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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.
Operator: Good morning, and welcome to Permian Resources conference call to discuss its third quarter 2025 earnings. Today's call is being recorded. A replay of the call will be accessible until November 20, 2025, by dialing (888) 660-6264 and entering the replay access code 91750 or by visiting the company's website at www.permianres.com. At this time, I will now turn the call over to Hays Mabry, Permian Resources Vice President of Investor Relations, for some opening remarks. Please go ahead. Hays Mabry: Thank you, Jimmy, and thank you all for joining us. On the call today are Will Hickey and James Walter, our Chief Executive Officers; and Guy Oliphint, our Chief Financial Officer. Many of the comments during this call are forward-looking statements that involve risks and uncertainties that could affect our actual results and are discussed in more detail in our filings with the SEC. We may also refer to non-GAAP financial measures. For any non-GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release or presentation. With that, I will turn the call over to Will Hickey, Co-CEO. William Hickey: Thanks, Hays. We're excited to discuss our third quarter results this morning. This marks the 12th consecutive quarter of strong operational performance by the PR team, culminating in our highest quarterly free cash flow per share since inception despite a suppressed commodity environment. Our business is firing on all cylinders as we are able to deliver strong execution in the field, progress our accretive acquisition strategy, improve our balance sheet and continue delivering strong returns to our shareholders. We think this performance is a testament to both the quality of our people and the quality of our assets and should continue to set PR up for strong and growing free cash flow going forward. In Q3, production exceeded expectations with oil production of 187,000 barrels of oil per day, up 6% from Q2 and total production of 410,000 barrels of oil equivalent per day. Our production outperformance was driven by continued strong execution, particularly from a large-scale Texas development that was brought online in the quarter. On the cost side, our operations team continues to set the standard in the Delaware Basin. We reduced controllable cash costs by 6% quarter-over-quarter, primarily driven by reducing LOE approximately $0.30 to $5.07 per Boe and D&C cost by 3%, averaging $7.25 per foot in the quarter. Both metrics were below full year guidance, and we see additional room for improvement on the D&C side as we head into next year. The combination of strong production and lower costs drove adjusted operating cash flow of $949 million and record adjusted free cash flow of $469 million with $480 million of cash CapEx. Our outstanding operating performance and conservative financial strategy further enhance our fortress balance sheet. During the third quarter, we called our 2026 senior notes and redeemed the legacy Centennial Convert, reducing outstanding debt by over $450 million and further simplifying our capital structure. In July, we received our first investment-grade credit rating from Fitch. And earlier this week, Moody's upgraded us to a positive outlook, bringing us one step closer to investment grade. Our credit metrics have long matched our investment-grade peers, and we appreciate the recognition. Slide 5 highlights our strong Haley production outperformance that underpinned Q3 production results. We frequently talk about our Delaware Basin leading cost structure, but this development is a great example of how our technical team approaches every project to maximize recoveries and value across our position. Our proprietary subsurface characterization dictated how we space, stack, sequence and customize completions for each of these 17 wells. The combination of these technical refinements drove a 45% oil outperformance versus offset wells in the first 90 days. The recipe here is the same one we've used to consistently improve results across our portfolio, data-driven spacing and targeting, interval-specific completions and precise wellbore placement, all supported by PR's cutting-edge technology and long history of technical expertise in the Delaware Basin. Having our entire team based in Midland close to our assets allows us to seamlessly translate technical insights to the field, driving lower costs and superior execution. On the back of our strong well results and stellar operational execution this quarter, we're raising the midpoint of our full year production guidance to 181,500 barrels of oil per day and 394,000 barrels of oil equivalent per day, while keeping our CapEx guidance unchanged. This plan reflects an increase to the original full year production guide of 5%, while lowering the capital budget by 2%, demonstrating continued improvements in capital efficiency. With that, I will turn it over to James. James Walter: Thanks, Will. Turning to Slide 7. We wanted to provide a little more context and background about how we built Permian Resources into the business it is today. When we started Colgate Energy and moved to Midland in 2015, we had no assets and no production. We quickly realized that building a business of quality and scale was not going to be easy. And if we were going to be successful, we would have to focus on doing the hard things that other companies didn't want to do. We built Colgate by working harder and being scrappier than the companies that surrounded us. We were also fortunate that our entire team was in Midland. This allowed us to have great real-time information and to build long-lasting relationships with mineral owners, brokers and legacy operators. It also gave us access to real-time intel on the latest technology, well results and information in a rapidly changing environment. Having our headquarters and entire team in Midland allowed us to truly ingrain ourselves in the Permian Basin ecosystem, which was our first competitive advantage. Today, we are fortunate to have another true competitive advantage, which is our peer-leading cost structure in the Delaware Basin. As you can see in the graph at the top of Slide 7, we're able to drill, complete and operate wells at a cost structure that is meaningfully lower than the companies around us. And the results speak for themselves. We have completed over 2,000 transactions in the past 10 years and have built a track record of driving the highest equity returns in the oil and gas business, both as a private company before and now as a public company. And our momentum and opportunity set is only growing. We are on pace this year to do more transactions than any other year and think the acquisitions we are doing today are as good as any deals we have done in the history of the company. We are proud that our team has continued to maintain the same culture of doing the small things and doing the hard things. This culture is clear in our approach to acquisitions and divestitures, but more importantly, it is deeply ingrained in every department and every part of our business. Doing the hard things not only supports our M&A effort, but leads to the best-in-basin cost structure that allows it all to happen. And all of this shows itself more specifically in what we were able to accomplish in Q3. We closed 250 deals primarily in New Mexico, adding 5,500 net leasehold acres and 2,400 net royalty acres for approximately $180 million. The acreage we bought in Q3 fits like a glove with our existing position and the locations will compete for capital in our high-quality portfolio from day 1. Our acquisition pipeline remains robust, and we feel good about PR's ability to continue to do accretive deals that increase our inventory life and drive long-term value for investors. Slide 9 shows the progress we have made increasing the amount of gas we sell of the basin and improving our netbacks. PR now has agreements to sell approximately 330 million cubic feet per day out of the basin in 2026, increasing to 700 million cubic feet per day in 2028. As a result, at current strip, the volumes associated with these agreements are expected to realize approximately $1 per Mcf higher pricing net of fees in 2026, resulting in a greater than $100 million uplift to free cash flow next year. As a result of these agreements and our existing hedges, the company has reduced its Waha exposure to approximately 25% of total gas volumes in 2026. Longer term, these agreements put PR in a position to benefit from growing natural gas demand and higher realized prices on a larger portion of its natural gas production. Moving to Slide 10. We want to point out that PR is in the fortunate position of having the flexibility to allocate capital to whatever part of our business we think is going to drive the most long-term value. Capital allocation is the most important thing we do, and our strong balance sheet allows the company to pursue an all-of-the-above approach to value creation. We can allocate capital to the highest return opportunities rather than having to focus our efforts on a single capital allocation strategy. Just this year, I've seen opportunities to deploy $800 million into acquisitions, $75 million into buybacks, all while reducing our total debt by $630 million and maintaining one of the highest base dividends in the sector. Having the flexibility to allocate capital to whatever we believe creates the most long-term value has been a key part of our business model for the last 10 years and remain a core part of our strategy going forward. Thank you for tuning in today. And now we will turn it back to the operator for Q&A. Operator: [Operator Instructions] Your first question is from Scott Hanold from RBC. Scott Hanold: I know it's a bit early on 2026, but obviously, it's very topical for investors. So can you just give us a general sense of how you're thinking about the activity pace and what that could just high level mean about oil production and relative CapEx? James Walter: Yes. Sure, Scott. I'd say, look, for our long-standing policy, we're not going to put out a soft guide or anything like that at this time. As we've done in the last few years, we think it makes a lot more sense running this business to wait until February to put out 2026 guidance. I'd say, obviously, 4 months from now, we think we'll know a lot more about the macro, the service cost environment, what we think commodity prices look like heading into the balance of the year. So I think what I'd tell you is, look, we're fortunate that our business continues to have a ton of flexibility next year, and we should be in a position to react to whatever the macro environment looks like. And I think if that's an environment that is supportive of and encouraging to higher reinvestment, quicker paybacks, higher returns and ultimately production growth, we can do that and do that quickly. And if it's an environment that has weaker commodity prices, kind of lower returns, then we're in a position to deliver a really capital-efficient kind of lower or no growth program. That's probably not as much detail as you'd like. But what I can tell you is that 2026 is shaping up to be a really strong year, whichever the various paths we do end up choosing. I think -- we think it's setting up to be the most capital-efficient year we have ever had. Look, we continue to get more efficient on the ops side, as you see this quarter and make substantial and sustainable improvements to really all parts of our cost structure. Our productivity remains strong. We think next year should be just as good as this year, which was just as good as the years before that. And as we talked about a couple of times in this deck and the last deck, our realizations are meaningfully better next year. We talked about on the prior earnings call that we expect to realize $0.50 a barrel higher on the crude side. And we think our gas netback could be $0.20 an Mcf better based on the agreements we've signed in the last couple of months. So all in, I think next year should be a really good strong year for Permian Resources, but we're going to wait and see what the macro brings before we formalize the plan. Scott Hanold: Okay. I appreciate that context. If we could take a look at that Haley kind of that pad you all drilled or at least set of wells. Obviously, fantastic results. But as you step back and look at your acreage holistically, are there any other opportunities like that across your asset base, whether smaller, larger or similar size? And why was that so like uniquely good on a relative basis? William Hickey: Yes. Thanks, Scott. Haley was unique to us in that it was kind of more of like a one-off block that we owned and is not contiguous with the greater PR position. And as such, I think it gave our team an ability to demonstrate what they do so well, both from the cost side and the productivity side as compared to offset results. But if you take a step back, I'd say on an absolute basis, the performance from the Haley pad is kind of right in the middle of performance of PR's overall position. This was a -- it caught us off guard because we built expectations based on offset production and significantly outperformed that over the first 90 days. But if you just look at kind of productivity of that pad, it should fall pretty much in line with our overall portfolio. So it was a nice surprise to the upside, and I think really demonstrate what our team does very well. But it's not a -- the rest of our portfolio will continue to perform as good, if not better, than Haley, which is consistent with previous years. Operator: And your next question is from John Freeman from Raymond James. John Freeman: Nice to see the continued progress on the gas marketing agreements. Obviously, it looks like in a couple of years out, '27, '28, you'll have 90% plus of those gas volumes being priced outside the basin. And I'm just trying to get maybe some color on maybe the optionality that you all have in terms of like the gas that's being moved to kind of the DFW market versus the options to move it to the Gulf Coast. I mean just looking at some of the agreements you've got like the Hugh Brinson line, I know that, that stops in April, South of DFW, I believe it has optionality to go to Katy. You've got Matterhorn that goes directly to Katy. Just trying to get a sense of kind of when I look at DFW versus the Gulf Coast markets, just kind of the optionality you all got with these agreements, if you could? James Walter: Yes. I think we do have quite a bit of flexibility to kind of shift volumes from the Houston Ship Channel to DFW markets. I think what that looks like for us out in '27 or '28 is going to depend on what the market looks like at the time. So I think for us, I do think specifically, most of our gas will go to Houston Ship Channel or DFW and probably somewhere close to 50-50 in a base case with the ability to swing that 10% or 15% either direction depending on what we're seeing in the market. But I do think we've got some flexibility there. But in any case, we'll have gas going to both DFW and the Gulf Coast markets. John Freeman: Got it. And then on the bottom of that Slide 5, we all highlight a number of different leading-edge things you all have been doing to improve recoveries, lower costs. I'm just -- some of those, I think you've all been doing for all year. I'm just trying to get a sense of kind of what you all would characterize as more maybe more recent developments, things that maybe are just starting to flow through operations results. Just anything you all could highlight on that front? William Hickey: Yes. I'd say we are always kind of tinkering and trying new things to both reduce costs and increase recoveries. Not to sound repetitive with kind of other conversations, but I'd say like recent breakthroughs have been on the drill-out side for longer laterals. We've kind of been testing and had a lot of success with a new technique that I'd say has meaningfully reduced drill-out cost. We're going to continue to kind of tinker with it and see exactly how well it fits across our whole portfolio, but I'd say especially on extended reach laterals, it has been a kind of a step change in efficiencies and costs on the drill-out side. I'd say on the recovery side, we are kind of continuing to play with optimal landing targets combined with kind of the right completion design those details change on every well we drill. But this is something that I'd say our team prides ourself on as we are, I think, have been deemed the leader on the cost side in the basin, but we put just as much effort on the recovery side as well to make sure that we are maximizing value of every acre that we own. And I think the team has done a really good job. Operator: And your next question is from Neal Dingmann from William Blair. Neal Dingmann: Nice quarter. James, just jumping right into my first question. I think really notable on that Slide 11, all the above slide. My question is, I can't help see the comment where you mentioned that dividend supported around $40. So my question is sort of on when you book in that, if prices do fall, let's say, in the near term around that, could we see mostly just leaning just that quarterly dividend and the other side of that when prices -- once oil does rebound, do you anticipate sort of again, all of the above where you would look at dividends, buybacks, debt repayment and acquisitions? James Walter: That's a great question. I mean I think that Slide 10 is our favorite slide in the deck. I'm glad you pointed it out. But I'd say, look, like the way we're trying to run this business is that we would be able to deploy this all of the above strategy and really in any commodity price environment, including something as low as $40 or below. I think as you see, like we've got leverage and liquidity in a place where we want to be able to deploy capital to whichever of these acquisitions, buybacks is the most attractive return. And we want to be able to do that even in the darkest days of a down cycle. So I think for us, like the way we positioned our balance sheet, the liquidity, the leverage, like we want to be doing this all-of-the-above strategy at any environment because I think we've seen it at the bottom of these cycles, the best opportunities arise and don't want to have to be on the sidelines at $35, $40, whatever kind of most bearish prices, we probably don't think will happen, but want to make sure we're ready for it. So I'd say this all-of-the above strategy is something we're going to deploy and in any part of the down cycle and as dark as it gets. And just fortunate that the business is in a position that we think we can do that in pretty much any commodity price environment. Neal Dingmann: And then just lastly, sort of bolting on to that, my second question, just on M&A specifically. You guys were very active. I know there's always the rumblings that they can't find any more acreage yet. You not only find it, you find it at a lower cost. And so I guess my question is, are there continue to be small deals out there and your thoughts about -- there was obviously some big prices paid on some of the New Mexico lease sales, and there's another one coming up this month. Just your thoughts on sort of ground game versus other M&A. James Walter: Yes. I mean I think kind of to the beginning of your question, I'd say our ground game and M&A pipeline is as full as it's ever been. You can see in the graph on Slide 7, like we've actually done more transactions through the first 9 months of this year than any other year in company history. So I'd say rather than kind of drying -- opportunity set drying out, it seems to be expanding. And we're having to look harder and turn over more rocks and probably do more deals and more small deals to find the values that you see add up to the really attractive prices you see on Slide 8. Like I'd say, as you mentioned, there have been some big prices paid in New Mexico. It's the best rock in the world and fortunately to be operating in what we think is the best basin and -- but also fortunate that we have, I think, a true differentiated and proprietary access to deal flow that other people don't see. We're on the ground here in Midland. We're kicking over every rock and still willing to do the small and hard stuff, like I said in my introductory remarks. So I think for us, this rock is incredibly valuable, but we're in a fortunate position of having a lot of different ways to find deals and kind of pursuing an all of the above strategy here, too. Operator: And your next question is from Neil Mehta from Goldman Sachs. Neil Mehta: Yes. Great execution, guys, have been multiple quarters of it. And so I guess my first question is beyond just the operational volume improvement, balance sheet is getting better recognized. You went to a positive watch, I believe, at Moody's and you're pretty close to turn an investment grade. So can you talk about what are the next steps there? And what does move into investment grade mean for Permian Resources? Guy Oliphint: Neil, it's Guy. Thanks for the question. Yes, we were happy with both the Fitch and the Moody's outcomes here recently. We think it recognizes what we've communicated to our investors and to the rating agencies, which is we have an investment-grade balance sheet and financial strategy, and we've grown fast and the rating agencies are following that along with us. What do we have to do from here? We're just continuing our dialogue with the agencies who I think really understand our story, and we've got a great shot at getting to investment grade in the near term. I think what it does for us is we continue to think about protecting the balance sheet through the cycle, availability of capital through the cycle and lowering our cost of capital, and this does all of those things. So it's very complementary to all the