fast-acting meloxicam. The moderate to severe acute pain market is substantial, and there remains a clear unmet need for fast, sustained and meaningful non-opioid pain relief. Let me share more on the broad market opportunity and how it's shaping our commercial strategy. There are approximately 80 million acute pain cases per year in the U.S. And going forward, the incidence is expected to grow at a 2% CAGR due to an aging population and an increased number of surgeries and medical procedures. These patients are predominantly seen in outpatient and ambulatory surgical centers for procedures like gallbladder removal, joint replacements, hernia surgery or bunionectomy or in procedure-focused offices for cosmetic or dental surgeries. Now switching to the evolution of the treatment landscape. Opioids currently account for roughly half of all acute pain prescriptions despite the known risk of dependence and misuse. Tramadol remains one of the most prescribed opioids for acute pain. There is, therefore, a strong demand for safer alternatives, combining strong efficacy with an established safety profile. In fact, current treatment guidelines show a strong consensus to minimize opioid use and prioritize non-opioid multimodal pain management strategies that include acetaminophen and NSAIDs. NSAIDs make up a substantial proportion of the total acute pain prescription volume because of their low addiction risk, short-term tolerability and anti-inflammatory effects. We believe fast-acting oral meloxicam is well positioned as a differentiated option among currently available NSAIDs for moderate to severe acute pain. Since receiving the data in May, our teams have been working hard to further shape our go-to-market strategy. We are progressing well with launch planning, including branding, positioning, prescriber segmentation, channel strategy and pricing and payer dynamics. We are taking a targeted approach to market segmentation, focusing on settings where fast, effective alternatives to opioids are most needed. We plan to leverage our own specialty sales team and are exploring partnerships to expand reach across key prescriber segments, which will enable us to go to market more efficiently and cost effectively. We anticipate being in a ready position to launch pending the FDA review cycle. We are also very focused on launch preparations for our low-dose estrogen contraceptive patch. This weekly patch fills an important need for women seeking a lower dose estrogen option for contraception. It also offers advanced patch technology as demonstrated by potential best-in-class patch adhesion performance observed in our Phase III study. We expect this product will be another meaningful contributor and we are planning towards a launch in the U.S. in the second half of 2026. Outside the U.S., we have made major strides in building out our innovative brand portfolio in Japan with the acquisition of Aculys. The addition of Pitolisant and Spydia further expands our portfolio of innovative CNS products, which will be complemented by Effexor for generalized anxiety disorder. These innovative assets, plus the many others in our late-stage pipeline combined with the strength of our generics and established brands portfolios position us well to positively impact patients' lives and create value for the business. Now I'll turn it over to Doretta. Theodora Mistras: Thank you, Corinne, and good morning, everyone. I am pleased to report that we had another strong quarter, underscoring the continued performance of our broad global portfolio of generics and brands. My remarks this morning will focus on key highlights of our strong financial performance, significant free cash flow generation, capital allocation activities year-to-date and the outlook for the rest of this year. Focusing on our third quarter results, total revenues were $3.76 billion, which were down approximately 1% versus the prior year. Excluding the Indore impact, we delivered operational revenue growth of approximately 1% versus the prior year. In developed markets, net sales were down 5%, primarily driven by the Indore impact. Breaking the segment down further. In Europe, our business continues to deliver consistent and durable performance, growing approximately 1% this quarter. The generics business continues to perform solidly and was up 5% year-over-year. This was primarily driven by new product revenues in key markets such as France and Italy. And within our branded business, solid growth in EpiPen, Creon and our Thrombosis portfolio helped to partially absorb the anticipated competition on Dymista. As anticipated, our North America business decreased 12% versus the prior year, primarily as a result of the Indore impact and competition on certain generic products. However, we continue to see double-digit growth in certain products such as Breyna and Yupelri as well as benefits from new product revenues, such as iron sucrose. In emerging markets, net sales increased approximately 7% versus the prior year. This was primarily driven by continued strength in our established brands across key markets, including Turkey, Mexico and Emerging Asia. And the growth in our generics business was primarily driven by stabilization of supply for certain lower-margin ARV products. In Janz, net sales decreased approximately 9%. Results were primarily driven by expected impact from government price regulations as well as a change in reimbursement policy that impacted off-patent brands in Japan. We also saw competition on certain products in Australia. Lastly, we continue to see positive momentum in Greater China, where net sales exceeded expectations and grew 9%. This was primarily driven by our diversified commercial model and increased demand for our brands that are sensitive to proactive patient choice. Net sales again benefited from the timing of customer purchasing patterns, which we expect to moderate in the fourth quarter. Moving to the remainder of the P&L. Adjusted gross margin of 56% in the quarter was in line with our expectations. As anticipated, margins were impacted versus the prior year due to the Indore impact. Operating expenses were essentially flat versus prior year. This was as a result of increased R&D spending driven by accelerated enrollment in our selatogral and cenerimod clinical trial programs, which was offset by the continued benefit in SG&A from our 2025 cost savings initiatives. We continue to generate strong and durable free cash flow. This quarter, we generated $658 million of cash, which includes the impact of transaction-related costs. Excluding this impact, free cash flow would have been $728 million. Our significant free cash flow has enabled us to execute on our capital allocation plan. Since our Q2 call in August, we have repurchased an additional $150 million of shares, which brings our year-to-date total repurchases to $500 million, achieving the low end of our full year range. Including dividends paid, we have returned more than $920 million of capital this year to our shareholders, and we remain on track to deliver on our commitment of returning over $1 billion of capital this year. With regards to business development, the Aculys transaction highlights our ability to leverage our global infrastructure to strengthen our commercial portfolio in Japan through disciplined business development. The $35 million upfront payment is expected to be expensed as IP R&D in the fourth quarter. Now a few comments on our updated outlook and phasing for the remainder of the year. We are raising and narrowing our 2025 financial guidance ranges across certain metrics, primarily driven by foreign exchange as well as share repurchases completed year-to-date. Our outlook is supported by the continued strength of our underlying business performance. With respect to anticipated phasing in the fourth quarter relative to our third quarter results, total revenues are expected to be lower across all of our segments due to normal product seasonality, resulting in our third quarter revenues being the highest quarter of the year. Gross margins are expected to be stable, and SG&A is expected to increase due to investments in our pipeline and upcoming launches to drive future growth. Lastly, free cash flow is expected to step down due to the timing of interest payments and the normal phasing of capital expenditures. As we close out the year, we expect the underlying positive fundamentals of the business to continue. As normal