things that we're doing as a business today and a recognition of how we've grown the business the right way. Neil Mehta: Yes. And then just the follow-up is just on the Permian broadly, we've seen strong growth year-over-year, I think, led by the majors. But I think companies like yourself have also outperformed expectations. There's a big debate out there. Are we at peak Permian or not? It obviously has macro implications. I know you guys spend more time thinking about your operations than trying to predict the oil price, but you got an on-the-ground perspective in Midland. How far away from peak Permian do you think we are? James Walter: Neil, that's a good question. I don't think we pretend to know the answer to that. I think what we do know, though, is activity has definitely been slowing down out here. I mean I think you've seen it in the rig count. You see it in completions activity that there's a lot of kind of slowdown. I'd say it will come. I think we've seen the Permian historically be more resilient than maybe people thought. I think it's kind of TBD if that continues, but it definitely feels like you can feel it on the streets in Midland, there's fewer people, there's fewer rigs, there's fewer completion crews. And eventually, we think that manifests itself in production growth slowing and ultimately flattening and then I think eventually declining. But I think it's kind of too early to tell when exactly that turnover happens. Operator: Your next question is from Kevin MacCurdy from Pickering Partners. Kevin MacCurdy: I wanted to ask on CapEx cadence this year and how that could translate going forward. The first half of this year, you're around $500 million a quarter. The back half is around -- it's closer to $480 million to $485 million given 3Q results and the 4Q guide. And is that just a function of lower well costs throughout the year? Are there any activity changes that affected that CapEx? And how can we kind of think about that quarterly cadence heading forward? William Hickey: No, it's been pretty flat activity. So I'd say well costs and kind of normal ebbs and flows in working interest would drive any kind of quarter-to-quarter differentiation. But well costs being the main driver of what you're seeing in the back half of the year. Kevin MacCurdy: That's helpful. And I wanted to ask again about the ground game and transactions. And just wanted to get your perspective. I mean, we've seen the M&A market kind of heat up and there's an assumption that large operators are hunting big deals. Just kind of curious if this reflects what you're seeing on the ground? And is that making it harder or easier to do kind of these smaller deals that you're known for? James Walter: Honestly, it's easier to do the smaller deals than it's ever been. I think we've always had a good sourcing pipeline, but I think our cost structure advantage is as wide as we see it today as it's ever been. And I think people with our activity levels, our kind of in-basin in Midland, on-the-ground knowledge of everything going on, like it feels like we've got a more sustainable competitive advantage on the small deal side than we've ever had. And I don't think we've seen the kind of pressure at the top. Neil had previously referenced some big prices paid in large-scale auctions, like that tends to not trickle down. I'd say the people who are chasing larger deals aren't chasing the deals at the smaller end of the spectrum. It's just kind of not how the ecosystem has been set up or has worked historically. And we don't see that pressure at the bottom of the day and really don't see it kind of coming down over time. Operator: Your next question is from Paul Diamond from Citi. Paul Diamond: Just a quick one, sticking on the ground game. You guys mentioned the strongest pipeline you've seen. But has any recent volatility kind of shifted the balance of those deals you're looking at between more of the working interest heavy versus those more blockout your acreage? James Walter: No, I don't think so. I'd say -- I think the macro -- the smaller end, the kind of smaller sized deals tend to be more stable and just kind of come at the pace, frankly, that we find them. A lot of those deals are us turning over rocks themselves and kind of finding the deals and drawing them out. So we -- that kind of tends to go as fast as we can go. And I do think that pace has accelerated a little bit with our larger footprint. I'd say, honestly, a renewed focus on the ground game. It's something we talk a lot about in the office today. I think volatility can have a bigger effect on larger deals. I'd say we got an Apache deal done in April, May. But besides that, the large deal pipeline was pretty quiet over that time period. I think people -- but it seems like the kind of the macro environment has settled down a little bit. I think we would expect buyers and sellers of deals in the hundreds of millions of dollars to kind of be able to get there in this environment. I think if you saw oil sharply go to 40 or 80, that might put things on pause again for a little while. But the beat goes on. I think that the deals that are going to come to market, are going to come to market and the rocks that we're going to turn over, we're going to turn over. So I'd say they can have 1 or 2 month slowdowns or accelerations. But by and large, it's pretty steady over here. Paul Diamond: Got it. Makes perfect sense. And then just sticking on the nat gas FT and sales agreements, moving to 50, 25, 25. I guess, over time, where do you guys see the right balance of that? Do you want more in that 75% number in FT and sales agreements? Or is the hedging going to remain a pretty substantial part? James Walter: I think a lot of -- I think we likely continue to hedge as we move forward. I think hedging could look different, right? Like today, our hedges are largely hedges that we have placed at Waha because that's where the gas -- corresponding gas sales are. I think over time, we'll be in a fortunate position that we're selling more and more gas in the downstream market at DFW and along the Gulf Coast. So I think we'll have a different question of do we want to hedge the Houston Ship Channel price and lock that in. I think we're fortunate about that as we'd expect less volatility and less dislocations the further downstream you get from the Permian Basin. So I have more flexibility there. But yes, I think we'll continue to hedge actual financial hedging like we've done. But I think more importantly, what we're doing is it's more of a physical hedge. We're actually physically selling more of our volumes at the end markets that we think will be better markets over the long term. So probably reduces the amount of hedging going forward. But I think that's going to be dependent on the market and the pricing as we see it in the future. Operator: Your next question is from David Deckelbaum from TD Bank. David Deckelbaum: A follow-up just on some of the gas marketing questions. I just wanted to get some color from your perspective, why sign these agreements now versus other periods in the past? And I guess, how should we be thinking about the impact to your cost structure beyond '27? James Walter: I mean I think we probably should have signed a lot of these agreements 3 or 4 years ago. That's probably on. I think a lot of people missed it, too. But I'd say, look, as we've run the business most of the time in the last decade, our #1 focus has been on flow assurance, and we bought a lot of assets that came with legacy contracts that had lots of restrictions on what amount of gas we could take in kind, how we could sell downstream from there. So I'd say we've been pretty transparent that over the last 2 years, maximizing our netbacks on not just crude volumes, which we think we've done an awesome job on the last 10 years, but on gas volumes as well, has been one of, if not the top priority at the company. And we've been making as much progress as we can. And I think it's all kind of coming together this year and the past couple of quarters, but we're convicted it's the right decision. We're convicted that for all your hydrocarbons that selling further downstream, closer to end users is going to get you a higher netback on the average over time. And you're seeing that play out in a big way in 2026. And we think although the kind of futures market doesn't imply as big of an uplift in years beyond that, we think it will continue to outperform and pay dividends for years to come. David Deckelbaum: I appreciate that color. And maybe just to expand a little bit. I know that you said you didn't want to give any self guidance on '26, but I think you did remark you think it's going to be your most capital-efficient year ever. Is that more in reference to the uplift that you see in realizations? Or are there -- it sounds like your expectation is that well productivity is pretty static. I mean what sort of motivates your enthusiasm around capital efficiency next year? William Hickey: I mean in short answer, we think that well productivity will be consistent with the last 2 or 3 years, and our well costs are as low as they've ever been. And I think that we probably have a little bit of room from here to continue to kind of reduce them a little bit from here. And so lowest well cost ever with consistent productivity and better realizations is a recipe for more capital-efficient business. And so I think that what James alluded to earlier is that '26 is going to be a great year. The decision that we ultimately need to make over the next few months is do we let that incremental capital efficiency accrue to more production or less CapEx. And I think that's what we're going to work through over the next few months. Operator: Your next question is from Geoff Jay from Daniel Energy Partners. Geoff Jay: There's a lot to geek out on Slide 5, but kind of wondering about when I see the 6% decline in controllable costs, you call out chlorine dioxide as a treatment to increase base production. I'm kind of wondering what other sort of initiatives you're taking on that side to sort of manage base production and keep lowering your LOEs in particular? William Hickey: I mean those guys are always trying to make the business better. We've had a lot of success in New Mexico where power is terrible on kind of combining well site generation to more central larger scale generation. I think we took 26 generators out of the field in Q3 over the 3 microgrids we put in. I think we've got 1 or 2 more between now and year-end. So that's a step change both in cost of power, but also in run time. I'd say a big part of our production outperformance over the course of this year has been improved run time. And if you can go stack lots of compressor or lots of power generation on one site, you get much better run time than you do when it's spread out over lots of different places. Yes, I'd think the chlorine dioxide is an interesting one, just as older wells have more buildup around the perfs when we have a failure and we're running in, a lot of times, we'll pump some kind of chlorine dioxide and acid to clean up perfs and clean up near wellbore. And we've seen in some places where you have a remarkable increase in production, 5x to 10x where you were temporarily. And ultimately, it kind of declines back to something that is still materially better than you were before. Look, I think that the Permian Basin is a place where innovation is always happening, and we've built a team and a culture of always trying to kind of have our ear to the ground. So we're the fastest follower in places where we are not innovating the new ideas. And in other cases, we are kind of truly pioneering new things. And I think that, that will show up in hopefully better run time, better well cost and better productivity over time. Geoff Jay: Got you. So I mean -- but it still sounds like it's potentially kind of early days for some of these initiatives. Is that fair? James Walter: I'd say it's always early days. Like I don't think the pace of innovation has slowed at all. Like it feels like every day, every month, every year, like the opportunity set to make the business better across all facets, production optimization specifically, but it's always good. I don't think we see it slowing down, and it may be early days on 1 or 2 of these technologies, but there's another technology coming around next year that we're not even talking about today. So I don't think that pace of innovation is slowing by any means. And we Permian Resources, I think, probably on the front end, but the whole industry is finding ways to continue to get better. Operator: Your next question is from John Abbott from Wolfe Research. John Abbott: Guy, maybe just a really quick question. You've had a little bit more time to examine the one big beautiful deal. Anything incremental as far as future cash taxes at this point in time? Guy Oliphint: Nothing different from last quarter. John Abbott: All right. That's helpful. And then the other question is, I mean, you have a very low corporate breakeven with the dividend. How do you think about the pace of future dividend growth at this period of time as you sort of look at what you're doing on and your ability to generate free cash flow? James Walter: Yes. I mean I think kind of -- look, for us, I'd say having a sustainable and growing base dividend is a core part of our strategy of Permian Resources. It's what we view as a core quality of any high-quality business in this sector or really in any sector. So I'd say growing the dividend over time is a priority and something you will see consistently from us year in, year out. I think the pace of what we've done in the last couple of years probably slows from here. It's been pretty exceptional from a CAGR perspective. But I'd say, as the end of next year, that's something we'd expect to finalize alongside our February budget. But I'd say the business is firing all cylinders. The ability to continue to grow the dividend, given the capital efficiency we've referenced on this call is as strong as ever. So you should see it continue to grow next year and for years to come. Operator: Your next question is from Paul Cheng from Scotiabank. Paul Cheng: I was just curious that I think the whole industry and including yourselves that is looking at the vessel length and you are saying that you are seeing some success. If I look at from a land position standpoint, where you see the opportunity set, what percent of your program could be in the 3 miles? And also, have you tested on the alternative shape and whether that you think that will be a good fit for you? That's the first question. James Walter: Yes. Look, I'd say the Haley Pad was a great example of a really successful 3-mile development. I think we drilled quite a few 3 milers this year. I'd say it's become a larger part of our program. And we're very impressed with how well our team has executed on the longer laterals. We mentioned some great technology on the drill-out side we've applied. I think our land position sets up really well. We've got a blocky position in Texas and New Mexico that could set up for long laterals. I think for us, the honest answer is we don't see that much of a capital efficiency step-up in the Delaware Basin today in most of the areas that we operate going from 2 miles to 3 miles. Obviously, 3 miles are better on a D&C per foot basis. But just given how much oil and gas and fluid we make in the Delaware, we often don't see the corresponding one-for-one uplift in initial production. So you drill and complete cheaper, but you make closer to the same amount of oil in the early time. So on a discounted cost of capital rate of return basis, you're not seeing major uplift from going from 2 miles to 3. I think the short answer is anywhere from 2 to 3 is a pretty good place to be. And the vast majority of our position sets up for long laterals in that window and should be the majority of our program going forward. Paul Cheng: How about on the alternative shape? Have you guys ever looked at that or tested out? William Hickey: U-turn wells. James Walter: We -- I think we've drilled 10 U-turns year-to-date. I'd say it's not an important part of our go-forward program. I think there's been some cool examples of us like where you had a legacy 1-mile well on a DSU and the rest of the pads set up for 2-mile laterals perfectly and you had a legacy well that you could do a U-turn or a J-hook around. That's been a really cool tool. It's allowed us to more efficiently drain resource, probably add an extra stick that otherwise wouldn't have been economic. But we're really fortunate our land position sets up for 2- and 3-mile straight wells, so aren't going to have to drill a lot of U-turns going forward. Paul Cheng: Okay. And on the opportunistic buyback, can you share that what kind of criteria or matrix that you guys are using in terms of that decide whether that this is the right time to do buyback or not? James Walter: Yes. I think we've always said we're going to buy back shares when there are material dislocations in the share price. I think most -- more often than not, that's driven by the macro. I think rather than tell everyone our specific criteria, I do think kind of pointing to what we did in April, immediately after "Liberation Day," we saw a material reaction downward in the Permian Resources stock price and had an awesome opportunity to buy shares in the $10 to $11 range and hit that as hard as we could that whole week. I'd say the stock recovered pretty quickly and that opportunity window closed. But I'd say for us, it's going to be a material dislocation is going to be kind of what we use as the criteria. And frankly, we're always going to be weighing that against our other opportunities. I'd say our acquisition pipeline remains robust. So we'll be constantly weighing do we think we'll generate a higher long-term return buying back shares or doing acquisitions or frankly, putting cash on the balance sheet for future opportunities. So I'd say any one of those is on the table at any given time, and we're constantly evaluating the opportunity set more broadly and going to allocate capital to whatever we think generates the highest rate of return and creates the most long-term value for shareholders. Operator: Your next question is from Noah Hungness from Bank of America. Noah Hungness: I'd like to start off on just the maintenance CapEx. Given the D&C efficiencies you've seen, how can we think about maintenance CapEx levels? And then also how your dividend breakeven evolves over time through '26 and beyond? William Hickey: Sorry, I get the first part. Can you repeat the second part of that question? Noah Hungness: Yes. The dividend breakeven, just how that evolves over time, like through 2026 and after. William Hickey: Cool. Maintenance CapEx, I'd say, kind of just generally speaking, we've quoted about $1.8 billion of maintenance CapEx plus or minus. And I think what you've seen transpire this year is we've grown production pretty meaningfully. So the base is a lot bigger, but we've reduced cost and kept well productivity the same. So I think that plus or minus those probably offset each other and you get to something that is in that range or slightly higher, something like that on the maintenance CapEx side. Dividend breakeven. James Walter: Yes, dividend breakeven. The goal is for it to get better over time or stay the same, but there's a proportionate increase in our base dividend. So I think for us, the business is getting better. So that should either lower our dividend breakeven over time or give us greater capacity to pay out the base dividend and lower commodity prices. So I think that's a TBD capital allocation decision, but the business is getting better, so you should be able to pay a larger base dividend with the same level of protection or lower the breakeven. Noah Hungness: Got you. No, that makes a ton of sense. And then for my second question, I know you guys touched on this a little bit, but regarding the additional FT that you guys took on, and you mentioned the strength of Waha kind of in the forward curve and how Waha basis kind of closes in back half of '26 and into '27. What was the advantage of signing up for the FT versus just hedging out the forward curve? James Walter: Yes. I mean, obviously, there's a really large near-term benefit to these FT deals we signed up to the tune of over $100 million uplift from gas alone at strip. I do think it's our expectation and clearly the market expectation that as some of these pipelines come online, the Waha differential should close kind of more or less to the cost of shipping. So for us, I think -- over the long term, I think we've seen trying to hedge gas ultra long term, there's just not the liquidity to do so. And we think you're ultimately better off selling your gas closer to end users and further downstream. I think although the long-term futures market doesn't reflect it, like I said, we do think your kind of downside skew for any regional hub like Waha is worse and more impactful than your upside. So I think the way we think about it is over the long term, we think we will be better off we realize better pricing from '27 and beyond, selling at Houston Ship Channel and DFW than we will at Waha. And I think that may not be every month, but I think the way we think about it is most months, it will be a push. But when you win, you'll win big, just like you've seen historically. Operator: [Operator Instructions] And your next question is from Leo Mariani from ROTH Capital Partners. Leo Mariani: You guys obviously did a good job lowering D&C costs yet again this quarter. You guys commented in some of your prepared remarks that there could be more downside into 2026. Could you provide a little bit more color around that? Are you starting to see leading edge oilfield service costs make another step down here? And maybe it's a combination of that and some