course, we will provide our outlook for 2026 in the first quarter of next year, along with our Q4 and full year results. However, from where we sit today, there are several dynamics to consider as we think about next year. These include timing of approvals and uptake from recently launched products, competitive dynamics in North America and potential loss of exclusivity for Amitiza in Japan. Investments supporting our pipeline and launch preparedness to drive future growth and the implementation of our enterprise-wide strategic review. In summary, we remain encouraged by the underlying fundamentals of our global business and the continued execution of our disciplined and balanced capital allocation plan. As Scott mentioned, we plan on hosting an investor event during the first quarter of next year, where we expect to provide our strategic and financial outlook, an update on our pipeline and portfolio and details on our enterprise-wide strategic review. With that, I'll hand it back to the operator to begin the Q&A. Operator: [Operator Instructions] And your first question comes from Les Sulewski with Truist. Leszek Sulewski: A couple for me. So first, perhaps maybe give us an update, if you could, on the Indore resolution situation. And then Second, if you look at through the branded portfolio across the regions, specifically 2 products that stand out in 3Q, one being the uptick in Lipitor, are you able to capture some of the share from the recent generic recall? And then second, what's driving the uptick in EpiPen given the options patients now have with the nasal spray and then also some shortages across that board. And then third, are there any key Paragraph IV challenges that you're facing into next year? Scott Smith: Les, let me -- I'll answer the Indore question and then pass it on. So I have to say, we're very pleased with where we are from a remediation perspective. We're largely remediated at this point. We recently had a productive and open meeting with the FDA relative to not only the remediation process but reinspection. Timing of the reinspection is with the FDA. It's not under our control, likely they'll show up unannounced at some point in '26 and reinspect. But I think it's really important to know that we've built redundancies by qualifying other sites and adding third-party vendors to try and decouple revenues from products on the import alert list and the Indore reinspection because the timing is out of our control. So I think the Indore remediation is going very, very well. And we just -- as I said, just recently talked to the FDA and had a very constructive meeting. I'll pass it over to Doretta. Theodora Mistras: Great. Thanks. With respect to our branded regions. Number one, on Lipitor, that's really driven by the strength of our brand outside of the U.S., in particular, in China. We've talked about the strength of our portfolio there, especially in cardiovascular and all the work that we've done in terms of the channels that we operate, the strength of our brand has really continued to drive performance on Lipitor. With respect to EpiPen, we are, to your point, seeing solid performance in this year. I would say our share has remained relatively stable. It's around 24% to 25% in the market. But to call out a couple of areas where we're seeing some strength. Number one, we relaunched EpiPen in Canada. We -- with the shift of commercial rights from Pfizer back to us. And secondly, we're seeing strong growth in Europe, and that's really led to the strength in EpiPen. Scott Smith: We're going to the next question, I just wanted to reemphasize, not only do we have a stated performance Lipitor in China, but the China affiliate in general had very strong third quarter and has a very -- had strong so far year-to-date this year. So we're very pleased with our progress in China. Operator: And your next question comes from Matt Dellatorre with Goldman Sachs. Matthew Dellatorre: Maybe on fast-acting meloxicam first, could you comment on any feedback thus far from the FDA regarding the potential for an opioid-sparing label. And how significant do you guys view that from an access and pricing perspective? And then could you comment on the partnership strategy to reach the broader market, including how do you guys think about the split in value between the channels that you will cover versus other segments that you might partner. And how much you structure a deal like that? And then maybe just quickly on capital allocation. Could you maybe speak to the key priorities next year? Scott, I know you mentioned U.S.-based BD. Just curious, would that be mostly midsized licensing deals? And how should we think about just kind of balance sheet capacity for those potential deals? Scott Smith: I'll kick it over to Philippe to talk a little bit about meloxicam and then I can finish up with not only where the partnership discussions are, but also capital allocation priorities for '26. Philippe Martin: Thanks, Scott. Thanks, Matt, for the question. So on fast-acting meloxicam, opioid-sparing specifically to your question. We've designed the Phase III study in collaboration with the FDA and designed the study in order to be able to get opioid-sparing language in the label. As you know, the data that came out of the 2 Phase III studies in both models in terms of opioid-sparing is very strong. And so we feel very encouraged with our ability to get opioid-sparing language in the label. We have a pre-NDA meeting with the agency over the next few weeks where we'll be discussing this as part of the meeting. It's one of the topics we'll be discussing. But like I said, I think from a labeling standpoint, we've done everything that can be done with very strong data to be able to get opioid-sparing in the label. Scott Smith: In terms of meloxicam partner, you're a little bit ahead of me in terms of segmentation and who covers what. We're involved with some discussions with potential partners, and we're working through that and what that would look like. Those are all sort of individual discussions and the specifics would depend on what partner we land with if we do land with the partner there. So we're actively involved in exploring discussions there. We also feel completely good to take this ourselves and commercialize ourselves. We've got the right people. We've got great data, and we've got resources behind it to make a great launch. So we would only go into a partnership if we thought it was significantly additive to the overall value. And then in terms of our capital allocation priorities going to into '26, let me just -- there's a word that I try and use all the time here, and that's balanced, right? We're going to continue to be balanced in terms of our capital allocation. As I've talked about many times over a 3-, 5-year period, we're going to try and be 50-50 returning capital to shareholders, but also trying to build a portfolio of growth assets. And so we'll be involved in business development as well. I love the deal that we did with Aculys in Japan. Japan is a key strategic priority for us. We put a couple of innovative assets in there to launch in '26. And we're going to continue to look for things for assets that we could be good owners of. I would love to be able to find some in-market accretive U.S.-based innovative products to add to the portfolio. And we're working hard on it. And again, but we're -- overall, we're going to continue to be very balanced in terms of our capital allocation between return to shareholders and also doing business development. And it depends a little bit -- every year is going to be a little bit different. This is the year so far, we've leaned into share buybacks given the uncertainty in the environment, the share price and other things. And other years, we may lean into business development a little bit more, but we want to be able to do both return and also build growth assets to sit on top of the strong base business we have to really return to long-term profitable growth for the company. Operator: And next question comes from Chris Schott with JPMorgan. Christopher Schott: Just 2 for me. Maybe just coming back to the enterprise-wide strategic review. Just any more color you can provide on the quantum of expense reduction we should be thinking about here? And when you mentioned reinvestment, is that a majority of those savings, a small portion? Just any -- just kind of directional color of just how we should think about that flow through? I know we're going to get more color next year, but just anything you can provide today. And maybe, Scott, just building on the comments you just made about the balanced approach to capital deployment. You mentioned this year is more of a capital return year. And just when you look at kind of the range of BD opportunities out there, balancing the stock price, like should we think about '26 looking more like '25, where it is more kind of capital return? Or directionally, does '26 look more like that 50-50 balance that you're targeting over time? Scott Smith: Yes. Thanks, Chris. So in terms of quantum, I don't want to get into quantum of savings at this point in time. We will be very, very clear and transparent relative to the quantum of savings that we get from the enterprise-wide review when we get into Q1, either at the call or through an investor event, but we'll be very, very clear about that. We're working hard on that. We think the quantum of savings is going to be significant. We believe we're going to be able to deliver meaningful cost savings over a multiyear period. And so we expect it to be pretty significant. Right now, we're sort of focused on commercial sales, marketing model, product mix, R&D, medical and regulatory activities, sourcing, manufacturing, supply chain, inventory optimization, corporate support functions. So it's a large project. We're looking at the whole organization, and we expect to be able to deliver meaningful cost savings, and we'll get into the exact quantum of those as we as we get into Q1. And we won't only talk about the quantum, but we'll also talk about phasing. We'll also talk about the magnitude of reinvestment, et cetera, at that event, either with the call or in the investor event. I do not see reinvestment being the majority of savings. I think it will be -- certainly, the minority will be likely putting more into savings and dropping to the bottom line than reinvestment, but there will be some significant reinvestments as well. So this is not about redistributing as much, as it's about finding the savings and then making sure we're looking after the base business and looking after our future growth as well. The last question was balance. So what's '25 going to look like from -- '26, sorry, from a capital allocation perspective, we'll have to wait and see what that year looks like, what opportunities are there, where the stock is trading at. Again, I don't look at it on a yearly basis. I look at it sort of over a longer period, a 3- to 5-year period that we want to be very balanced in returning that capital allocation. As things evolve, again, as we get into guidance for '26, we may talk a little bit more about that. But again, I want to continue to be able to do both, return to shareholders, but also build a portfolio of assets that are going to fuel our growth in the future. Operator: And your next question comes from [ Dennis Ding ] with Jefferies. Unknown Analyst: This is [ Li Wenwen ] for Dennis Ding. Our question is about meloxicam. What is your overall confidence in the self-ramp and peak sales potential? And if there's anything to be learned from competitor journavx [ slow ] launch? Scott Smith: Yes. So I think just let me comment and then maybe Philippe can talk a little bit about the data. But we're very excited about meloxicam. The combination of the data and the people we have on board, I think we can do a very significant launch here. Whether peak sales, $0.5 billion, I think that's in the right sort of range. But we'll be more clear about that again as we get into '26 and get ready for launch. We do not have a label on that yet. So part of that -- I think there's great potential here. We can be more specific what those peak sales look like once we understand what the label looks like once the full plans together. I will say we've got an excellent team on this right now. They've launched multiple blockbusters before. We feel very, very good not only about the data, but our ability to commercialize this asset. We're going to commercialize it as if it's a branded product, it's got -- we think there's significant exclusivity there. We're looking to expand that exclusivity. And we expect meloxicam to be a very meaningful contributor to our portfolio for the rest of this decade at a minimum and maybe longer than that. So we're very excited about it. Operator: And your next question comes from Umer Raffat with Evercore ISI. Unknown Analyst: Congrats on the quarter. This is JP for Umer. A couple of questions on meloxicam and the presbyopia medicine. Meloxicam, as you finalize your planning, what kind of payer guidelines engagement are you thinking? Is it going to be a multimodal pain pathways? Or how does it work versus traditional retail channels. And on presbyopia, is this going to be more of a cash pay optometry play initially? Or do you see a path to broader reimbursement and physician adoption as the category matures? Philippe Martin: Philippe. So let me start with meloxicam. I think what we've experienced both from, I think, a payer, but also from a KOL standpoint is the fact that this is the pain -- the acute pain market has moved to a multimodal approach where, generally speaking, patients are discharged with a couple of medications. And that we believe we'll be able with the data we have to leverage that trend within the market. So our data supports that positioning. And -- I'm not sure what I -- can't recall on the second question was. William Szablewski: Second question on presbyopia. Scott Smith: Prebyopia and payer channels and commercialization. So we'll hand that over to Doretta. Theodora Mistras: Yes. Thank you. And we're still working through both not only our presbyopia but also our dim light disturbance strategy as we get closer to commercialization. But taking a step back, we view this more as a portfolio approach. When you couple that with tyrvaya that's already in the market as well as ryzumvi, we have the opportunity to really create a portfolio of assets that tailor to the front of the eye. But we're ultimately still working through the commercialization strategy. Given the indication, it is natural to assume there will be a large cash pay component to it, but we'll be able to provide more details as we get closer to commercialization. Scott Smith: Yes. We're very pleased with the direction we're going with the Eye Care group. We've got some new leadership on that team. A couple of positive readouts, obviously, this year in presbyopia and dim light. And we'll see what those labels look like. But we're putting -- starting together a portfolio of assets in the eye care area and starting to get some critical mass in terms of that particular group. Operator: And your next question comes from Ash Verma with UBS. Ashwani Verma: Congrats on all the progress. So maybe one for Scott. So for the strategic review, I know you don't want to comment on the quantum of savings. But just in terms of the order of priority here, is that the right way to think about how you spend it out as in thre's more potential for savings from commercial, followed by R&D and then COGS? And then secondly, for Doretta, so as we think about like the top line for 2026 versus 2025, can you talk about the pushes and pulls? I see at this guidance of '25 midpoint, you have $350 million of FX tailwind. So that laps next year? And then in terms of the new product contribution, do you think that you can deliver the sort of the [ reference ] you've been at the $450 million to $550 million. Scott Smith: Yes. So let me take the enterprise-wide strategic review, and then we'll pass it around the table here to answer your question. So Ash, thank you very much for the question. We're not trying to -- we're trying to be as open and honest and transparent as possible with the enterprise strategic review and where we are. We're not trying to be cute with it. The reason we're not giving a quantum is because it's a big project. It's a big company. We're looking at everything. We want to be able to not only identify it, but we want to be able to trace it back and lock it down with the individual groups that we're working with there so that we come with a number that's accurate, sustainable and durable, and we can hold on to that number over a number of years. So we're trying to make sure that not only do we identify things but we understand and map out the activities needed to be able to really realize those savings. In