other things you're working on the efficiency front? William Hickey: Yes. I think that -- I mean, obviously, with oil price where they are and the amount of activity being shut down and pulled out, we've seen a pretty meaningful reduction in service costs over the last few quarters, and you kind of combine that with the efficiencies we've picked up, and that's what's driven the kind of cost reduction year-to-date down to the $725 a foot level. I'd say my comments on where it could go from here is really just we are continuing to get better in the field, and I don't see at this crude price and based on activity levels of kind of the basin cost snapping back anytime soon. And so if we can maintain kind of this level of service cost and keep picking up efficiencies in the field, which we are, I think there's probably a more upside or lower prices is more likely than higher from here. But I don't know what the tune is a couple of percent, something like that. Leo Mariani: Okay. Helpful. And I guess just on the share buyback, obviously, a number of questions around it. I guess, trying to be opportunistic. If we get in the lower for longer oil environment, hopefully, we don't in 2026, could you guys be a bit more programmatic if oil is kind of consistently in the 50s for a while? Or will you just kind of say, hey, it's a good time in the cycle to buy stock? James Walter: I don't think it'll ever be that programmatic. I think that fails to factor in the other opportunity sets and what are the other things you can do with capital and what's your view on things looking like going forward. I'd say for us, I think if we're in the 50s for a long period of time, you should expect us to buy back more stock than we have historically. I think that's pretty easy from our perspective. But I don't think it will ever be programmatic. We think we are able to create more value for us and our investors by being thoughtful and making each decision to buyback shares, do an acquisition or put cash on the balance sheet as a decision made in that time with all the facts and information we have in that moment. So I think for us, we don't think the programmatic strategy creates the maximum value and going to keep on this kind of -- this path that we've been on. Operator: And your next question is from John Annis from Texas Capital. John Annis: For my first one, on Slide 5, you highlight leveraging AI to expand play boundaries. I wanted to ask if you could expand on this. And then more broadly, how do you see the opportunity for organic inventory expansion through additions of secondary zones from here? William Hickey: Yes. Look, if you look at -- I think Eddy County is a good example of we have been both one of the most active buyers of acreage and also one of the most active drillers in Eddy County over the last few years. And so as such, we have a significant informational advantage over really anyone in Eddy County. We get production information, logs, incremental seismic information faster than anyone else does, just given everything that we drill is there's a 6-month plus lag before it's public. And what our team has been able to do is just kind of the workflows that we had internally, which may have previously taken weeks or months to get incorporated into passing that through to the A&D team or passing that through to the next development package. I'd say a lot of these large language models allow us to do that in minutes. And so really, it's just speeding up the passing of information across our team to something that's kind of more real time, and that allows all the different groups, the land team, the BD team, the drilling team, the completion engineering team, et cetera, to kind of benefit from what truly is an informational advantage that we have, albeit short term. And then with new zones, I'd say that's one that is unique, I'd say, to some degree of -- we are seeing tons of shallow and deep, but newer zones drilled across the New Mexico Delaware. And New Mexico and Delaware has a huge benefit of state and federal leases don't have few clauses when you drill one well, you hold all depths basically forever, which is, I'd say, unique to New Mexico. And given Permian Resources deep inventory position of kind of the same benches we've drilled over the last few years, I'd say that is not a huge part of our program, and we have the benefit of getting to kind of wait, watch and see. And so we've had a, I'd say, a ton of organic inventory expansion via offset operators' drilling programs that it's obviously the cheapest way to go add inventory is to kind of let others do it for you around us. I think you'll see that we'll drill, call it, 5 or 10 wells a year in kind of the more upside or kind of organic inventory expansion benches. But for the most part, we've had the luxury of getting to kind of sit back and let that get proven up by people around us. James Walter: And I think that's one of the things that's so special about being in the Delaware Basin is that the rate of new inventory additions really hasn't slowed over the last decade. Like every year, it seems like PR and offset operators finding a new zone. And not just a new one, I think the zones that we're discovering, the zones that we're delineating actually compete with capital with the best parts of the basin. So it's not like we're finding secondary and tertiary zones that better margin. We're finding new zones that can compete for capital day 1. And we think that's a really big differentiator in what we think is the best and most exciting basin in North American E&P. John Annis: Great color. I appreciate that. For my follow-up, staying on Slide 5, could you expand on the microseismic azimuth analysis? And then maybe more specifically, to what degree are you altering the azimuth to optimize completion efficiency relative to the analysis? William Hickey: Yes. I'd say -- I mean, a lot of this is things we've been doing a long time. I think we've just gotten better, faster and further along in how to leverage it. But I mean, on not a large percentage, but on some amount of our program, we'll go ahead and run microseismic and microphones to really understand where fracs are going. And really, the goal is just to optimize our design. We want to pump more or stimulate more where the rock is good, and we don't want to go waste a bunch of capital in places where recoveries will not be as good. And so I think what you're starting to see is just the incorporation of that in the business, both either increasing recoveries in some instances or just lowering costs in others. I'd say that microseismic has been around a long time, but the use of it and kind of the way that people are using it today is slightly better and more efficient. Operator: There are no further questions at this time. I will now hand the call back to Will Hickey for the closing remarks. William Hickey: Thank you. As you can tell by today's results, the business is firing on all cylinders. Importantly, we can continue to find ways to improve the business each and every day. Given our high-quality asset base and fortress balance sheet, we believe we can continue this execution and value creation going forward in any commodity price environment. Thanks to everyone for joining the call today and following the Permian Resources story. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.
Claus Zemke: [Interpreted] A very good morning from Cologne, ladies and gentlemen, dear colleagues, this is Claus Zemke, and I'd like to extend a cordial welcome to you on the occasion of our telephone press conference on Q3. We have got Matthias Zachert here, CEO, and the CFO, Oliver Stratmann and they both will give you an update on what has happened over the past quarter, and we'll give you the guidance for the remainder of the year. Thank you very much for joining. Technical remark from my side. We are having this press conference in German, but there will be simultaneous interpretation into English. If and when you want to ask questions, there will be a possibility after Mr. Zachert's talk. How that is going to work will be explained a little bit later. And then, for legal reasons, you must know that there is an Internet stream. Mr. Zachert? Matthias Zachert: Thank you very much. A cordial welcome to all of you listening to this press conference of LANXESS. So let me talk about Slide 3, making a head start on my update. And I'd like to give you a description of the general situation of the economy, the German economy. And I mean, you are all reporting about what is happening in the major industries of Germany, that is, the automobile industry, mechanical engineering, and this quarter, all the industries mentioned that the economic situation is very difficult indeed. And this is, of course, also true for the chemical sector, which requires a lot of energy. Well, the reporting has corroborated exactly that. And this brings me to LANXESS. So we are navigating stormy waters, and EBITDA and also sales are burdened. There is one segment that we have strategically developed, and this much to our pleasure, is rather stable, and that is consumer protection. Going to talk about that a little bit later, but the 2 other sectors, segments, that is the intermediates like the individual units, they go to show what fierce competition we have got and how difficult it is to run the business. And this is also true of Specialty Additives. So we are doing our best to offset the general conditions and navigate these stormy waters by cutting costs. So this is something that is under control, under our control, and we will go about it. And we will need to be more precise about the remainder of the year in a minute. Now, the Slide #4, weak environment, unfortunately, and also changes in the portfolio. And I mean, we divested a business unit, but also the unfavorable currency translations and the weak American dollar have had an imprint on sales and EBITDA. So sales are minus 16% and portfolio and currencies are one side of the story. But on the other hand, we have got price reductions of around 2%, a bit more than 2% and also a volume decline, which is rather painful because that holds up to 6%. Of course, that has a bearing on EBITDA. In the prior year quarter, we had EUR 173 million, which was not exactly brilliant in 2024, but that's still better than this year, and it was also an improvement over 2023. So we are still in a weak environment in 2024. And now figures have come down again. And this goes to show how dramatic the situation is in the energy-intensive sectors. Now, let us talk about our individual segments. And I have mentioned before, consumer protection. What we can see here is a rather stable operating income. The level of the prior year, and the margin is quite high, just under 16%. And this is the segment which we have developed and strengthened, also on account of acquisitions. So we have entered businesses that show rather stable performance, even if competition is a bit more intensive in comparison to previous years. Now let me talk about Specialty Additives, Slide 6. This suffers from the weak demand in the industry, particularly in the building and construction industry is still very sluggish, particularly in China, but also here in Germany. And suffers from the declines. This is something we have not seen ever before, particularly if you have a look at the last 10 to 20 years. And I mean, of course, there is an awful lot of catching up to do, but somehow it doesn't happen. There is still a crisis in the building and construction sector. And then the weak dollar is also having a negative impact on sales and EBITDA. As we all know, we are very busy in America as well, and we deliver from America to China, particularly when it comes to our fire protection materials, flame retardants, and well, the relationship between America and China is not exactly helpful in this context. Advanced Intermediates. In this segment, we see a lot of competition from Asia, particularly China, and weak demand. And the Advanced Intermediates business is the core activity of our activities here in North RineWustralia. So our sites in Leverkusen Endingen, and these business units, the Advanced Industrial Intermediates and also inorganic pigments are being produced there. And they suffer not only because they are confronted with strong Chinese competition. Well, the Chinese actually deliver at prices that are below our production costs. And I mean, we really have to discuss antidumping here. These activities not only face fierce competition, but also suffer from high energy costs, a lot of bureaucracy, and general conditions. I mean, we keep trumping that off the rooftop, saying they are conditions that are breaking the neck of our sets, even if our facilities are top-notch when it comes to their activities, their abilities to produce, and they can produce on a world scale. We are hard hit here over the prior year. We must say that there is a further decline. Slide #8, cash management. We are doing a good job here in the third quarter, stable environment. When it comes to the group's capital structure, net financial debt is stable, which has to do with good cash management, which we a couple of quarters. Now, Slide 9, geopolitical situation. I mean, tensions are still very, very high, which makes a contribution to the uncertainties in the world and in the individual regions. We still proceed on the assumption that the automobile industry will stay weak, as well as building and construction, and also the agricultural sector, even if there are different developments among the different actors. Looking at LANXESS, we are continuing with our cost and efficiency program. These are topics that we can control, and we are doing our level best to improve the framework conditions. And whenever possible, we try to draw attention to the fact that it is high time to bring the economy back on course and improve the framework conditions for the German economy. We talk to politicians and decision-makers, and these framework conditions have to be reestablished or else it's going to be so difficult, both in Germany as well as in Europe, to keep up strong industries that are definitely suffering under the present framework conditions. Our guidance of EUR 520 million to CHF 580 million, as published in the summer, will end up at the lower end of our forecast range. And in the second half of 2025, the framework conditions as well as demand haven't changed. So that supports this. On Slide 10, we would like to present the programs we are already using. You know our program forward with CHF 150 million. We finished this program swiftly, and we will be fully effective by the end of the year. In the second quarter, I spoke about the optimized production network. And we mentioned the closure of 2 operations and optimization of organization, and we are implementing these plans, and we take it that we will be successful according to our plans. Today, I would like to let you know that we are in the process of preparing further measures to achieve structural improvements of around CHF 100 million over the coming years. We are already discussing matters with our works council members, and we'll do so very soon and discuss, and decide and implement very soon, and this will probably be specified in the first quarter of 2026, so that you will be in the picture as well. You do see that we accept the market environment, and we change whatever we can change and control. And of course, we hope that the framework conditions will change in the future. But in particular, Berlin and Brussels are involved in the framework condition situation, and we hope some progress will be achieved there. The next slide, #11, gives you an overview of what's happening in the European chemical industry. Handelsblatt already mentioned some or many of the closures on the left-hand side in an article published in the summer, and we are repeating this. But in the right-hand column, we would like to share with you what was published recently. So you see, it's not just 10 minutes to 12, it's already gone to 12, and a lot of these changes are already taking place. The industrialization of those areas that need a lot of energy, and this is to be emphasized, those industries that need a lot of energy are taking place. And these are closures of operations that will not be resuscitated. They will not be back. These are closures of industries, especially the German industry is reputed for the high wages paid in this industry. We are among the industries paying the best wages. But should the framework conditions be such that you can no longer be competitive or even incur losses, then you have to draw your consequences, meaning you have to close plants and operations. This leads to lost jobs and a reduction in wealth. Other countries are fighting for their industry, knowing fully well that this is a driver of wealth and will attract other services, which will be beneficial for any country's wealth. So a lot of regions are fighting for their industries. And let me call a spade a spade. What is being closed here is in areas where the chemistry is needed and will be produced, most of which will be produced in China, where they're using coal for their production, which means, for the climate balance, this is no good news at all. There is not so much technological cleaning taking place. We know purification of water and air, tar, and catalytic purification. This is part of our standard. We are world market leaders there, but these capacities will be migrating to other countries, and they produce the same chemistry and generate wealth for their countries, but that is not beneficial to the global climate. So this is a detrimental effect on our global climate. This is worth thinking about again. You should know that the chemical industry right now is facing one of the most severe crises I've seen over the past 30 years, and we need to return to good competitive circumstances and framework conditions so that this high-level technology, especially the chemical industry, as the third largest industry in Germany, will be able to survive here in Germany. So the signals and the feedback we send out to the political decision-makers, as you see it on Slide 12, is that it's high time to act. We must return to competitive energy prices. We welcome the present discussion or initiative. Hopefully, there will be decisions taken soon on the industrial electricity prices and the compensation of electricity prices that have to be taken into consideration for the chemical industry. We clearly and unambiguously communicate to the European Commission and the European Parliament what is our position with respect to European emissions trading systems, and this needs to be reformed. And you quite frequently cover this topic in your articles. We also face the decision-makers, especially in Brussels, and say that they should not burden the European industry with additional regulations and restrictions, but rather to finally start to defend their own industry, to protect their own industry, as many other states are doing. And I also think we have to have a faster antidumping process. At the moment, it takes around 12 to 18 months rather than just a quarter. And things can be analyzed and decided within a quarter, if you ask me. Ladies and gentlemen, let me now look at the last slide in our deck. The economic situation has just been described, but there is also some light at the end of the tunnel or on the horizon. In the second and third quarters, we've seen the maximum uncertainty in the world because of this erratic tariff policy. And at the moment, this has a full effect in the second and the third quarter. I take it that this tariff uncertainty will be here to stay, but at a lower level. There are some stipulations and regulations in some places; there is no longer total escalation. So the level of uncertainty should exist in the next year, but not as much as we've experienced this year. We also think that the stimulus program for the defense of infrastructure in Germany will also have its bearing on the industry in 2026. So order books will see more orders accepted. That will have some consequences on different products, flame retardants, screed, coatings, and pigments. We've got different portfolios, and we don't take it that this will change overnight. It's November now. We don't see the effects right now, and we take it that there will be a gradual increase. The new government has only been in office since May. And it is on the various levels, like the Federation, the federal states, and the municipalities, that this is going to be implemented, and then it should bear fruit. I can say that the EU is already working on antidumping processes. We have been successful in 2 such procedures in a way that we were supported in that respect, and this is an adpinic acid sector, and also the phosphorus-based claim retardants. And of course, we are looking for further investigations simply because here in Europe, we see that we are actually being glutted by products that are produced by China, products that they cannot sell in the U.S. any longer. Now they are pushing that into the European markets for a song. And market consolidation is what is happening just now. And as I've said previously, there are company shutdowns, site shutdowns, and also our competitors are reducing their capacities or closing them for good. That, of course, will strengthen our position in the market. And from a technological point of view, and also from a size point of view, our facilities are well established. And if we were to survive this competition, then of course, we will emerge stronger from the crisis once it's overcome. This is what I wanted to share with you, ladies and gentlemen, concerning the third quarter and the market environment. So together with my Board members, I have discussed the situation at great depth. And I must say I'm really very pleased that we are all rolling up our sleeves, taking rapid decisions, and responding in a pragmatic fashion. This is what is required in order to get through a time of crisis. We accept that we have a crisis on our hands. We are doing something about it, and we all pull together in order to handle 2026. But before that, of course, we need to conclude 2025. And when we are going to have our financial year press conference at the beginning of next year, covering the entire year of 2025, you will hear what we have been doing. Claus Zemke: [Operator Instructions] Now Jonas Jansen. Mr. Jansen, you can ask your question. Jonas Jansen: Thank you very much for your statements. I've got a question concerning your cost-cutting program, even though you say you can only be more detailed at the beginning of the next year. But what are your ideas? And you said as of 2027, the situation ought to become better. So, is that on the basis of the cost-cutting efforts planned for 2026? And what does that mean? Does that mean that more facilities need to be closed? Or will you try to cut costs further? And I mean, you already have an ongoing program and EUR 350 million, and now you want to double that figure. So where on earth do you intend to get that from? Matthias Zachert: Well, Mr. Jansen, the EUR 100 million well, actually, we will be more detailed at the beginning of next year, but it is not true that this is only to have an impact on 2027. Part of it will already have an impact in the course of 2026. And how are we going to do that, please? Can I ask you to accept that we can only share more details if and when we have discussed the matter also with our works council, and when we can be more specific about the implementation. But it is quite clear that in the course of 2026, this will come the group's way and will bear more fruit in 2027. So when it comes to individual sites or facilities, I have said before that when it comes to production, we have already carried out our analysis and the implementations thereof, and we communicated that in the summer. So I'm really fighting for these sites. I cannot make any promises, but this is what we are fighting for to keep these sites, and sitting here today, we think that we will be able to keep all our facilities here in Germany. But that, of course, means that when it comes to our general cost basis, COGS, we need to save more money. And that, of course, is geared towards whatever does not make a contribution to the actual production. And then, of course, you have to discuss possibilities of simplifications, streamlining processes, and how to become even more efficient and effective. And we have to make sure that no facility produces any loss any longer. Since competition is so fierce and tough, we can only do what is under control, and this is keeping costs at bay. But as I've said before, we will communicate more details thereof in the first quarter of 2026. Claus Zemke: Next question, Patricia Weiss from Reuters. Patricia Weiss: I hope you can hear me all right. Well, the demand situation. And you said that this is going to stay weak until the middle of 2026, or even not longer. So will that reduce your earnings further in 2026? And then the second quarter, also, when it comes to your program to cut costs. And you said you want to keep the existing sites up and running. So, where do you want to get these savings from? I mean, are you considering further job cuts? And then also when you're talking about the general conditions, I mean, it seems that you are a victim of the general conditions. But what else can you do? What can you do when it comes to your strategic setup? And how can you become more resilient as an industry or a company in that sector? Matthias Zachert: Well, Ms., let me take these questions one after the other. Job cuts are not exactly excluded. I mean, we are trying to keep as many jobs as possible, but we cannot exclude that some will go away. I mean, we will go for the approach of natural attrition. We are talking about demographic change, and that makes it possible to reduce the workforce without actually dismissing employees. And your second question, I mean, there is still quite a chunk of COGS, general costs. And 2 years ago, I said that we, for example, are spending too much on our IT. We are significantly above a target value that we must achieve, which is attributable to the fact that over the past 3 years, we introduced a new ERP system. So that was double a burden, if I can call it that. But this is now something that we have concluded. In the first quarter of 2026, this will be concluded for good, and there should be a major part from this sector that will then help with saving costs. That was our target and still is our target. When it comes to the strategy of LANXESS, I mean, the individual segments, if you have a look at what we have done up to now, we have certainly established a consumer protection element. This is a very strong pillar in our group now, and very many of the businesses that we have separated from were polymer activities, and the polymer industry is being shut down here in Europe. This is really in the crossfire together with other sectors of the chemical industry when it comes to Europe. So it was a good idea to get rid of these polymer activities. But then the remaining sector of the chemical industry is still subject to a lot of difficulties. But over the past 6 months or so, we said, yes, we want to orient ourselves in a way that we become future-proof with a strong global position. So this is the market orientation we are affecting, but this cannot be done overnight. And this has nothing to do with the cost, but with the business model and the go-to-market approach, which, of course, we are strengthening in parallel and reorganizing our company accordingly. I hope this answers your questions. Claus Zemke: Next question to Annette Becker from Börsen-Zeitung. We can't hear you yet. Now we can hear you. Annette Becker: Another question on the consolidation of the market as of 2027, as you expected. Do you think that it will be exclusively due to competitors dropping out of the market? Or will there be some options for acquisitions as you see it? And is the European chemical industry in a position at all, given the market conditions, to acquire new businesses, because what we've been seeing for 1.5 years is costs up, costs down, and so on. And where on earth would you want to have the money from to acquire new businesses? Matthias Zachert: Well, looking at the past 30 years, there were different waves of consolidation in our industry, and they always took place after a severe crisis. Thereafter, acquisitions were an option. But quite often, there were also mergers that took place, creating a critical mass together with another company or more companies at the plant, at the business, at the value, adding chain level. So the industry always came up with innovative approaches. These need not always be decisions to acquire new businesses. There were also other approaches in the past, and we will see what the industry will be doing in the next 1 or 2 years to come. I believe that everybody will see that it's not only your own structures that you have to influence and change, but you have to think outside the box. And that has always been an element used by the industry, so I'm firmly convinced that the chemical industry will remain an innovative industry and will find new ways of strengthening its own position for the future. T Claus Zemke: Next question from Bert Frondhoff from Handelsblatt. He is still muted. Can you unmute yourself, Mr. Frondhoff? It doesn't seem to work. So we will return to you. Annettebekker seems to have another question. I was probably too fast. Annettekka, back to you again. Annette Becker: Talking about mergers, another question. The prime example for mergers is to be seen one of the partners will have to have the upper hand. And when you sold your primary businesses, you showed that there was 1 of the 2 companies that remained in control. And I think you are talking about mergers to create critical masses, but that's unrealistic. A lot of companies are failing when this happens. Matthias Zachert: Well, Ms. Becker, I can't confirm that there are successful joint ventures and less successful joint ventures. And over the past 30 years, when looking at the different value chains, there were good examples. Also, we did have a good joint venture of PBT with DuPont, where both of us had 50%. This joint venture was extremely successful, and there are other examples as well. So I would like to say that talking about mergers, if we were to imagine a special type of joint venture, we should talk about it once it's communicated for value chains. All I said was that acquisitions alone are not the panacea to consolidate the business; there are different tunes that you can play on the keyboard, right down to a joint venture. And should that be announced, then we ought to talk about it. I hope that answers your question, Ms. Becker. Bert-Friedrich Frondhoff: Sorry about the glitch beforehand. I have 2 topics. The first topic is that the first emissions trading in Europe was commented on yesterday by the ministers in Europe about free allocation. How do you see it? And what are the numbers? What would happen if this were not implemented and with respect to free allocation and further allocation, and short-term measures? And the second question is linked to this. Are you in favor of abolishing ITS as it is at the moment? Or do you want to see it changed? And if so, how should the change be affected? Matthias Zachert: First question. I can only briefly comment on this. I have not seen an evaluation on the individual elements discussed by the federal ministers at the European level or the different ministers at the European level, whether it's free allocation, yes, or no. And will the door be opened or rather closed, and how to consider this? So let's turn to the second question right away, which was of a more general nature. On the system or the trading concept with CO2 certificates. There are very clear comments on this. Our industry has a consensus. And here, I would like to share with you what I'm reading and what my colleagues are saying. This system, according to our opinion, needs to be revamped, reformed at least, if not abolished. There are different levels of clarity in the comments, but everybody says that the present design of the system would substantially make or worsen the framework conditions substantially and let me be very, very blunt. Our industry over the past years has made substantial progress with respect to achieving the climate targets. If you look at our company, we were really supported and praised, especially by the SBTi initiative. We are Climate Truck Paris 1.5. We earned many awards, although we are not so affected by the ETS costs because we have a much progressive portfolio. But looking at the industry, I have to clearly say one thing. The European industry has the highest standards, and we have all sorts of requirements when it comes to water purification or water treatment, recycling, and air purification. I mean, they are all very, very strong, and we are being certified and need to earn these certificates. So we've got very high ecological standards, and we've got wonderful facilities that meet the requirements at a top-notch level. But over the past couple of years, these facilities have been hit hard by increasing energy prices. And over the last 3 to 4 years, particularly because of Timmansi, former commissioner, who is not exactly friendly towards the industry sectors, quite the opposite is true, I must say. So all the industries, including the chemical sector, were hit hard by excessive requirements and red tape, and whether it is EUR 50 billion, EUR 80 billion, or whatever, I mean that is the cost that is being mentioned because we all had to spend a lot of money in order to meet the requirements. So it is bureaucracy. It is high energy costs, and we had quite high labor costs, and other industries thought that it was really quite enviable that we could pay such good wages and salaries. But then, on top of it, we cannot invest very much in America or sell a lot there. And there is other stuff developing. And on top, the fierce competition of China now in 2026, on the basis of the decisions that were taken by the commission in 2022 and 2023 under the auspices of Commissioner Timmansi, that the ETS allocations ought to be curtailed when it comes to free allocation. Now there is an additional burden, and this is where our industry is saying. I mean, that was decided 2 or 3 years ago, and this is no longer in line with our current realities. What is happening here is a significant additional burden and triggers their respective shutdown events. And the general conditions are no longer the right ones here. So we are producing chemical products, which we are producing under very good conditions, and all that goes to China. And China will care less about clean production. So they use coal and they will not reduce their emissions, and then they put that into their tankers and transport the stuff to Europe, which is fueled by heavy diesel fuel. So we get the products from an environment that is not as conscious about climate protection as we are. And we are, and I mean, it comes back to Gemlif, saying that this is suicidal when it comes to climate protection and when it comes to the protection of our industries. I mean, this is really a very clear and very tough statement. But at the end of the day, I can see the reality thereof. And unless we get our act together now and protect our industry that produces products in an environmentally friendly way. And then we will lose out, and the whole world will lose out because we will then get the products from areas in the world that couldn't care less, or at least are not as conscientious as we are. So we will abolish ourselves unless we reform, unless the lawmakers can agree on a proper compromise, which, at the end of the day, will protect both the climate and our wealth. Under the current conditions, this will not be possible. So, Mr. Frondhoff, I hope that I've been clear enough. Claus Zemke: Mr.Frondhoff says he's got another question, but of course, he doesn't want to hog the scene. So, is there anybody else? Well, why don't you go on, Mr.Frondhofff? Quite all right with us. Bert-Friedrich Frondhoff: Currency translations, foreign exchange effects. Can you quantify that? What does it mean for you? Is this attributable to the weak dollar? Or is it also the renminbi development? And what kind of further developments are you expecting? And maybe you can also talk about the business situation in the individual regions. Matthias Zachert: Well, Oliver, why don't you take over? Oliver Stratmann: Well, Mr. Frondhoff, you kicked it off very well. I mean, the most important currency is the dollar. Well, this dollar is the basis for our business in America and in Asia. So this is about 3% simply on account of the weakening of the dollar. And we expect this to stay? And if I have a look at the banking sector, this is a consensus that you cannot really talk about a short-term recovery when it comes to the most important foreign currency. Claus Zemke: Thank you. Now we have a question from the English space, Andrew Noel. Andrew Noel: If it's possible to get an answer, that would be great. The first one is, I guess, LANXESS was at the CPHI, and you've got some feedback from there. I want to ask, has CDMO finished in Europe? Has the market already shifted to India and Asia? Because when the Syngentas of this world look at ASM, it's in administration. I'm just wondering how much confidence they have in the future of Europe's CDMO. And what is the plan for the longer-term plan for Saltigo, if that's the case? The second question is just a clarification. We've been speaking about mergers and consolidation this morning. And I heard you sort of say different tunes that you can play on the keyboard and so on. Can I ask, do you feel more open to strategic mergers and the other kind of options, LANXESS as a company? Do you feel more open to these situations than previously due to the downturn in the market? Matthias Zachert: Well, I will continue in Germany, and I just hope that you can understand the translation well. First, CDMO. For everybody to understand what that means. This is a custom manufacturing business, and this is all bundled in the Saltigo unit. And the conference that you mentioned is a conference that is happening here in Europe on a regular basis, where everybody comes together. And now your question is quite clear. We want to keep CDMO here in Europe. And this is a business activity, which is very important for the chemical sector. But then, of course, you really have to have first-class facilities and first-class technology to offer. I think the very early synthesis stages that are not yet on a high technological level that they will be in the hands of Indian and Chinese producers. But when it comes to the more complicated synthesis, and there are more steps in the entire chain, that they are going to remain here in Europe. But of course, you need to have a competitive position here. You have to know the technology, you have to know about innovation, and you have to be cost-effective. And you see that in the automobile industry. They have got a strong position in the premium segment, and they have to have that in order to have a good cost structure in order to be competitive in the international comparison. This is also true for the European and German CDMO business areas. You mentioned ASM, and that's not on our list for closures. I think in October, there was a communication that the Austrian CDMO company, ASM, filed for bankruptcy. They were by far not as widely established as Saltigo, and they used to be owned by a private equity company for 10 years before that. So they were not as well-equipped when they had to face the storm. And therefore, they were hit hard. This is changing the market in a way that Saltigo should benefit more than have a detrimental effect. So CDMO will remain important in Europe, technologically speaking, for the respective customers and clients. Cost-wise, of course, you have to keep pace so that in the international environment, you can survive the competition. And this is the motto also for Saltigo going forward. Our technology is of high value, high [indiscernible] value. But of course, we have to face the cost of the international competition as well. I hope that answers the first question. Second question, more with respect to mergers and acquisitions. Looking at the past 10 years, LANXESS has always been a company, which on the M&A side, was rather progressive in inverted commerce or took a pragmatic approach, never a dogmatic approach. And we will have a look at what will be beneficial for both LANXESS and our stakeholders. And then we will see what kind of strategic steps we may take in the future. I hope that suffices as an answer for the second question. Claus Zemke: Thank you, Mr. Zachert. I have no additional questions, or nobody wants to take the floor, but let me look around. No show of hands. Thank you for attending our press conference. And lots of success and enjoy the rest of the day, and greetings from Cologne, and goodbye.