terms of the things that we're looking at, sales and marketing, R&D, operations, corporate support. I think probably the largest quantum can come from our sourcing, manufacturing, supply chain, inventory optimization. There's a significant amount that can come from corporate support as well. And some of the commercialization and the way that we're commercialized and the way that we need to not only sort of prepare for today and be able to continue to deliver today, but we want to be able to understand the functions that we need to be able to commercialize in the future. So we want to be fit for purpose for today and for tomorrow with this. It's not just about realizing cost savings. It's also about evolving our model to be more effective going forward as well. So we really look forward to being in a place to talk exactly about the quantum of exactly where it's coming from, what the phasing is by year, with the reinvestment opportunities on things, and we're going to be able to do that in Q1. But we're not trying to -- again, to be cute here. We're trying to be accurate. We're trying to be thoughtful, and we're trying to make sure that we give numbers that we can deliver on. Theodora Mistras: With respect to your question around 2026 revenue, without getting into specific guidance, our focus this year is really finishing the year strong. We're very happy with the momentum that we're seeing in the business. We remain on track to deliver the 2% to 3% operational revenue growth for the year, excluding Indore. And we expect the underlying positive fundamentals that we're seeing in the business to continue into 2026. And as I think about the pushes and pulls to your point, number one, continued performance in our commercial business, including Europe, China and emerging markets, it's also going to depend on the timing of approvals and uptake of recently launched products as well as the competitive dynamics in North America and the potential loss of exclusivity for amitiza in Japan. But as normal course, we will provide our outlook for 2026 in the first quarter of next year. With respect to your second question around new product revenue and how that ties into 2026. We've talked about the $450 million to $550 million without getting into specifics, we will provide that next year. We are also seeing positive momentum of our new product revenues going into 2026 just based on the number of opportunities not only that have gotten approved like iron sucrose but the ones that are currently under regulatory review, including octreotide. And so we will provide more information next year when we provide our full year. Scott Smith: And I feel -- personally, I feel very good about '26 and the new product revenue. A lot of the approvals this year were back ended in the back half of the year. We've got some more approvals to come. We've got a lot of launches coming in '26 as I went through earlier, that are going to be catalysts. So I feel very, very good about where our new product number is going to be for '26. Operator: And your next question comes from David Amsellem with Piper Sandler. David Amsellem: So just some pipeline questions, brand pipeline questions. So just back to presbyopia, can you talk to how you see differentiation versus the other modalities that have come on the market. So that's number one. Number two, on cenerimod. Just wanted to get more insight into your thought process regarding running the study now in lupus nephritis. Is that informed by any additional analyses of earlier data? Or is it something of potentially a hedge to the extent SLE isn't successful? Just wanted to get your thought process there. And then lastly, on the rapid acting meloxicam, can you just remind us how you're thinking of your IP/exclusivity runway for that product? Scott Smith: So let me hand it to Philippe for presbyopia and cenerimod. Philippe Martin: Yes. So I think for presbyopia in terms of differentiation versus other mechanism of action. I think the miotics in general, do stimulate the ciliary muscle, and that leads to a number of potential issues, including risk of retinal tear or detachment, and a reduction in vision in dim and dark environment, which we certainly don't see with our drug. We actually see the reverse. So we think that from a benefit risk profile, our drug is differentiated. It is both effective and safe. So that's, I think, where we can see the most differentiation from MR-141. The second question about cenerimod. Cenerimod, if you look at the Phase II data, you'll see that cenerimod tends to work better in more severe patients, patients that tend to look like lupus nephritis patients. And so on top of it, the mechanism of action applies to both SLE and lupus nephritis. So I think it's just a natural evolution of the asset leveraging the opportunity we have with the S1P mechanism of action that is pretty broad and can be applied to a number of autoimmune disease, lupus nephritis just makes sense based on the data we have. And like I said, the mechanism of action. So it's -- we're not hedging anything at all. We're just getting -- expanding our opportunity with cenerimod. Scott Smith: I just want to reemphasize the last part that Philippe said there, we are not in any way hedging the SLE trial with a lupus nephritis. We feel very, very good about SLE. We feel good about the molecule. We see an opportunity, as Philippe said, to expand. So we're going to go ahead and start that study and start dosing patients now. So in no way is that a hedge, I think more than anything shows confidence that we have in the molecule going forward. Lastly, I think your third -- your last question was IP around meloxicam. We see right now based on -- we see exclusivity in the 4- to 5-year range right now based on what we have, but we're very actively working on expanding that IP suite to be able to extend that exclusivity very significantly. Again, I sort of look at it as being a very meaningful contributor to the portfolio for this whole decade. And hopefully, we can expand beyond that. So a very important molecule for us. We're working very hard to expand our IP network there and also obviously expand the exclusivity that we have with the molecule. Operator: And your next question comes from Jason Gerberry with Bank of America. Jason Gerberry: A couple for me. A lot of my questions have been answered. But just on the enterprise review and just why not an update today versus giving the update on 1Q '26. Is it that effectively, those efforts are still ongoing or that you need to assess maybe some of the cost of commercial buildouts that need to be offset? Or is it just wanting to have a forum next year that you could really get into the details with investors in 3Q is just not the best forum for that? So that's my first question. And then just as a follow-up on Indore next year, in a scenario where, I guess, the ban isn't lifted, do the price penalties, which I think were $100 million, did they recur in that scenario? Or are they nonrecurring? I just wanted to understand that dynamic a little bit better. Scott Smith: So I'll take the enterprise-wide review question and then kick the Indore over to Doretta to answer for us. She's very deep on Indore and what '26 looks like for that. It's not that we're holding things back. If we were ready to go with the enterprise-wide review, we would certainly give it to you guys right now, we'd be very clear. It's a big company. We're operating in 165 countries. We're looking at everything, commercial, marketing, product mix, R&D, medical, regulatory, sourcing, manufacturing, supply chain, we're looking at it all. It's a very large and complex project that we're engaged in. It's absolutely the right time for us to be doing this now, right? The work we've done over the last 5 years, strengthening the balance sheet, paying down debt, divesting noncore assets, investing in innovation. It's just the right time for us to be doing it. We initiated this project sort of, I would say, late in Q1 of this year. And by the end of the year, we'll have a very good handle on it. And again, to me, it's not just about identifying where the cost savings might be. It's mapping those back to the organizations that are going to give, putting the action plans in place, being credible in terms of living with the number that we give you, and we want to be able to talk not only about the effect of the strategic review in '26 but also '27 and '28. The reason we're doing it then, not now is about accuracy. It's about us having numbers that we can live with. It's about us being transparent and believable. It's got nothing to do with holding it back, so we have something to talk about next year. If it was available, we get it to you, but it's a big project. And we want to be clear, transparent and credible when we put those numbers out, and we want to make sure they're mapped back in the organization. So we're holding ourselves accountable to delivering on those numbers. Theodora Mistras: With respect to your question specifically around penalties, [ Chris. ] So the $100 million incorporates both penalties and supply disruptions a little over, I would say, 50% specifically relates to penalties. Those we do not expect to even independent of Indore, those will not materialize. We don't expect them to materialize again next year. However, I do also would comment that we've been working in the background, not only to remediate Indore, but also to create redundancies within our network and our third parties in order to reestablish supply outside of Indore. And we do expect, regardless of the impact to see some stabilization of that as we move into next year. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Scott Smith, CEO, for any closing remarks. Scott Smith: So first of all, thank you, everybody, on the call for your thoughtful detailed questions. Secondly, some closing remarks here, '25 has been -- is proving to be a really pivotal year for us, one where we're delivering results today while building a stronger, leaner, more innovative Viatris for tomorrow. I'd like to send a sincere thank you to the more than 30,000 employees of Viatris. A lot of good and hard work has been done to get us to this place. We're moving forward with confidence and excitement for the future. We see sustained profitable growth ahead and are actively executing on all key strategic priorities. I believe we are very well positioned to continue to deliver strong results and significant value for our shareholders. Thank you for listening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the Turkcell's conference call and live webcast to present and discuss the Turkcell's Third Quarter 202 Financial Results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Ozlem Yardim, Investor Relations and Corporate Finance Director. Ms. Yardim, you may now proceed. Ozlem Yardim: Thank you, Constantino. Hello, everyone, and welcome to Turkcell's 2025 Third Quarter Earnings Call. On the call today, we have our CEO, Ali Taha Koc; and CFO, Kamil Kalyon. They will provide an overview of our financial and operational results for the quarter, followed by a Q&A session. Before we begin, I would like to kindly remind you to review our safe harbor statement, which is available at the end of our presentation. With that, I will now turn the call over to Mr. Ali Taha. Ali Koç: Thank you, Ozlem. Good afternoon, everyone, and thank you all for joining us today. This quarter once again demonstrated Turkcell's strong momentum powered by disciplined operations, sharp execution and the strength of our growth engines. We delivered 11% revenue growth, reaching TRY 60 billion, driven primarily by our core telecommunication business. Strong ARPU performance, a growing subscriber base and rising data center revenues all contributed to this outstanding performance. Group EBITDA increased 11% to TRY 26 billion, achieving a solid 43.9% margin, a clear reflection of our continued cost discipline. In addition to our operational success, prudent financial management strengthened our bottom line. Lifting net income from continuing operations up by 31.8% to TRY 5.4 billion. Competition remained intense this quarter. Even so, we added 569,000 net postpaid subscribers. Through targeted pricing and upselling, mobile ARPU rose 12%, once again proving our ability to deliver double-digit growth in a highly competitive environment. Residential fiber ARPU also grew by 17.3% year-on-year in the third quarter. Our strategic growth areas also continued to perform strongly. Data center and cloud revenues grew 51%, and our renewable energy capacity from solar fields across 4 cities in Turkiye has reached 37.5 megawatt. Next page, please. We are proud to reinforce our leadership with the successful outcome of the 5G spectrum tender, a defining milestone for Turkiye's digital future. The results were exactly in line with our expectations and reaffirm our leadership position. We secured 160 megahertz of spectrum, the maximum capacity available to a single operator in this tender. This allocation enabled us to deliver speeds exceeding 1,000 megabit per second while paving the lowest cost per megahertz per subscriber among all operators. 5G will be commercially launched in April 2026, marking the beginning of a new chapter in Turkiye's digital transformation. It will empower industries such as manufacturing, transport, health care and education with high-speed connectivity to regions that currently lack fiber access. Once 5G officially launches, these customers will be among the first to experience 5G speeds. And just as we have done over the past 30 years, we will continue to lead in this new era of connectivity. We are fully ready to shape Turkiye's 5G future and drive the next wave of digital transformation. Next page, please. Let's take a closer look at the key operational highlights from the third quarter. Competition in the mobile market was strong as we expected, maintaining our dynamic and customer-centric approach, we continue to expand our customer base. We recorded 569,000 net postpaid additions, bringing our total net gains to 2 million over the past 12 months. As a result, our mobile subscriber base exceeded 39 million. Leveraging our AI-driven dynamic micro segmentation approach, we executed our upsell strategies with precision. We offered customers precisely targeted offers, moving the vast majority of our base to higher tier plan. In addition, the share of postpaid subscribers, a key driver of revenue growth, rose by 4.6 percentage points year-on-year to 79%. These efforts, together with higher seasonality, delivered double-digit mobile ARPU growth of 12%, reflecting our continued focus on value-driven growth. Our mobile churn rate was 2.6%, primarily reflecting the ongoing competition and high activity in the number portability market. Next page, please. Now let's move on to our fixed broadband operations. With a focus on fiber customers, we had a net add of 33,000 this quarter, bringing our Turkcell fiber base to over 2.5 million. Including sales over other operators' infrastructure, we introduced 55,000 new customers to high-quality fiber services. Our fiber strategy is best described by a simple principle, high quality and high speed. With this approach, since last year, we remain committed to offering 1,000 megabit per second speeds and delivering greater value to our customers. Year-on-year, the number of subscribers on these plans more than tripled. With effective pricing adjustments, a higher proportion of customers on 100 megabit per second plus plans and 88% commitment rate to 12-month contracts, our residential fiber ARPU grew 17.3% year-on-year in the third quarter. As we continue to strengthen our fiber network, we expanded our footprint with 107,000 new home passes, reaching 6.2 million households. Our 42.6% take-up rate is a clear indication that our fiber investments are effectively planned. Next page, please. Let me now turn on to our strategic areas, beginning with Digital Business Services. Digital Business Services delivered robust 97% revenue growth, reaching TRY 4.9 billion, supported by recurring service income and stronger hardware sales. The backlog from system integration projects reached a remarkable TRY 5 billion. Data center and cloud revenues continued their strong momentum, increasing 51% year-on-year in real terms. We had targeted an 8.4 megawatt capacity expansion at the beginning of 2025, guided by our vision of keeping Turkiye's data within Turkiye, and we successfully activated that capacity in this quarter. Thanks to our early-stage investment, we have established a strong market position, becoming the leading player in the enterprise colocation market. We are preparing for our next strategic move in data centers and cloud businesses, which will further strengthen our leadership. Next page, please. Now moving on to another of our strategic