Operator: Good morning, and welcome, everyone, to BT Group's results presentation for the half year ended 30th of September 2025. Presenting today is Allison Kirkby, BT Group's Chief Executive; and Simon Lowth, BT Group's CFO. Following the presentation, we'll be having a Q&A session. I would like to make everyone aware that this event is being recorded for replay purposes. Before we start, I'd like to draw your attention to the usual forward-looking statements in our press release and our latest annual report for examples of the factors that could cause actual results to differ from any forward-looking statements we may make. Both the press release and the annual report can be found on our website. With that, I'll now hand over to Allison. Allison Kirkby: Hi. Good morning, everyone, and welcome, and thank you for joining us for our half year results. In terms of the presentation this morning, I'm going to start by setting out the progress we've made against our strategic priorities so far this year. Simon will update on the financials, and then we very much look forward to taking your questions after a quick recap from myself. So in summary, it's been another period of solid delivery despite the competitive markets we operate in, with very clear progress in the U.K., while we've also worked hard to manage headwinds from our accelerated migration away from legacy voice products and in our international markets. Let me begin with some highlights. Our leadership in fiber, 5G and secure networking has strengthened further since the start of the year. Openreach achieved another set of records on full fiber build and again on take-up with even better efficiency. Consumer gained customers in all its key segments, broadband, mobile and TV and grew its number of converged households. Business is showing a stabilizing financial performance for the first time in many years, and we continue to press ahead with our GBP 3 billion transformation program, offsetting some of the cost headwinds we are facing, including the higher labor-related costs incurred since the beginning of this tax year. In addition, we have agreed or completed 4 targeted disposals outside of the U.K. and having carved that out with dedicated leadership, we are accelerating the reshaping of our international business. As a result, we are today reconfirming all of our guidance metrics for the year and beyond, including our target of GBP 2 billion in normalized free cash flow for next year and GBP 3 billion in fiscal year '30, and our interim dividend is rising 2%. As you will recall and as I set out in May, our ambition is to become the U.K.'s most trusted connector of people, business and society, guided by our purpose to connect for good. Our strategy focuses on 3 things: building the best, most trusted digital networks, connecting customers so that they thrive as we grow in a digital world and accelerating our modernization to restore leadership in everything we do. By the end of the decade, this strategy will have delivered for all of us, including meeting our financial commitments of service revenue growth, EBITDA growth ahead of revenue and a doubling of this year's normalized free cash flow. So how are we doing so far this year? Well, I'm pleased that we continue to deliver on the key levers that will realize our short, medium and long-term ambitions, specifically a focus on the U.K., building the U.K.'s only nationwide digital backbone, a growing customer base as a result of a much improved customer and product experience, all enabled by a radically simpler and better BT. On build, our nationwide reach expanded further. The Openreach team hit a new record of 2.2 million homes passed. On mobile, we won best network with RootMetrics for the 12th year in a row, and we lifted our 5G+ coverage by 23 percentage points to reach 66% of the U.K.'s population. And today, we're announcing a new landmark agreement with Starlink so we can offer the best broadband connectivity in the hardest places to reach in our country. On Connect, we connected a record 1.1 million Openreach customers to full fiber, and we've again lifted our market-leading take-up rate, which is now at 38%. Our consumer customer base grew again with customer growth in broadband for a third quarter in a row and further growth in both mobile and TV. Our decision to adopt a multi-brand strategy is clearly paying off, allowing us to reach more market segments without diluting our premium position. Customer satisfaction also rose again with growth in converged homes too, building customer loyalty and over time, lifetime value. And our sales orders in business grew with clear demand coming from British businesses for more secure and more resilient networking solutions. And finally, on Accelerate, our cost transformation is allowing us to offset margin pressures as they arise and still grow our EBITDA, and there is much more to come. We've achieved GBP 1.2 billion in annualized cost savings in the first 18 months of our 5-year program with particularly solid progress in our networks and digital units during this first half of this year. We have exited businesses outside the U.K. that do not fit with International's mission to serve only multinational companies. And in international, now that it is carved out, we have clearer and more accelerated plans to simplify our product portfolio and reshape our office footprint. Finally, we are continuing to carefully migrate customers off the PSTN ahead of closure in January '27, investing to support the elderly and the vulnerable in particular, and we're leading in safety with the launch of our Safer SIMs product for children as we build the best, most trusted networks for families. On the next slide, it's worth stepping back to look at the longer-term achievement of our Openreach and our networks teams. We are the only operator building fiber at scale with nationwide reach. And we are well on track to achieve our target build of 25 million premises passed by December '26, so just over a year from now, with an ambition to reach 30 million by fiscal year '30, assuming a stable and pro-investment environment. And we remain on course, therefore, to earn good returns for our shareholders and to create one of Europe's most attractive fiber infrastructure assets, whether in a competitive market or one regulated under Ofcom's fair bet. Why is that? Well, returns in network businesses depend on building at the right price and quality with the best take-up and a reasonable cost of capital. We compare very well on all 4 of those metrics, and we continue to build within the cost ranges we aimed for at the beginning despite the inflation we saw during the period with excellent quality and resilience. On mobile, we have a growing 5G connected base with now 89% population coverage, 66% 5G+, which is our name for 5G stand-alone coverage, and we're well on track to reach 99% 5G+ coverage by fiscal year '30, almost 4 years ahead of the other networks. We are clearly super proud of the network credentials we've built over the last 12 years and before that. But I can assure you, we are not resting on our laurels and are always working on ways to improve customer experience, including now the deployment of the millimeter wave spectrum we purchased in mid-October for high-density locations and in reapplying what we learned from uniquely running the emergency services network into building the most trusted and resilient network experience for everyone. Moving on to each of our customer-facing units. And in turn, let's start with Openreach. As I've said, we continue to build full fiber at pace and now pass over 20 million premises, of which we had already connected 7.9 million at the end of last week. Broadband line losses were 242,000 in the quarter, similar to Q4 last year and in line with what we expected. Within that, we estimate that the broadband market remains either flat to slightly down as new homebuilding is still running around 100,000 a year below what the government's target was. Meanwhile, competitor losses for Openreach are a little changed half-on-half, but with a tilt towards wholesale operators rather than retail where we're seeing some declines. Quarter-to-quarter, there's always going to be some natural variability based on competitor build and promotions and the orders that we have coming into the quarter. But the guidance we gave in May of last year's second half run rate continuing for the full year remains unchanged. But I do want to point out, and it's worth saying that October has progressed well. After quarter end, we launched new offers to stimulate fiber migration, which our CPs have welcomed, and we made good progress to be ready to launch XGS-PON next year. In our operations, our repair volumes decreased 13% year-on-year due to the shift to full fiber, and we reduced our headcount by 11% year-on-year as we upgrade our network and transform our operations and as we ensure we've got the right resourcing for when the fiber build steps down during next year. Thanks to the strong demand for our fiber and the impressive build and connect progress made by our Openreach team, we're maintaining steady revenues with ARPU growth of 4%, offsetting line losses and good growth still in Ethernet revenues of 5%, and we're delivering continued EBITDA growth. Moving to Consumer. Our strategy is clear. Having invested in and built the U.K.'s only nationwide networks, we intend to get back to sustainable service revenue growth. This starts with having a growing customer base by leveraging convergence, our breadth of household relationships and all 3 brands to ensure we compete carefully on value, not just price. So it's good to report that our consumer business is continuing to win customers in the first half of this year despite the competitive pressures. Convergence, multi-SIM household tariffs and leveraging all 3 of our iconic retail brands has helped us grow the broadband base for a third consecutive quarter, our mobile base for a second consecutive quarter and our TV base for the fifth quarter in a row. We are achieving excellent levels of fiber take-up with almost half of our broadband base now on full fiber. Broadband continues to grow in our mobile base, and so our converged customers have grown to almost 26% of all broadband and mobile customers, which is up almost 3 points in the last year. And we're seeing a steep increase in customers moving on to EE One, our main convergence offer. All of this, plus our renewed focus on customer experience has helped improve customer satisfaction, which was flat or up in all 3 brands in the last 6 months, resulting in stable churn rates at relatively low levels across mobile and broadband. While the customer base grew, service revenue was basically stable, excluding a 1% drag from legacy voice. Admittedly, there has been some ARPU pressure, but this is mainly a result of coming off the high price rises over the last few years into a more competitive market. As inflation stabilizes and we move towards pounds and pence, this sawtooth effect should dissipate. And the equipment sales market has been slower, too, as consumers now keep their handsets for 48 months, hence, why total revenue was also down in the period. But we're now seeing excellent performance by EE on recent new device launches. At EBITDA, we were able to offset almost all the lower revenue and the higher input costs from Openreach with disciplined cost control. Additional headwinds from the rise in national insurance and national living wage, combined with the ongoing transition to digital voice accounted for over 2/3 of our EBITDA decline. But with the progress made in the first half and the run rate we're now seeing, we remain confident that Consumer will, as it did last year, return to year-on-year service revenue and EBITDA growth in the second half as a result of the levers I just mentioned, customer experience, convergence and our multi-brand strategy. Moving to business now on Slide 10. As you well know, since the start of the fiscal year, we've focused business now on the U.K., improving our ability to develop and deliver the best products and services for U.K.-based companies across the private and public sectors. The levers to growth and transformation remain the same, simplifying our product portfolio, migrating customers off legacy systems and products and radically improving customer journeys and satisfaction on the back of digitalization of our processes and our journeys and through secure and resilient by design products. Our delivery in corporate and public sector improved with sales orders up 16% year-on-year, including new business in the industrial sector. In broadband, we increased our fiber connections by over 40% and our 5G connections by over 30%. Net NPS also improved. Our modernization agenda continued with another 10 products retired in the half year, taking us below 200 products, down by 1/3 in just 2 years and units on legacy networks fell by almost 40%, a nearly GBP 0.5 million reduction. Clearly, it's still early days for John and the team in business, but I am pleased that in the half, the financial performance was more stable, especially considering the drag from legacy voice is still sizable. We have a robust pipeline in corporate and public sector and have launched new offers for smaller businesses, reinforcing our most trusted status including last week's Cyber Defense exclusive with CrowdStrike and our announcement just yesterday to place business experts in all of our high-street stores. I'm confident that BT Business is at the start of its long-awaited turnaround. Moving on to transformation on Slide 11. We're making solid progress against our transformation agenda. This includes GBP 247 million of run rate savings delivered in the past 6 months, taking us to GBP 1.2 billion achieved in the first 18 months of our 5-year program. We continue to drive most of the cost savings from four key programs: shutting down legacy networks, simplifying our products, scaling the use of fewer shared platforms and deepening our data and AI capabilities. With respect to what happened in H1, while we migrated over 1 million customers away from legacy networks, we reduced our energy consumption by 54 gigawatt hours or 5% year-on-year. We cut the number of applications we use by nearly 20%. And as a result of all of these initiatives, our total labor resource dropped by 5,000 in the half across all divisions. Now with the arrival of our new Chief Digital Officer, Peter Leukert, on the 1st of September, I know that we will build further on this progress. No pressure, Peter. But part of this will be to ensure we take full advantage of the capabilities of AI, where we see significant potential, particularly in better and more efficient customer care, higher, more personalized marketing velocity and greater efficiency across all areas of our corporate functions, including the Investor Relations function. Now turning to the transformation of international. We have successfully agreed or completed our targeted disposals. This is the end of a loan process that began back in 2019, but which had paused in recent years. From 1st of July, international has been carved out, giving it much greater strategic focus and clarity to become the global leader in secure multi-cloud connectivity anchored by next-generation platforms, Global Fabric and Global Voice. There is naturally a transition period between moving from the existing MPLS-based services, to the new Global Fabric network. But having carved the unit out, we're now accelerating our plans to reshape it, including a reduction in the number of office locations and in radically simplifying the product and service set. This will help deliver EBITDA growth from next year and ensure that in the midterm, international is no longer a drag on group cash flow, allowing for clearer optionality for future partnerships, which we still believe are possible. With that, let me now hand you over to Simon, who will talk you through the financials in some greater detail. Over to you, Simon. Simon Lowth: Allison, thank you very much indeed. So I will take you through our group level results before then explaining the performance of our customer-facing units in more detail. First half U.K. service revenues was GBP 7.7 billion. That's down 1%. Now this was driven principally by a reduction in legacy voice revenues of about GBP 100 million. Price pressure in retail fixed and mobile was largely offset by growth in our retail connectivity bases and Openreach revenue. First half total adjusted revenue fell by 3% to GBP 9.8 billion, in addition to the lower U.K. service revenue, this was driven by lower sales of U.K. equipment, particularly mobile handsets and by lower international revenues. We reduced our operating costs by 3% and due to the strong progress of our cost transformation programs, supported by tight expenditure controls. And as a result, adjusted EBITDA in the period was flat at GBP 4.1 billion. Adjusted EBITDA in our U.K. businesses, excluding the international unit, that increased by 0.5%. Reported CapEx increased by 8% or GBP 171 million to GBP 2.4 billion. That was driven by a higher FTTP build and provision in Openreach as we ramp up our build to 5 million premises this year and then drive take-up of our fast-expanding FTTP footprint. Openreach has continued to drive efficiencies in its unit cost to build and provision through engineering innovation and dynamic management of the supply chain. Our build and provision costs have consistently been within the ranges we've set despite the significant inflation over recent years. Cash CapEx was slightly higher than reported CapEx due to the timing of capital creditor payments and about GBP 60 million worth of grant funding gain share. Normalized free cash flow was in line with our plan at GBP 408 million. This was GBP 300 million lower than last year due in largely equal measure to higher cash CapEx, the prior year tax refund and reduced working capital funding due to lower handset volumes. We remain confident of our outlook for GBP 1.5 billion normalized cash flow in the full year. As Allison just announced, our interim dividend is up 2% year-on-year to 2.45p per share, in line with our policy of paying 30% of the prior year's full year dividend. The IAS 19 pension deficit fell to GBP 3.8 billion from GBP 4.1 billion at the FY '25 year-end. Scheduled contributions of just under GBP 800 million were offset by a decrease in credit spreads. The IAS 19 deficit does not drive our cash contributions. These are determined by the actuarial valuation, which will be determined at the triennial review next year. Moving now to performance of the customer-facing units. Openreach revenue was flat year-on-year at GBP 3.1 billion, inflation-linked price rises and the increasing FTTP mix in broadband were offset by the lower broadband customer base. Openreach EBITDA again grew ahead of revenue, up 4% to GBP 2.1 billion. We continue to reduce our operating costs through a combination of labor efficiencies and lower repair and energy volumes as we transition to FTTP, offset by inflation in pay and noncommodity energy costs. Consumer service revenue was down 1%, and that's the same as last year to GBP 3.9 billion. ARPU declined, reflecting the higher prior year comparator and competitive markets, combined with reduced legacy voice revenues as we migrate off the PSTN were only partially offset by the stabilizing broadband base, growing mobile base and increased FTTP mix within broadband. That's now up to 45% of the base. We will continue to compete to defend and where we see value, grow our customer base, and we will protect and grow our margins through cost transformation. Consumer total revenue declined by 3% to GBP 4.7 billion due to the service revenue and reduced sales volumes in the mobile handset market as customers retain their devices for longer and with many of our own customers already on 3-year Flex Pay contracts. Consumer EBITDA fell by 4% to GBP 1.3 billion. Our transformation programs and our tight cost controls successfully mitigated most of the gross margin pressure from reduced revenues and the higher Openreach input costs. However, as Allison said, we were impacted by the significant increases in national insurance and the national living wage and by some additional costs incurred in the accelerated migrations to digital voice. These headwinds will be progressively offset with cost reduction. And in the case of the digital voice migration, will end with the closure of the PSTN as we move into FY '28. Business service revenue was GBP 2.4 billion. That's down 1% driven principally by lower voice revenues as we migrate off legacy voice to voice over IP. Service revenues in connectivity, secure networking and Managed Services were broadly flat with some growth in SMB and wholesale, offsetting a decline in CPS. Business total revenue fell by 2% to GBP 2.6 billion with lower equipment sales adding to the service revenue decline. Business EBITDA was down 1% to GBP 647 million, with the impact of lower revenues, partially offset by cost transformation and the benefits of cost phasing, which reversed in the second half of this year. International revenues were GBP 1.1 billion. Revenue declines in businesses whose sales either been agreed or completed accounted for about 4 percentage points of the 9% fall and adverse foreign exchange accounted for a further 1 percentage point. The remainder was driven by legacy product declines on the renewal of several managed services contracts. International EBITDA declined 27% to GBP 66 million due to the lower revenues, cost inflation and the increased investment in Global Fabric, all offset partially by transformation programs and tight cost control. As Allison has said, we're accelerating our restructuring and our cost transformation programs in international to ensure that the business moves rapidly to generate positive cash flow. We expect to complete all of the announced divestments within International before the end of this financial year. We don't anticipate these divestments will have a major impact on EBITDA and normalized cash flow in either FY '26 or FY '27. While the divestments will have some impact on total revenues in FY '27 and beyond, which we will share when all disposals are complete, there will clearly be no impact on our U.K. service revenue. And with that, I'll hand back to Allison to conclude. Allison Kirkby: Thank you, Simon. So as I said earlier, we're reconfirming the fiscal year '26 outlook, which we gave in May of revenue around GBP 20 billion, U.K. service revenue of between GBP 15.3 billion to GBP 15.6 billion, adjusted EBITDA between GBP 8.2 billion and GBP 8.3 billion, CapEx at GBP 5 billion and normalized free cash flow of around GBP 1.5 billion. And we expect, as last year, that revenues in the second half of this financial year will be slightly stronger than the first half. Our outlook beyond fiscal year '26 remains unchanged for all metrics and in all years, and we're confidently progressing towards our BBB+ credit rating target. So to conclude, our ambition to create the U.K.'s most trusted connector of people, business and society is on track. The pace in Openreach is exceptional. We are winning customers and consumer across all key segments. Business is showing greater stability in the U.K. as we reshape our international operations, and we are diligently addressing our cost base quarter-on-quarter, year-on-year. Of course, there's still a huge amount to do to accelerate our transformation, keep differentiating our brands and propositions and to improve our delivery for all our customers, but we have the team and we have the plan to succeed and to create a better BT for all. So thanks for listening. We'll now move to Q&A, which will be audio only, and please we only have just over 30 minutes if you can try to keep it to 1 question each, that will leave time for everyone. First question, please. Operator: [Operator Instructions] Our first question comes from the line of David Wright from BofA. David Wright: So my question is just around consumer. Just trying to understand how you are managing to grow that customer base without obvious excessive, let's say, ARPU pressure in what is a very competitive and increasingly competitive environment with, I think it's fair to predict building macro pressures? And underlying that, you have flagged this new drag from voice transition, which is weighing on the EBITDA of consumer, which was definitely a little bit light of our expectation. It looks like that's a trend through calendar '26. Are you able to give us any idea of the voice revenues in absolute terms that we can kick around here, like you used to do with the business, B2B back in the day? That would be super useful. Allison Kirkby: Okay. Thanks, David. I'll kick off and then I'll pass to Simon for some of the final parts of that question. Listen, how are we managing to grow our base and get back to sustainable revenue growth. This is -- our strategy has always been to get back to sustainable service revenue growth. That starts with a growing customer base, which, quite frankly, was in decline for far too long because we weren't properly leveraging all of the tools at hand. So how are we doing it? In a thoughtful, value-focused way is we're leveraging all three of our brands. We weren't doing that before. And that limited our potential, particularly with the Plusnet brand to address the value segment but protect our premium brands of BT and EE. So leveraging all three brands is the first lever that's having an impact. The second lever is convergence. Convergence gives great value for money and locks in customer loyalty and customer lifetime value. And EE is doing a fantastic job at convergence and driving multi-SIM tariffs into the household, which is helping us defend our mobile base against the growing value segment without it being overly all dilutive. And then we are always just improving our customer experience all of the time. So -- but of course, it is a price-competitive market, but we are in markets that customers need. Our markets are flat. We offer great value for money. It's becoming better all of the time because of the migration to fiber, the migration to 5G and us offering better converged services, whether it be a great new flexible TV product or multi-SIM tariffs on the back of the EE proposition, and that's how we're managing all of it. From an ARPU point of view, if you strip out the voice that was bundled into some of our broadband packages, we're actually seeing underlying broadband ARPU going up slightly. And mobile, as I said, some of it is because of coming off of the high price rises of a couple of years ago, but a slight shift into SIM-only and those multi-SIM tariffs in the household puts a little bit of pressure on ARPU, but we're holding up well. But as I said, our strategy has always been to get back to sustainable service revenue growth, and that starts with our customers. In terms of the drag from voice, I called it out as 1%. We've really started ramping up our migrations now. And we're actually investing in that to do it in a thoughtful way, particularly for vulnerable and elderly customers. That's why you see a little bit in the OpEx line in the period. But that goes away as of January '27. So it's a short-term headwind. I don't know whether we've not put any numbers on it, Simon, but do you want to comment? Simon Lowth: No. I mean I think David, what I described was about GBP 100 million total impact of legacy voice to our revenues in the first half of the year, and that comes from consumer sort of Solus voice customers and voice plans on top of broadband. It comes from the traditional voice and business. And also, of course, there is some external Solus voice lines in Openreach. That's the GBP 100 million. And I think as we close down the PSTN, you can see that we're going to face that sort of drag over the next 18 months as we move through to closure of the PSTN. In terms of the consumer share of it, I mean, you can, I think, figure that out for yourself when you look at the number of Solus WLR lines in Openreach, you can derive that, and you'll know that consumer accounts for much of that. Allison Kirkby: And one of the things I just want to call out, David, is consumer are doing a fantastic job of migrating our broadband customer base to fiber. Almost half of our customer base now is on fiber. So kind of record take-up, and that's just making those customers even more loyal. And we're giving them great value for money because it's a great product. Operator: Our next question comes from James Ratzer from New Street Research. James Ratzer: So hard to keep it to one question, but I will try. So Allison, in your remarks talking about kind of Openreach line losses, you were calling out to kind of change in the balance you're seeing between retail alt-net losses may be improving a little bit, but at the same time, now wholesale migration increasing a little bit. And so there's always the chance that could get a little bit worse if the alt-net sector finally can consolidate at some point. So I suppose really where I'm going with this is, do you think FY '26 marks peak line losses for Openreach? Or do you think actually things could get slightly worse in FY '27? Allison Kirkby: So listen, James, we are doing 4 things, and then there's a fixed lever that we fundamentally believe will defend our base and reduce the line loss pressure over time. The first thing is we are the only real builder at scale and pace in the country now. We're the only one building nationwide. And what -- based on the estimates that we see, we reckon alt-net build is down by at least 40% year-on-year. And we are accelerating our build every quarter, every half on the way to 25 million by the end of next year. And when we've got to that 25 million, that basically means we have overbuilt all of our original VDSL network by full fiber. Take-up, just as we are building at pace, we're provisioning at pace. We've now built a provisioning machine that can provision up to 60,000 homes and premises a week. And that is why despite us building at pace, we're also ramping up our take-up rate to market-leading rates every period. The next lever we're pulling is quality. We are building at the highest quality, and we are the most resilient. In storms, we see that we recover faster than others. And the quality of our fiber network is encouraging our CPs to encourage further take-up and there's clearly demand for it, having now converted almost half of BT Retail's consumer business and what we're seeing from our CPs. The fourth lever we then have is how -- since there is demand, the country, the government want take-up. We've put some new migration offers in the market because the demand is there and our CPs want it. And we're encouraging faster migration onto our fiber products. So those 4 levers, we believe, will, in time, reduce the impact that we've had from heightened line losses. And then the fifth lever is the market is going to return to growth at some point. Housebuilding is now as low as it was during COVID. The government has an ambition to grow houses. The country needs it, and that will stimulate growth again. On your comment on the tilt from retail to wholesale, as I mentioned, build is down. The wholesale competition was not unexpected that we've built it into our plans. That's why we're very much sticking to our guidance for the year. That wholesale footprint at the moment doesn't seem to be in growth. It's certainly not growing at the rate we are. A lot of that wholesale footprint is also in very competitive areas where we are competing. And so we also expect that since we are the one building at pace, and we are provisioning at pace, and we've got the highest quality, most resilient product out there that will all benefit us in time. Operator: Our next question comes from the line of Andrew Lee from Goldman Sachs. Andrew Lee: I just had a question on costs and cost efficiencies. I think you called out that you've done a good job in reducing capitalized labor costs. And you've also -- as you laid out, you've done almost half of your 5-year cost plan in 18 months. So I just wanted to ask, is this you picking off low-hanging fruit and a pull forward or phasing thing? Or are you finding new areas of efficiencies versus what you saw when you set out on this cost-cutting program. Just kind of a bit more of an insight in terms of is this just an acceleration and pull forward? Or are you finding greater opportunities to cut costs? And I think you laid out in quite a lot of detail on the call exactly where this is coming from. But if you could maybe pick out some of the incremental areas where you're finding efficiencies, that would be great. Allison Kirkby: Yes. I'll let Simon give you more detail, Andrew. It's not a pull forward. We're just doing an outstanding job, particularly in Openreach and in networks. And there is definitely more upside to come from AI, but maybe you want to take a more fluid answer to that question, Simon? Simon Lowth: No. I mean, I think, Allison, you captured it in that we set out a cost transformation program. We're delivering that cost transformation program to our plan. We're moving, Andrew, possibly a little bit faster. The areas that we're able to drive some acceleration, firstly, I think that in Openreach and in the networks business, we're performing very strongly in terms of driving our build unit productivity. We've done a lot of good work on the supply chain and procurement. And so that's giving us a little bit more upside than we'd anticipated. I'd also say that the structural cost efficiencies, we keep working at that. And each year, we find further opportunities to improve some process efficiencies within our various processes. I think the opportunity that we're still beginning to build into the process and the transformation does come from AI. The sort of tools and capabilities that, that brings is something that we do think over time, brings us further opportunity, and we'll develop that over the coming year or two. Operator: Our next question today comes from Karen Egan from Enders Analysis. Karen Egan: So my question is about the alt-net sector. So given the press reports that a number of alt-nets are for sale and quite a few others appear to be under quite considerable financial distress. Would BT be willing to be the buyer of last resort to prevent assets from being stranded if other buyers can't be found? Allison Kirkby: Okay. Well, our strategy is clearly to build organically our own nationwide networks and make them the most trusted, the most resilient and the highest quality. And that's what our capital allocation is very much focused on, Karen. Of course, when smaller assets become available for sale, we are approached, we take a look. But at this point in time, we're very much focused on delivering on what we promised for our owners when we embarked on this journey so that we give them a good return on investment on the 25 million build that we've already committed to. And -- but as opportunities arise, we'll always take a look if we believe it is an economically good and sensible decision relative to other capital allocation choices. Operator: Our next question comes from Joshua Mills from BNP Paribas. Joshua Mills: I was going to come back to some of the comments you made about the Openreach line losses in the broadband market. And you gave a very clear explanation of the 4 levers you have to pull. I guess the one that's not within your own control is housebuilding, which has been significantly lower than expected. It's below government targets, but governments often missed targets. So my question is, when we look at the overall growth in the U.K. broadband market, which you said was flat to slightly negative, how much lower is that relative to your expectations when you provided midterm guidance last year? And given how much linkage there is between Openreach line losses and overall growth in the U.K. broadband market, is there a point in time when you need to see the U.K. broadband market return to growth in order to hit your financial targets for 2027 and 2030? Or do you believe that those numbers are still achievable even if we see flat to slightly negative growth in U.K. broadband overall? Allison Kirkby: Yes. Great question, Joshua. No, listen, the broadband market is developing in exactly the way we expected it to as we predicted this time last year. We have not banked on a growth in housebuilding into our plans for the next few years. So if there was a sudden surge in housebuilding, that will bring upside to the guidance and the plans that we are investing behind. We're very much -- when we update our plans, we are cautious about assuming for growth, but it will come. The U.K. relative to other European markets still has relatively low fiber take-up penetration based on how we're seeing take-up demand, government support for that, when the housebuilding returns, that will be upside to our current plans. If you go way back in time, we clearly had planned for more housebuilding, but we've offset that with other levers, but it certainly wasn't assumed in the guidance that we gave in May. And Simon, maybe you want to build. Simon Lowth: No, I was going to say that absolutely, when we've set out the financial guidance for the midterm, that was based upon a view of the broadband market that we see before us today. But I think Allison, you're absolutely right, back in sort of the early 2020, '21 when we set out the FTTP investment case, as many of the people on the call recall, we did expect higher growth in the broadband market. However, we have more than offset that through -- in terms of the returns on the business case through lower cost to build and provision, the lower service cost because of the faster take-up and a somewhat higher ARPU mix in terms of speed tiering. The other point I would make is that one of the drivers of the weaker broadband market has obviously been not just we talked a lot about alt-net churn, but also customers who are experiencing today relatively low broadband speeds where we still got copper. And we're taking active steps to address that. You saw the Starlink partnership today. But in addition to that, as we roll out FTTP, we provide faster, more reliable broadband in these communities where we will also, I think, see some abatement in terms of the reduction in the broadband market. So I think that's another positive driver for us. Operator: Our next question comes from Max Findlay from Rothschild & Co. Max Findlay: I just have a couple of questions on consumer. So firstly, and following on from David's earlier question about your net adds performance. I was wondering if you could add more color about front book pricing generally in the market. Have you noticed any change in promotional intensity and front book pricing generally over the past quarter? And do you expect incremental pricing deterioration in broadband given what appears to be the weaker performance of the retail? And secondly, a recent FT article suggested you might reenter the budget mobile market by reintroducing your own budget mobile brand or purchasing an MVNO. Would you be interested in reentering the budget segment so soon after sunsetting Plusnet Mobile? And if so, what has changed for you to consider this strategy switch? Allison Kirkby: Thanks, Max. On your front book pricing question, what you are seeing is competitive pricing on higher speed broadband levels. And we are competing very well with those. So what you're -- as Simon was just talking about, there is real demand for upgrading speeds to households. And so the front book pressure is a little bit more on higher speeds rather than the lower speeds, which is actually positive for market development over time because a higher speed broadband customer, particularly on fiber is going to be less likely to churn over time as well. So that heightened a little bit over the summer, but it's not got any worse in recent periods. And it's that heightened demand for higher speeds and migration to fiber that has meant our CPs, the Openreach CPs are very much welcomed that migration initiative that we put into the market during October. In terms of the alt-nets, some of them that when they originally launched did not put in pricing, inflationary pricing into their contracts. That now exists in a lot of the alt-nets as they try to recover some of the cost pressure that they're under and the revenue pressure that they're under. So I'm not seeing any heightened impact by weaker alt-nets at the moment. And in fact, as I mentioned, what you're seeing in Openreach is this tilt away from retail alt-net line losses to more wholesale. On budget mobile, that was a pure speculative article. EE is doing a fantastic job with convergence and offering the best network in the country for 12 years in a row. And particularly those multi-SIM tariff propositions that are linked to EE One and a solid household relationship is allowing us to compete and defend our base against the value segment because those second, third SIMs in the household were sometimes given to smaller, more value, no-frills types of brands and now EE is picking those up. So our multi-brand strategy and particularly focusing on Plusnet again, was recognizing that the broadband market has a clear value segment that we were not fully exploiting considering the great brand that we have in Plusnet. But we're doing it. We're managing that in a very thoughtful way so that we don't dilute our overall value propositions in the market, but playing to that value segment in broadband. Operator: Our next question comes from Maurice Patrick from Barclays. Maurice Patrick: Yes, a question, please, on taxation and investments, if I can, please. I mean you've been pretty vocal around the sort of taxation and rising costs that BT is facing. You called out around national insurance and minimum wage on the call. You talked about overall taxation impacts on BT in previous conferences. Given the sort of noise around the upcoming budgets and possible tax increases, curious to understand your sort of thinking about how you're thinking about the impact of that could be on your business? And just linked to it, I mean, I think if you've done 2.2 million homes passed in the first half, that's well below the run rate for your 5 million full year. I see the comments from Clive about possibly rolling back on the 30 million target. What's the -- I guess, your excitement level around accelerating fiber rollout whilst you have those uncertainties? Allison Kirkby: Well, I remain excited because our investment into the country's fiber infrastructure and digital backbone is the FTSE's single biggest capital investment over recent years and what I believe is going to be one of the U.K.'s rare infrastructure investment success stories. We have a very constructive and open dialogue with the government on this. They see the value from an economic point of view and a skills point of view of the investment that we're putting into the country. We all recognize the challenges the government are under, but they do and seem to be still very focused on growth, very focused on a pro-investment fiscal and regulatory environment, and our infrastructure investment is a sweet spot for that. I was also delighted to see this morning that they are looking at other international comparisons in other sectors. I think the financial services banking sector was referenced this morning. And that's why with my experience in Scandinavia, I was very keen to call out the scale of government-related costs, whether it be business rates or others that we incur here in the U.K. versus our peers elsewhere to ensure that they have a total view of our position and the risk to their ongoing investment and growth strategy if businesses were again disproportionately impacted by any conclusions coming out of the budget. So -- and that's why we have a great constructive dialogue with the treasury. Simon has a constructive dialogue with the valuation office on business rates, and let's see what happens next. In terms of your other questions, we ramp up the build over the year, and that is still the plan. We are still planning to build up to 5 million homes passed for this fiscal year. There's just phasing by quarter. And we only gave Clive the extra capital towards the end of last fiscal year. And so he's in the process of ramping up. In terms of some of the media coverage this week, as you know, the telecoms access review has not been finalized yet. We have always been clear on what was needed from a competition and an investment and a return point of view to deliver on the first 25 million homes passed, which we'll have reached by the end of next year. In the dialogue and the consultation that we're now having with Ofcom, we are keen that we -- that they retain a pro investment predictable from a regulatory and fiscal policy point of view as they look into the second half of this decade. And until the words are written on the page, clearly, we won't put a commitment to that next 5 million until we understand, will we be able to get a return on that investment similar to what we are getting for this 25 million. So that's why you're seeing that coverage. On that next 5 million, that is really filling out. It's also dependent on further government funding from BDUK because you're getting into some areas of the country that it doesn't make economic sense. Hence, why we got ahead with the Starlink announcement so that we're able to bridge with satellite if we're not able to offer high-speed fiber to some of those homes as well. But it's still our ambition to build to GBP 30 million. We still need to see what Ofcom is going to finalize in the telecoms access review, and we have good constructive dialogue with both Ofcom and with the government on anything that might be coming out in the coming weeks. Operator: Our next question comes from the line of Carl Murdock-Smith from Citi. Carl Murdock-Smith: My question is on intragroup eliminations and consumer. So intragroup eliminations grew by about GBP 30 million in H1, following on from growth last year, too. That's largely due to internal revenue growth in Openreach while external Openreach revenues are shrinking. But looking at consensus, it forecasts revenue eliminations declining next year by