pillars, techfin. Our techfin ecosystem, representing 6% of consolidated revenues achieved 20% year-on-year growth in the third quarter, outpacing the group's overall performance. This growth was mainly driven by our digital payment company, Paycell, which achieved a 42% increase in revenues. Within Paycell, POS and Pay Later services were the key contributors supported by favorable regulatory revisions in mobile payment limits and broader adoption of POS solutions. Our Financell brand, providing customers with fast and flexible financing solutions continued to expand its loan portfolio, reaching TRY 7.5 billion despite the high interest rate environment. The net interest margin improved to 5%, driven by more favorable funding costs. Financell continued to support the sales of Samsung A26, locally manufactured 5G smartphone exclusive for Turkcell with a total of 54,000 contracted sales since its launch in April. Next page, please. Despite global geopolitical and macroeconomic headwinds, we delivered performance that exceed our expectations over the first 9 months of the year. In line with these strong results and the revised CPI outlook, we are upgrading our 2025 guidance. Reflecting our solid momentum and confidence in the sustainability of our results, we are revising our revenue growth expectations upwards to around 10% and raising our EBITDA margin target to 42% to 43% range. Even as we continue our intensive investment cycle, we are revising our operational CapEx to sales target to around 23%, mainly driven by the acceleration in revenue recognition. As for our data center and cloud revenues, we are also revising our growth guidance upwards to around 43%. With that, I will now hand over to our CFO, Mr. Kamil Kalyon, to walk us through the financial highlights. Kamil Kalyon: Thank you very much, Ali Taha. We had a solid quarter driven by continued momentum in our core business and techfin expansion. We achieved 11.2% year-on-year revenue growth, fueled by strong execution across our key business lines. Turkcell Turkiye remained the main top line driver, contributing TRY 5.5 billion of additional revenue. This was supported by double-digit real ARPU growth, a larger postpaid base and solid performance from digital business services. Techfin added TRY 569 million in revenue, driven by solid growth at Paycell, particularly across POS and mobile payment verticals. On profitability, margins reflected our ongoing investments to enable 5G rollout and to capture the strong growth momentum in Paycell transaction volumes. At the same time, personnel and energy costs contributed positively to our overall performance. Overall, we maintained a solid profitability level, demonstrating the strength of our operating leverage and disciplined cost management. Next slide, please. Profit from continuing operations increased 31.8% year-on-year to TRY 5.4 billion, reflecting focused execution and effective cash management. EBITDA contribution totaled TRY 2.5 billion for the quarter, remaining the key driver of profit growth. Despite persistent competition, Turkcell sustained its leadership through a clear strategic focus and efficient execution. We prudently managed our net finance income and expenses this quarter, resulting in a year-on-year contribution of TRY 1.5 billion. With FX depreciation decreased to nearly half of last year's level, we recorded a positive FX impact of TRY 912 million. Despite a higher nominal debt level versus Q3 2024, our strong financial discipline and proactive funding strategy led to a decline in interest expenses to TRY 677 million. Meanwhile, although interest income remained limited, returns were supported by a well-diversified and efficiently managed investment portfolio. Our strong cash position, together with the slower inflation growth year-on-year resulted in a monetary loss this quarter. Next slide, please. Turning to our investment strategy with a clear focus on 5G readiness. CapEx intensity was 17.4% this quarter, reflecting our continued commitment to strengthening network infrastructure and preparing for next-generation technologies. With the largest spectrum allocation secured from the 5G tender, we are maintaining our investment momentum at full speed. This quarter, approximately 80% of CapEx was directed towards our core businesses, mobile and fixed broadband. Our base station fiberization rate surpassed 45% this quarter, laying the groundwork for a seamless and efficient 5G transition. In our data centers, we activated an additional 8.4 megawatts of IT capacity, bringing the total to 50 megawatts. On the renewables side, solar capacity reached 37.5 megawatts with further expansion expected in Q4. We have started to see savings from renewable energy investments this year with a more visible impact expected in 2026. Given the expected ramp-up in 5G investments and seasonal factors in Q4, we continue to manage our CapEx with a disciplined and value-focused approach. Our revised guidance reflects both the progress of our investment programs and our commitment to efficient capital allocation. Next slide, please. Moving now to our balance sheet. Our cash position reached TRY 122 billion in Q3. The second dividend installment will be paid in Q4, while under the 5G tender, the first 2 installments are scheduled for 2026. We consider our current liquidity as strong, sufficient to cover upcoming 5G payments and debt service over the next 2.5 years. We are well prepared, having issued a Eurobond earlier this year and secured Murabaha fundings on favorable terms in the first half. Our net leverage ratio increased slightly to 0.2x, but remains comfortably within healthy levels, reflecting our continued financial discipline. Given the 5G payment schedule, we expect leverage to remain below 1x in the upcoming periods. Debt repayments of around USD 1 billion are expected to be completed by year-end, of which USD 800 million is denominated in foreign currency. Next slide, please. Finally, a brief update on our FX risk management, 81%. As of Q3, we held USD 3.9 billion FX debt and USD 3 billion FX-denominated financial assets and USD 800 million derivatives portfolio. We maintain a dynamic FX risk management strategy. We actively manage a short-term derivatives portfolio to mitigate potential FX volatility while accounting for higher hedging costs. We closed the quarter in a neutral FX position. Following the acquisition of the 5G license, our net foreign exchange position is expected to increase. We will closely monitor market conditions and proactively manage this position over the next 1.5 years until the full 5G license payments are completed. Therefore, during this period, we will not apply our neutral position definition. That concludes our presentation. We look forward to addressing your questions. Thank you very much. Operator: [Operator Instructions] The first question comes from the line of Singh Maddy with HSBC. Madhvendra Singh: My first question is on your CapEx and dividend outlook, especially given the recent 5G auction win. I wonder -- for this year, you have given the guidance for CapEx, so that's fine. But I was wondering whether next year, we should expect a significant jump in the CapEx to sales intensity and whether this spectrum payment is going to affect the dividend payments at all? So that's the first question. And then the second question is on your pricing action during the quarter? Did you increase any prices? And how was the competitive response to that? Are you comfortable around the pricing environment? So that's the second one. And then the final one, actually on your final comment about the net short FX position, you said the definition will not be applicable going forward. So can you please explain what do you mean by that? And how should we think about the FX losses going forward, yes? Kamil Kalyon: Thank you very much, Maddy, for the questions. First question and third question will be responded by me. First of all, -- for the next year, CapEx intensity, we are not expecting higher jumps. As you know, starting of this year, we declared 24% CapEx sales ratio for this year. Now we revised it to 23%. For the next year period, we do not -- we will not be in a position exceeding the 24% around the CapEx intensity levels will be around this 24%. We will see the budget figures that will come from the business lines. The other one, as you know, our dividend policy is distributing our 50% net income of the year. We are