about GBP 20 million. Why would that happen? Basically, I'm asking whether consensus is wrong, and therefore, consensus revenue forecasts need to reduce due to larger eliminations. And as a follow-up to that, on the impact of those growing internal revenues in Openreach to downstream financials. I'm asking in the context of consumer EBITDA consensus having decreased every quarter for 6 quarters in a row, and you've missed the consumer EBITDA again today. So my question is, are you consciously prioritizing Openreach financials at the expense of consumer because that's certainly what it looks like. Allison Kirkby: Okay. It is with great pleasure that I will pass the intragroup eliminations questions to Simon, Carl. But let me just before that, just touch on your final question on are we consciously prioritizing. We -- as I said earlier, we have 4 levers for creating value at BT in the coming years. U.K. focus, building the U.K.'s only nationwide network, restoring our retail businesses to growth in a sustainable way with new modern day products and technologies and radically simplifying our business. Consumer has been particularly impacted by the sudden increase in national living wage and national insurance contributions. It's also in the midst of ramping up the migration from PSTN. And those 2 elements we were not able to offset in the first half of this year. But with transformation, which is now ramping up, particularly on the back of AI and other elements, those will dissipate over time. And of course, because I -- we want to get our retail business back to growth, we want to give our customers the best we can in products and services and fiber is one of those, their margin is clearly impacted by the fact that as they migrate to more fiber customers faster than anybody else in the market into a competitive market from a pricing point of view, they have short-term margin pressure from that as well. But it's all a balanced strategy, building the best network and then getting back to growth in our retail businesses. But over time, transformation will offset some of those short-term headwinds and will have EBITDA growing faster than revenue. But now the intra-group eliminations question, Simon. Do you want to build on that as well. Simon Lowth: Well, I think Carl sort of answered your own question, actually, Carl. I mean the -- quite rightly, you identified that the eliminations are predominantly the sales of Openreach access products, broadband and Ethernet into our downstream units, consumer and business. We have seen strong performance on the consumer base, broadband base as we've stabilized. Our business activities have also performed well. So when you've got a strongly performing BT downstream in consumer and business as a percent of Openreach's revenues, the eliminations will typically grow, and that is what you've seen. I don't think I can add more than that at this point. Allison Kirkby: Thanks, Carl. Operator: Our next question comes from the line of Andrew Beale from Arete Research. Andrew Beale: I'm just wondering where you think you can stabilize international post disposals and structural drags from MPLS and voice. I'm guessing it will be a bit below GBP 2 billion in revenue and maybe, I don't know, GBP 100 million annual EBITDA. And if that's in the sort of right ballpark, are you thinking that the next steps of cost rationalization and growing Global Fabric can get you back consistently into double-digit EBITDA margins? And then you can buy your time a bit to do a JV or disposal. Is that the way to think about it? Allison Kirkby: Yes. No, that's a very good way to think about it. We are -- now that we have -- so international is not the same as what was formerly known as global. because there were large aspects of global that were related to U.K. multinationals or the U.K. public sector. And so that's all been carved out. So what you now see for this first time is just the international multinational segment without some of these unique businesses, Italy, Ireland, radiance that we've been selling along the way. Now that we've carved out, we can actually properly see the cost base incurred to support that GBP 2 billion of revenue. And it's out of proportion. And so we now have a very clear plan to restructure that business whilst transitioning it to modern day Global Fabric, global voice products and services. But as we said on the call, we already have a plan to get back to EBITDA growth next year and the drag on cash flow will follow soon afterward. That will be diminished and gone soon afterwards. So GBP 2 billion in revenue, GBP 150 million to GBP 200 million in EBITDA is the minimum EBITDA that, that business should be throwing off once it is a more simplified asset. And as I also said on the call, once we've got it carved out now and we have a clear line of sight of how we modernize it, simplify it and make it less dilutive on cash flow, we still see lots of optionality for future partnerships or even consolidation. Operator: Our final question on today's call is from Nick Lyall from Berenberg. Nicholas Lyall: Just a very quick one on Openreach and the ARPUs, is all of Clive's discounts and promotions filtered through? Is this a sort of steady state now? Or is there a risk that as you try and sort of fight back in the second half of the year versus particularly in the wholesale market? Will we see Openreach ARPU sliding, do you think? I think you're done plus 4%. So what's the risk to Openreach ARPU for the rest of the year, please? Allison Kirkby: Don't really see any risk to Openreach ARPUs as I look forward. The demand for fiber continues. The demand for higher speed fiber continues. CPI is looking to be higher in October this year than it was last year and all our pricing goes through as of April. And those discounts and promotions, they only -- they were only launched in October. They're only just now being taken up, and it's very limited in nature, and it's about migrating existing customers on a copper or VDSL network on to fiber and is encouraging a better quality product that brings with the OpEx benefits as well. So we don't see any risk to ARPUs, Nick. Simon Lowth: Yes, that's it, that we do not. Allison Kirkby: Yes, great. Operator: Thank you. That concludes the Q&A portion of today's call. I'll now hand back over to Allison for some closing comments. Allison Kirkby: Thank you, everybody. As you saw another solid delivery on our strategy. We're making great progress. Really proud of the team that's delivering it and there's much more to come, and I look forward to seeing as many of you as possible in the coming days and weeks. Thank you.
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: Hello, ladies and gentlemen. Welcome to McEwen's Third Quarter 2025 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner; William Shaver, Chief Operating Officer; Perry Ing, Chief Financial Officer; Jeff Chan, Vice President, Finance; Stefan Spears, Vice President, Corporate Development; Michael Meding, Vice President and General Manager of McEwen Copper; Carmen Diges, General Counsel and Secretary; Michael Swistun, President and CEO of Canadian Gold Corp [Operator Instructions] I will now turn the call over to Mr. Rob McEwen, Chief Owner. Please go ahead, sir. Robert McEwen: Thank you, operator. Good morning, fellow shareholders, interested investors. We have been preparing McEwen Mining to benefit from the stronger metal prices we are seeing today. Over the past year, gold at just below $4,000 an ounce is up 45%, silver up 47% and copper is close to $5, up 13%. And I believe the intermediate and long-term prices will be considerably higher. This is an excellent environment for our portfolio mix of assets. I go to -- as far to say that perhaps you could think of us as a mini Freeport with growing gold production pipeline and large exposure to a robust world-class long-life copper story. The improved gold and silver prices have buffeted us from the inconvenient unexpected events that can temporarily throw us off course and off guidance. Fortunately, these moments are temporary and can be resolved in a relatively short period of time and have not seriously delayed our ambitious growth plans of delivering by 2030, 250,000 to 300,000 gold equivalent ounces of annual production, plus watching Los Azules become a copper mine. And in the first 5 years, we're looking at producing at an annual rate of over 450 million pounds of copper a year, which today, copper prices would be about $2.2 billion, and it has a -- at least based on the feasibility study we just put out and the current copper price would have a gross margin of 64%. So we've done a number of things in the quarter, and we've made some investments, and I'll start with those. And then I'll move to asking Michael Meding to talk about the excitement at Los Azules, and then we'll get into our finances and our operations on our gold operations. So I'll start with Ian Ball to talk about our investment in Canadian Gold Corp and also [Technical Difficulty]. Operator: Ladies and gentlemen, we're experiencing technical difficulties, please stay on the line. We'll resume momentarily. Ian Ball: Thank you very much, operator. So on the Canadian Gold front, we're set to close that acquisition in January. Upon closing, we expect to issue an updated resource estimate for the end of February that will come out with our year-end financials, and that's going to be part of a preliminary economic assessment. Our shareholders will note, we have not included Tartan in any of our guidance going forward over the next 5 years, but we fully anticipate including that as we set to embark on our studies of that project. Exploration is ongoing and Canadian Gold is scheduled putting out an exploration update over the next 3 weeks. The key there is we've been drilling on the main zone, continuing to build out that resource. We've been doing a lot of work on the recently acquired ground to the west, which is option from Hudbay, where historically, there was a lot of historical high-grade drill intercepts and surface. We think there's a lot of synergies between Tartan and that ground. It really fits well with the McEwen mining portfolio in terms of the underground style, the processing plant, and we feel there's a lot of ways that we can optimize this and we can accelerate the permitting on this project to get it back into production upon some of the completion of the test work that we're currently undertaking. So we're quite optimistic both on the time frame for permitting, the exploration as well as the production profile that it can deliver for McEwen going forward. Robert McEwen: Mike, would you hop on the call? Michael Meding: Okay. Thank you, Rob. Thank you, operator. Q3 was an excellent and transformative quarter for McEwen Copper. We successfully advanced Los Azules from a world-class deposit into a derisked politically endorsed and bankable Taiwan asset. At McEwen Copper, we are committed to excellence in 3 key areas: operations, ESG and exploration. The most significant strategic event of the quarter was the acceptance of Los Azules into Argentina's [indiscernible] or the large-scale investment incentive program in Argentina on September 26. This is a fundamental game changer for the project. Through VG, Los Azules now benefits from 30 years of legal, fiscal and custom stability, access to foreign exchange and a significantly lower and internationally competitive tax rate. This provides a predictable framework and strong protection against future regulatory changes. The approval of the VG is a powerful public endorsement, which was personally announced by Argentine's Minister of Economy, Luis Caputo, and reinforced by President Javier Milei on their official X accounts. We also finalized a collaboration agreement with the IFC, a member of the World Bank Group. This partnership will align the project with the IFC's rigorous ESG performance standards and establishes a framework for collaboration on future financing. Our most recent milestone was the publication of the NI 43-101 feasibility study results on October 7. The study confirms robust project economics driven by a production process designed for low environmental impact. The leach and SX-EW process will produce 99.99% LME Grade A copper cathodes and as Rob already mentioned in the first 5 years, 204,000 tonnes of pure copper per year. The highlights include $2.9 billion after-tax NPV at 8%, 19.8% after-tax IRR, a payback of 3.9 years, $3.2 billion initial CapEx, C1 cash cost of $1.71 per pound of copper produced, all-in sustaining cost of $2.11 per pound of copper. The financial model used a copper price assumption of $4.35 per pound. The full National Instrument 43-101 technical report is scheduled for publication later this month. Looking forward, detailed engineering for Los Azules is set to commence, and we are targeting construction for late 2026, beginning of 2027, subject to project financing. Finally, let's talk about the upside. Our total mining rights cover approximately 32,000 hectares. To date, we have explored less than 10% of our holdings, about 3,000 hectares. We have already identified 8 significant targets, 4 of which we will focus on in the upcoming season. We have strong reason to believe we can significantly increase the resource size of Los Azules and ultimately convert this project into major mining districts. Thank you so much. I hand back over to you, Robert. Robert McEwen: Thank you, Mike. Perry? Perry Ing: Thank you, Rob. Good morning, everyone. I'll just provide some brief highlights from our third quarter report. So in terms of headline numbers, we reported a net loss of $0.5 million or $0.01 a share compared to a loss of $2.1 million or $0.04 a share in the corresponding period. I will note that this net loss included $4.3 million in terms of the loss from McEwen Copper. As we've noted previously, now that the feasibility study for Los Azules has been published, going forward from the effective date of the feasibility study at the beginning of September, we will be able to report those associated costs on a capitalized basis. So any loss attributable to Los Azules from prior periods will no longer -- will now be capitalized on a go-forward basis. In terms of adjusted EBITDA, we reported $11.8 million of positive EBITDA during the quarter or $0.22 a share compared to $10.5 million or $0.20 a share in the corresponding period. In terms of our treasury, we ended the quarter with $51 million in cash as well as $24 million in marketable securities. Our cash balance was relatively unchanged from the prior quarter at June 30. So just looking ahead, in terms of our release, we've outlined a number of significant projects ahead of us. So just looking into 2026 and our capital needs, obviously, we expect to finish the stock ramp by the end of next year. complete a heap leach pad expansion at Gold Bar. And as noted, we will undertake El Gallo Phase 1 with a capital cost of approximately $25 million. Overall, we expect to accomplish these using our existing treasury and cash flows from operations. And specifically for the El Gallo project in Mexico, we also expect to utilize some form of gold prepay for approximately half of the anticipated CapEx. So with that, we'll turn it over to Bill for some comments on operations. Robert McEwen: And what we're going forward. William Shaver: Good morning, shareholders. So from the operation perspective, as we all know, we started off the year poorly. However, we have a very good start to Q4. Q3 wasn't exactly as we anticipated due to some issues with the final few months of the Froome mine. And this is, I guess, to some extent, I guess, one of the outcomes of the end of a mine life. However, the Froome West deposit has kicked in nicely in -- towards the end of Q3, and we see it producing gold at the rate in our guidance through Q4 and well into 2026. We now see Froome mining until Q3 of 2026, by which time the stock deposit should be coming into production, which we're now indicating as occurring later in the first half of next year. In terms of the development work that we are doing at Stock, the ramp development is going along on schedule. And I would have to say both the mining contractor and our own mining crews continue to have their safety record in very good shape with no lost time accidents by either our contractors or our own forces. In terms of Gold Bar, Q3 has been quite challenging because of the fact that there was one part of our ore that we intended to mine in Q3, which basically did turned out not to be ore when we got to the mining. But we pivoted there quite nicely to move into Q4. Q4 is already looking very good, and we're back into the normal routine of our mining and our stripping and are moving north of 1.5 million tonnes per month. So that's a very good outcome for operations. From the perspective of exploration, we've had very, very good success in both operations at Gold Bar and at Stock. And at our Board meeting yesterday, we approved going ahead with the re-leaching of the -- of the assets in Mexico. So that will start early in the new year with construction and then move on into leaching of the El Gallo leach pad and then putting those tailings back into the pit. So we see a challenging fourth quarter, but we're in very good shape, I would say, in the month of October. And so looking forward to the next 2 months, and we're really looking forward to getting back to producing gold in Mexico. Thank you. Robert McEwen: During the year, we've enjoyed exploration success at we discovered the Froome West deposit that allowed us to bridge our production. During a time when we found permitting delays, we're backing up our production pipeline and our development plans. Both at Gold Bar over at the acquired timberline properties, we're getting excellent grades and continuity. There's one area that I don't know if everyone in the company shares my same optimism, but it's a property called even Seven Troughs. And historically, it excites me because of its historic record is one of the highest grade mines in Nevada at averaging more than 1.2 ounces per tonne. And there was a recent grab sample in an area that historically had shown a lot of plus 1 gram material, and that was better than 270 grams over a very short intercept, but still exciting given the history of that location. Gold at in Timmins, our Grey Fox area is growing. We'll have a preliminary economic assessment out in the first quarter of next year. We've got plans to expand in Mexico, as you heard from Perry and Bill. And we're bringing in some other properties and have some investments in areas and in companies that I think have a lot of growth potential. So with that, I do have to say that our miss year-to-date on our production is inexcusable, but we're taking steps to remedy that and get us back on track. So with that, I'll open it up for questions. Operator: [Operator Instructions] Your first question today comes from the line of Heiko Ihle from H.C. Wainwright. Heiko Ihle: Rob, can you hear me okay? Robert McEwen: Loud and clear. Can you hear us? Heiko Ihle: Perfect. Just making sure. First of all, congratulations to Ian Ball on his appointment there. Rob, you actually early on this call preempted a bit of what I was going to ask you. But I mean, your deal for Britannia or Paragon Geochemical Labs, an interesting move there. A few follow-ups to that. Do you think that you will engage in more vertical integration like this? And building on that last part, do you think we'll see a bit of an arms race for lack of a better word, or other guys want to get involved with suppliers, distributors in order to guarantee supply and fast processing? I mean like one example would be an assay lab. Obviously, you can't do it for independent assays, but would that be like a potential target? Just maybe elaborate a bit on what you were describing earlier on the call and what... Robert McEwen: Heiko, Paragon holds a technology called photo assay, and it's an X-ray process that is faster, cheaper, more comprehensive in terms of the data being provided. I first saw this technology 5 years ago, comes out of Australia. Paragon stepped in and got in line to secure 12 units, and that's about the annual production. Some of the majors have bought units for their sole use. I think as more money comes into the mining space, and that's surely going to happen with everybody, all the sovereign nations and corporations around the world looking for new sources of mineral -- being able to compress time and get more information for your dollar out of your assays is going to grow increasingly more important. And the old suppliers of assays, I mean, you could see backups go 3, 4 weeks or more. And here, you can get it in 2 weeks or less and sometimes almost daily. So I think that's important. I mean the whole industry is under a lot of strain right now. There are labor problems, so there's going to be competition there. There's equipment supplies. When someone comes along, we're going to have all these projects coming on. Who's going to -- will they be able to deliver the trucks, the shovels, the drills and that. You're already -- in Argentina, we looked at that problem with drills. We ended up buying 8 drills because there weren't drills down there readily available. And so mean you look at the world and say mining investments in a mix of global portfolios is very small today. It might be 1% or 2%. 