proposing to the general assembly and general assembly decided. As you know, we have -- as [indiscernible] said, we are a very dividend-friendly company. And if you chase our company, we will be -- we have been distributing dividends for many years period. Therefore, for the 2026, our AGM has not been decided about this issue, but our dividend policy is still distributing the 50% of the net income. For the third question, as you know, we are declaring our FX position as minus -- plus USD 200 million. And when we look at the 5G tender, the results and officially, the tender results will be ratified by the governmental bodies approximately in January 2026. Therefore, the FX position -- net FX position or this liability will be in our balance sheet starting from 2026. Therefore, we will look at the position at that time. But as Ali mentioned, the 5G tender price will be paid within 3 installments. In the first installment will be in January 2026. Therefore, it means that 1/3 of the tender price plus 20% VAT amount, which corresponds 44% or 45% of the total amount will be paid in January 2026. Therefore, we will look at the -- our FX position in January 2026, and we will decide how we will manage this FX position starting from 2026. As you know, the decision will be taken under the scope of the macroeconomical conditions, hedging costs and Turkish internal macroeconomic conditions. Therefore, we will see it in January 2026. I will hand over the mic for the second question to Mr. Ali. Ali Koç: Regarding the price adjust, I will divide this question into two different parts, mobile side and the fixed side. For the -- as the leading mobile operator and the leader and the biggest operator, mobile operator in Turkiye, we have adjusted our prices in almost every quarter between 2021 and 2024 to reflect the inflationary environment. Considering the slowing pace of inflation and competition conditions in the market, we updated our prices in January and July into 2024. Following 14% price increases implemented in January 2025, we carried out further price adjustments on our micro segmented packages such as youth and regional offers in June and August. On top of price adjustments, thanks to our successful upsell performance, we registered above inflation mobile ARPU growth of 12%. With respect to fixed broadband market, following the competition, we increased prices in December 2023, August 2024, March and October 2025. We are driving ARPU growth by increasing the share of customers within a 12-month commitment, boosting transition to high-speed packages and also widening the price gap between our TV+ bundled offers and data-only packages. This successful efforts and initiatives enables us to outperform inflation and achieve at the fixed market -- fixed broadband market, 17% real growth performance in our residential fiber ARPU. As Turkcell, we continue to focus on value as the main differentiation point from the competition. Hence, rather than competing on price, we focus on creating additional value for our customers. And we will continue to closely monitor market conditions and the competition in the upcoming quarters as well. Madhvendra Singh: If I may ask a follow-up on the spectrum part. So the payment is in hard currency. I was wondering whether the asset itself will be recognized in hard currency as well. Kamil Kalyon: Normally, as you mentioned, the payments will be done in U.S. dollar terms. Therefore, we will -- our liquidity position is fair enough to make all the payments in both in TL side and the U.S. dollar side. Therefore, starting from the January 2026, we will look at the macroeconomical conditions, FX rates, TL rates and the most important one, the hedging rates, for example, hedging costs are very important in order to decide. But as I said, we have enough TL and the U.S. dollar money in our hands. Therefore, we will decide it in January 2026 by taking into consideration the macroeconomical conditions on that date. It's a little bit early to give a guarantee or to give a color how we will make the payments. We can prefer to make dollar payments or maybe we can prefer to make TL payments. But at TL, we will be keeping our U.S. dollar money in our hands, and it will not create additional problem from our perspective. Madhvendra Singh: My question was more on the balance sheet entry on the asset side. So you will recognize the spectrum as an asset, right? But the value, I'm not sure whether that will be put in a lira number or a dollar number. Kamil Kalyon: Normally, it will be included into our balance sheet in 2026, and we will make this capitalization in the TL terms. And as you mentioned -- as you imagine, that starting from 2026, this asset will generate an inflation profit starting from the depreciation in the income side starting from 2026. Operator: The next question comes from the line of [indiscernible] with Barclays. Unknown Analyst: Congrats on the results. I have just a couple of questions. So my first one is on your 2026 outlook. Do you think that the revenue growth that you've delivered in 2025 or planning to deliver is sustainable going forward given the 5G regime coming? And also -- and also on your profitability, do you think like current margin -- EBITDA margin levels are sustainable for next years? And second question is also on your -- do you have any long-term target for your net leverage? Or maybe where do you see the net leverage ratio next year and going forward after the 5G payments are done? Ali Koç: I can start with the first one. Let me talk a little bit about the current year, the great year and a great quarter. So we had another solid operational and financial results this quarter and which was actually beyond our initial plans. We continue to expand our subscriber base in both mobile and fixed segments, while delivering a real ARPU growth in each quarter of 2025 through our dynamic tariff and pricing management, higher postpaid share, also successful upselling actions and rising demand for high-speed connection also supported our ARPU performance. So consequently, in the first 9 months, our consolidated revenue grew by 12% year-over-year. And also techfin, if you talk about the techfin in the first 9 months, delivered a 25% year-over-year growth, making a very meaningful contribution to our top line. Also, our strategic investments, data center and cloud services also achieved robust revenue growth of 51% compared to the same period last year and significantly exceeding our previous full year 2025 guidance. EBITDA grew by 15%, leading to a 43.7% EBITDA margins. Building on our strong 9-month performance, we have revised our full year both revenue growth and as well as the EBITDA margin expectation and guidance. So to remain prudent while revising our guidance, we also considered the reduced magnitude of price adjustments compared to last year. And we are expecting a very competitive environment in the following years on 2026 expectation as we are in the planning process. It is too early to comment. However, our goal is to maintain our micro segment management strategy, along with our AI-driven technologies, along with our revenue growth initiatives and continue growing above the inflation rate. Kamil Kalyon: For the second question, as I mentioned in my presentation, at the end of this year, we will be paying the second installment of our dividend payment, and we have some additional repayment of debt for 2025. And in January, as I mentioned, we will be paying the 44% of the total tender price for the 5G side. Therefore, our expectation is this leverage ratio would be around 0.7 or 8x. And as I mentioned in my presentation, again, our aim is to keep this level lower than the 1x. Operator: [Operator Instructions] The next question comes from the line of [indiscernible] with [indiscernible]. Unknown Analyst: Good results. Actually, all of my questions have been answered. Operator: The next question comes from the line of Demirtas Cemal with Ata Invest. Cemal Demirtas: Congratulations for the good results. My question is rather some technical issues in the income statement. We see monetary loss in third quarter versus like the monetary gain in the previous quarters. Could you just tell us more about the changes that lead to monetary losses in this quarter because it offsets a portion of the higher-than-expected operating profit when we go to the bottom line? And the other question is again about the TOGG participation side, we see lower losses unlike the previous 2 quarters. Do you think it's going to be the permanent? Should we expect lower the losses contribution from the TOGG, your subsidiary side? That's my second question. And again, could you just give any direction about 2026 from your side? And again, I would like to ask what kind of value-added -- the things that could come into surface in 2026 as now the 5G is done, please, in terms of licensing. What are the opportunities rather than the organic growth of the company? What could be changing in 2026 from your perspective? Kamil Kalyon: Cemal, thank you very much for your technical questions. First question regarding the first question, yes, you're right. Our monetary gain declined by TRY 2.4 billion compared to Q3 of 2024. There are certain reasons. One of them is the slowdown in inflation rates. As you know, last year, inflation was in the same period around 8.9%. Now currently, it's declined to 7.5%. Therefore, this is the first reason for the lower monetary gain. The second one and the most important one, as you know, we sold our Ukraine business in 2024. It means that you are taking a significant portion from your balance sheet, especially generating inflationary income in your balance sheet. Therefore, due to this effect, Ukraine subsidiary sale led to a negative composition against nonmonetary assets. And furthermore, the capital reduction executed in our Netherlands company subsidiary in Q4 in 2024 indirectly led to a monetary loss due to indexation in Q3 2025. Therefore, this is the reasons of this one starting... Cemal Demirtas: Sorry for interrupting, but before passing to the next question, when I look at the -- my question is rather compared to second quarter, what -- I know that there might be changes from quarter-to-quarter, but even what changed from second quarter to third quarter? The inflation is higher, the quarter-over-quarter change. I don't know if you have any justification for the Q-over-Q comparison, the year-over comparison fair. Just if you have any comments before answering the next question. Kamil Kalyon: Normally, from Q3 -- Q2 to Q3, you're asking in 2025. Am I right? Cemal Demirtas: Yes, yes, yes. Kamil Kalyon: As far as I remember, we do not have a significant change regarding the year-over-year side. Yes, the Ukraine business is very important for this one. But Q2, Q3, we do not have a significant change in the inflationary side. But as you know, this -- some of the -- how can I say, in the CapEx side, there are some CapEx amounts are eliminated, as you know, for the 5G side and the 4G side. Therefore, this might affect the inflationary accounting side. But in Q2 and Q3, I do not remember the significant result. But starting from Q2 or Q3, we have started to generate inflationary loss for this year. But for -- starting from 2026, our 5G license amounts and the additional CapEx amounts will be included in our balance sheet, and we will be starting to see significant amount of monetary gain in our balance sheet starting from 2026. But for this year, as I mentioned, the main loss item is coming from the Ukraine sale asset and the inflation rates. The second question is regarding the TOGG. As we mentioned in our previous calls, there are some problems, especially in the market -- electric vehicle market in 2025. And starting from the Q2, TOGG started to take the necessary actions for the cost optimization. And as you might remember, there are certain changes in the special consumption tax base in third quarter. And this change led to an increase in vehicle prices, which was also supported by the launch of the new model. Therefore, TOGG recorded a moderate improvement in its performance during this quarter. Most probably this improvement will continue in Q4. Therefore, starting from -- we hope that Q3 2025 would be a significant milestone for the TOGG side. In the coming periods, we are expecting more performance from the TOGG side. But as you know, this is a production investment and there are heavy EBITDA -- amortization expenses of the company. But we are -- we can observe the positive impacts of the precautions that are taken by the TOGG company for this quarter. We hope that this performance will continue in Q4 because you know the new model is also in the markets right now. And there are some extra models are presented to the market, especially 4x for electric vehicles. There are important demand for these cars. Therefore, we will see the positive impact of these actions in the Q4 also. Ali Koç: Regarding the 5G, Cemal, thank you very much for the great question. Yes, 5G era is starting. So starting from April 1, 2026, we are going to launch 5G all over the Turkiye, and it's going to create new value-added services and opportunities. Especially with 5G, a new era of flexible and personalized tariff is the beginning. The age of one-size-fits-all plans is coming to an end. And today, for example, Turkcell serves more than 39 million mobile subscribers, which means 39 million unique tariff possibilities. In this environment, our goal is to maintain the highest level of customer satisfaction by offering plans tailored to each individual's need. We also aim to accelerate 5G adoption because 5G is going to bring high speeds, lower latency, but we need to -- our customers to have 5G phones. So we also aim to accelerate 5G adoption by supporting device financing and establishing new partnerships with smartphone manufacturers. Following our recent collaboration with Samsung, for example, we have already bought 100,000 5G-enabled devices. We plan to -- which are built in Turkiye, domestically produced A26 phones, Samsung phones. We plan to form similar partnership to further increase the number of 5G-ready phones in the market. Through these initiatives, we will make the next-generation devices more accessible as well as drive broader 5G usage across our customer base. So in order to give you a brief information about what is the difference between 4G and 5G, 4G technology was designed primarily for people, but 5G opens the door to a world where machines communicate with each other, enabling smart cities, connected factories, smart factories, industrial automation. And as a new value-added services over the next 5 years, we anticipated that the autonomous driving and connected car sectors will gain momentum in Turkiye. During this period, data consumptions and speed requirements are expected to rise significantly. And additionally, similar increases in data demand, speed requirements will emerge across government services as well as logistics, supply chain, smart manufacturing, the energy sector and smart city ecosystem, driven by the adoption of hybrid and private 5G networks. So stay true that 5G will unlock new revenue opportunities across not only the automotive industry, but also the government services and logistics and energy and smart cities. So as new technologies mature, Turkcell is positioned to be a leading operator, enabling Turkiye digital transformation through 5G and delivering the best and the greatest 5G technology to our customers. So how we are going to do it is the tender is a solid proof for it. So by securing large-scale 5G frequency resources, we gain a significant competitive advantage in both capacity and the quality because we got the highest frequency spectrum. The wider the spectrum will allow us to deliver superior customer experience in densely populated areas, ensuring high speed, low latency connectivity even under heavy network loads. It also enables us to serve a much larger number of people. So we are going to bring this fixed wireless access customers. We call it Superbox 5G, fiber-like performance. Even if you don't have a fiber, we are going to provide you 1,000 megabit per second speeds with our Superbox 5G-enabled boxes. So even if you don't have your fiber in your house in anywhere you go, we are going to provide the best speeds within a wireless domain, and it's going to give you a huge flexibility and then it's going to come up with a huge efficiency. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Turkcell management for any closing comments. Thank you. Ali Koç: Thank you very much for joining us, and I hope to see you in the next quarterly meetings. Thank you very much for attending. Ozlem Yardim: Thank you for joining us. Hope to see you for the year-end results. Thank you. Kamil Kalyon: Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.