10 years ago, it was up around 12%. We get back to that. As you said, there's going to be a real battle for a lot of the inputs that are required to define an ore body. And at the same time, we have to compress time in this industry. It's taking far too long to reach certain decision points. And so you're going to see a lot more technology. I view what Paragon's technology, the crisis rather, is a disruptive technology that will advance the industry. And we -- we'll be looking for other opportunities to accelerate and improve the knowledge of the industry, first for us, but then for the industry. William Shaver: Yes. Heiko Ihle: Yes, good answer. Obviously, interesting move. I've seen this machine in operation. I was trying to dig up where it was, but I've seen it on a site visit before somewhere. It was one of your assets, it was somewhere else. It might have been -- I go to so many sites. At Gold Bar, you did obviously 8,200 ounces, quite a bit lower, frankly, a bit lower than what we had in our model as well. You were talking about the reinterpretations of geological data and changes to your mine plans. What should we be looking at for next year? I mean this sure sounds like a temporary issue, but is it? William Shaver: I would say absolutely that the particular zone of the mining operation that we were in, in the last quarter, we ended up with a part of the -- where we were mining that we anticipated would be ore. It turned out to be -- to, in fact, be unmineralized material. And as a result, that part of the pit basically turned into stripping material. So -- and for some reason, the historical drilling that was done many years ago didn't identify that horse of unmineralized material. So we've mined through that with our stripping part, and we're now back into what we would call our normal ore. And what we're seeing in the rest of the mining that we're doing is that the reconciliation to the block model is standing up. And it was just, I guess, something that we missed in our confirmation drilling or something that we missed in the mine planning at the time. And again, this is a part of the ore body that we decided more than a year ago to start stripping because of the increase in the gold price, and that's what brought that whole zone into ore. At the gold price that we had 1.5 years ago, that stripping wouldn't -- and that mining would not have been done. So in answer to your question with regard to next year, we see the mine plan being pretty consistent through the year, and we'll be announcing the production guidance for next year shortly. Operator: [Operator Instructions] Your next question comes from the line of Joseph Reagor from ROTH Capital Partners. Joseph Reagor: I think Heiko asked the 2 big ones there. But just kind of following up on Gold Bar. In the comments, you guys said that you're going to be doing some more work to review this. What degree of risk do you see to an overall resource change, if any? Or is this just a matter of sequencing? Robert McEwen: It appears to be a matter of sequencing and not a large risk. Joseph Reagor: Okay. That's good to hear. And then you mentioned with Phoenix mid next year, how comfortable are you guys with that time line to have all your permits? And where do you see like the kind of the potential for to get started earlier on that front? And then do you expect to publish an updated financial study once you have permits in hand? Robert McEwen: Yes, the last question, and the permitting is somewhat unknown. We have a permit to do some of the work and it needs to be amended. And we're hoping that the timing will coincide with what we gave you. William Shaver: And we've had a number of meetings with the government authorities on permitting, and we're fairly optimistic that we'll have those permits in time and the construction of the plant will start in Q1. Joseph Reagor: Okay. And then part of your comments on the Canadian gold thing, I think got cut in the beginning. What is the time line to complete that merger? And then how -- what's kind of the time line after that by quarter as far as expectations for analysts? Robert McEwen: The process, there's a shareholder vote in December, and then it has to be ratified by the courts, and that's set for the 6th of January, I believe. Mid-January? 6 -- early January. And in terms -- then we'll go in there and do a resource estimate and a preliminary economic assessment on that. Joseph Reagor: Okay. Okay. And when do you think the -- what's the rough estimate, assuming a Q1 close, what's the rough estimate on PEA being released, like how many months or quarters? Robert McEwen: You'd probably be looking into the fourth quarter next year. Operator: Your next question comes from the line of [ Gord Weber ] from RBC Capital Markets. Unknown Analyst: With respect to resource estimates, how would McEwen Mining now calibrate or estimate their proven resources? Robert McEwen: The same way everyone else does. Unknown Analyst: And how many ounces or equivalent ounces would McEwen claim to have today? Robert McEwen: It's all set out in our statements. We're looking at about 3 million ounces at Fox. And it's about 4.2 million, I think, between all of the operations. And then we have development going on at drilling at Grey Fox right now. We're drilling down in Nevada at Gold Bar over at Eureka, starting at Seven troughs. Unknown Analyst: The reason I ask is it seems to me a little inequitable that we're being asked Canadian as Gold Corp stockholders to tender 50 shares for one of those shares when, in fact, we have a proven resource. Robert McEwen: Who are you representing? Sorry, who are you a shareholder of? Unknown Analyst: Yes, I'm a stockholder. I've been a long-term stockholder of Canadian Gold Corp. We know we have proven resources, and we also know that we have a lot of drilling that hasn't been analyzed to date. So I assume we have greater resources than has been booked. And it just seems to me 50:1 isn't -- well, it just seems to me very opportunistic. Robert McEwen: We put a bid on the table. It was accepted by management, and it's going to shareholders in December. We thought it was fair at the time, and I believe management thought it was fair. Unknown Analyst: Yes. And will there be a resource estimate for we, the stockholders before it goes to vote? Robert McEwen: We don't have any control over that. Unknown Analyst: Okay. So I think that's an... Robert McEwen: I don't have an answer to that question, but we're not driving a resource estimate. Unknown Analyst: But as the majority shareholder, don't you want to know what that number is before you conclude the transaction? Or do you already have some inside information that leads you to believe it should be concluded? Robert McEwen: No, the drilling is going. It's exciting. It's in an area that had past production, although the Tartan Lake mine wasn't run very well, and that's why it went into bankruptcy. But it's -- it's in a favorite area of the country in terms of energy costs and that and mineral deposit. Unknown Analyst: Yes. No, you don't have to sell me on the merits of the Tartan mine. My concern is that the majority shareholders may have insight or information that the minority shareholders haven't been provided with. Robert McEwen: That isn't the case. Unknown Analyst: Well, that's refreshing to hear that. Robert McEwen: Any other comments, questions? Unknown Analyst: Perhaps we can follow that up later. Operator: Your next question comes from [ Terry A. DeVries ], a private investor. Unknown Analyst: You know what, I'm good. I'm actually really good. I've had a great couple of months watching your stock double. Congratulations for Los Azules. Really exciting what's happening there. And the gold market goes up, the gold market goes down, and we just got a fantastic buying opportunity. And so I stepped up to the plate again. The one question I have I didn't really hear it from Michael Meding. The IPO for Los Azules, do you have any further information that you can give us when you think that might be happening? How much money you'd be willing to -- or looking to raise in the first issue? Robert McEwen: Well, we were hoping to do it earlier, but the feasibility, we got that out in October and didn't feel the market would have enough time to do an IPO in the fourth quarter of this year. Now we're looking at going to sometime next year, doing -- taking the company public. Unknown Analyst: First quarter... Robert McEwen: In terms of raising money, our last financing was at $30 a share. And I would expect that we're been accepted in the RGI. We've got the feasibility study. The project looks very attractive relative to a number of other development projects in copper that we'd see a higher price than that when we go public. Unknown Analyst: Any other market-moving news that you can expect in the next quarter or 2? Robert McEwen: I don't know. I'm going to go meet with the President of Argentina tomorrow in New York. I don't think that will move the market. Unknown Analyst: Well, your drill bits success has been rather encouraging. So I wish you all the luck in pursuing that and look forward for some good news. Operator: And there are no further questions at this time. Mr. Rob McEwen, I turn the call back over to you. Robert McEwen: Thank you very much, operator. Thank you, everyone. We've set our course where we're going. We think by planning by 2030 to have substantially more production coming out of our gold mines. There are a couple of other projects we'd like to see brought into production, and we hope to have the copper mine up and running by -- in 2030. So all good news in the long term. Thank you. Operator: And this concludes today's call. You may now disconnect.
Operator: Greetings, and welcome to the Thermon Earnings conference call fiscal year 2026 quarter 2. [Operator Instructions] As a reminder, this conference is being recorded. And it is now my pleasure to introduce to you, Ivonne Salem, Vice President of FP&A and Investor Relations. Thank you, Ivonne. You may begin. Ivonne Salem: Good morning, and thank you for joining Thermon Group's Second Quarter Fiscal 2026 Results Conference Call. Leading the call today are CEO, Bruce Thames; Chief Financial Officer, Jan Schott; and Chief Operating Officer, Tom Cerovski. Earlier this morning, we issued an earnings press release, which has been filed with the SEC on Form 8-K and is also available on the Investor Relations section of our website. Additionally, the slides for this conference call can be found in our IR website under News & Events, IR Calendar, Earnings Conference Call Q2 2026. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to and not as a substitute for measures of financial performance reported in accordance with GAAP. I would like to remind you that during this call, we might make certain forward-looking statements regarding our company. Please refer to our annual report and most recently quarterly report filed with the SEC for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Our actual results might differ materially from those contemplated by these forward-looking statements, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as might be required by law. Today's call will begin with remarks from our CEO, Bruce Thames, who will provide a review of our recent business performance, including an update on our strategic initiatives. Following Bruce, our Chief Operating Officer, Tom Cerovski, will share an update on our progress and opportunities in the data center market, which is a key component of our business diversification strategy. After Tom, our CFO, Jan Schott, will provide a financial update and review. Bruce will then wrap up our prepared remarks with an update on our business outlook. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn it over to Bruce. Bruce Thames: Thank you, Ivonne, and good morning to everyone joining us on the call today. I'll begin my commentary with our second quarter highlights, which you can find on Slide 4. As we committed in our Q1 call, the Thermon team delivered exceptional second quarter results with solid incoming orders, strong revenue conversion, and robust profit capture that exceeded expectations across the board. Our reported revenues were up 15% from last year, which combined with our strong margin execution and operating leverage resulted in a 29% increase in adjusted EBITDA. These second quarter results, combined with a backlog that is up 17% year-over-year and improved visibility position us well for the balance of the year. On a trailing 12-month basis, our revenues and adjusted EBITDA have reached records of $509 million and $114.1 million, respectively. We believe our performance reflects the strength of our strategy, the resilience of our business model, and the outstanding execution by our global team despite a volatile macroeconomic backdrop. I'm incredibly proud of our team's ongoing efforts to execute our margin improvement initiatives, including tariff mitigation measures, demonstrating steady progress towards our longer-term EBITDA margin objectives. Together, these actions enabled us to generate 23.2% adjusted EBITDA margins in the second quarter with adjusted EBITDA margins growing to 22.4% on a trailing 12-month basis. While we've been pleased with the steady progress, additional opportunities to drive further EBITDA margin expansion remain. This quarter is illustrative of the earnings power of our business, and we remain committed to driving EBITDA margin expansion over the longer term. Our unwavering commitment to our strategic growth initiatives has us well positioned to benefit from a strengthening macro backdrop and several favorable secular demand trends, including reshoring, electrification, decarbonization, and rising power demand. This is evident when looking at our total bid pipeline, which was up 11% at quarter end with nearly 80% of the opportunities coming from our diversified end markets, including power generation, renewables, commercial, and data centers. I'm also very excited to report that this update will include details of our first order for the new Poseidon liquid load bank. We're seeing extremely strong quoting activity for our data center solutions and expect order activity to accelerate in the coming quarters. Tom Cerovski, our Chief Operating Officer, will provide a more detailed update on the data center market later on this call. The team continued to demonstrate disciplined financial management during the second quarter, and we ended the period with net leverage at 1x with total liquidity of $129 million. Our M&A pipeline remains active, and we're excited by our strong capital position, which provides us with the capacity and flexibility to act decisively on opportunities to deploy capital in alignment with our strategic priorities. We are encouraged by the strengthening trends in our business and anticipate this momentum continuing into the third quarter. During the first half, we've established a new global engineering center in Mexico to handle the increased project workload driven by the backlog growth we experienced coming into this fiscal year. During the second quarter, we saw a 41% increase in large CapEx revenues, driven by 2 large North American LNG projects as these move through the design phase into execution. Based upon these factors, we are well positioned to deliver strong second half results and are pleased to raise our full year 2026 financial guidance, which I will cover in more detail in my closing remarks. Before I turn it over to Tom, I'd like to take some time to provide an update on our strategic growth initiatives, which are centered around our 3D strategy of decarbonization, digitization, and diversification shown here on Slide 5. We believe our focused commitment to our strategic pillars has us well positioned to benefit from several strong secular drivers to generate sustained organic growth moving forward. Turning now to Slide 6. I will begin with an update on our digitization opportunity. Since launching the Genesis Network, we've received extremely positive customer feedback with over 86,000 installed circuits, up from 58,000 at the end of fiscal '25. We are now beginning to leverage our digital technology capabilities across a broad spectrum of Thermon Solutions, including commercial heat tracing, rail and transit, and data center product offerings. Our customers need real-time operational awareness and analytics to more effectively manage their business and provide actionable insights to help unlock predictive maintenance, enhance performance, and energy efficiency. This differentiated hardware and software platform helps create value for customers, which drives growth and improves retention while delivering enhanced returns. Turning now to Slide 7. I'd like to provide an update on an exciting area of growth in the decarbonization space represented by medium voltage heaters. The electrification megatrend is driving momentum to replace hydrocarbon-fired heating systems with electrical solutions, especially in Europe. Medium voltage heaters offer a compelling alternative with higher efficiency, zero emissions, lower initial capital costs, and lower maintenance expenses, all while providing a higher level of control. Our Quantum medium-voltage heater product line was launched in 2024, offering voltages from 3,600 volts to 7,200 volts. Our first 2 orders totaling nearly $10 million are now being produced for customers in the U.S. and the Middle East. This market is estimated to be growing at a 17% compounded annual growth rate to $263 million in 2030 with a very short list of competitors. Given Thermon's differentiated capabilities in heat transfer analysis and design, we are leveraging legacy customer relationships in the chemical, general industrial, oil and gas, and food and beverage end markets to grow share. We are seeing strong order momentum with a solid pipeline of high probability opportunities as we work to scale our capacity in both North America and Europe. I would now like to turn the call over to Tom Cerovski, our newly appointed Chief Operating Officer, who will provide an update on diversification into the data center market. Tom? Thomas Cerovski: Thank you, Bruce, and good morning to everyone. Moving on to Slide 8. I'm excited to share updates on a key end market that is now central to our overall business diversification strategy. As we've discussed on prior calls, the unprecedented investments in data centers driven by AI adoption represent a significant and long-term growth opportunity for Thermon. The recent shift to liquid cooled data centers has created a rapidly accelerated demand for liquid load banks to validate critical cooling systems and power infrastructure. Thermon is uniquely positioned to capture this opportunity, leveraging our legacy solutions. Given the pace of this market, we are proud of how quickly our team has executed. In just 4 months from project kickoff, we completed prototype builds for our Poseidon and Pontus liquid load bank solutions and customer demonstrations are already underway. The response has been outstanding. Our quote log now totals roughly $30 million and continues to grow, and we've secured our first order for 20 Poseidon units. Based on management estimates, the liquid load bank market is projected to grow at a 21% CAGR from $84 million in 2024 to $386 million by 2032. We are targeting a 20% to 25% market share within the next 24 to 36 months, and this early traction gives us confidence in achieving that goal. Customers are excited about our differentiated design, which offers clear advantages over our competitors, including compliance with the ASME pressure vessel code, Canada Registration or CRN number for Canadian customers and industry-leading power density or kilowatt to weight ratio and our pursuit of UL and cUL product certification. The combination of these features and benefits position Thermon well to emerge as the trusted partner for mission-critical data center applications. Beyond liquid load banks, remember that Thermon also has significant pull-through opportunities for our traditional product solutions in data center applications, including electric heat tracing, environmental heaters, immersion heaters, tubing bundles and removable heat blankets. As data center growth accelerates, our commercial team is actively developing channels with owners and operators, HVAC contractors, commissioning firms, and rental houses to ensure Thermon is top of mind for these data center projects. Capitalizing on these opportunities in the data center market is a great example of our strategy in action, creating value for customers and shareholders through innovation and disciplined execution. We look forward to sharing more updates on this exciting growth opportunity in the quarters ahead. With that update, I'll turn it over to Jan for a detailed review of our second quarter results. Jan? Jan Schott: Thank you, Tom, and good morning, everyone. I will review financial results for the quarter, give an update on working capital and free cash flow and conclude with comments on the balance sheet and liquidity. Moving to Slide 9. Revenue for the quarter was $131.7 million, a year-over-year increase of 15%. The growth this quarter reflects more favorable spending patterns following tariff uncertainty, improved trends in large project revenues and continued momentum from F.A.T.I. As expected, we also benefited from backlog conversion in the quarter, stemming from previous supply chain disruptions and delayed projects. Excluding F.A.T.I., organic revenue grew 9% year-over-year. Our OpEx revenues were $107 million during the second quarter, an increase of 10% compared to last year. Excluding the contributions from F.A.T.I., OpEx revenues increased 3% from last year. OpEx revenues represented 81% of total revenues for the quarter. Large project revenue was $24.7 million during the second quarter, up 41% from last year. As we highlighted in last quarter's call, we saw several CapEx projects move from engineering to execution early in the second quarter. We expect this momentum to continue through the balance of the year. Our gross profit was $61 million during the second quarter, an increase of 20% compared to last year. Revenue growth benefiting from pricing, combined with efficient execution and tariff mitigation measures contributed to the increase in gross profit. As a result, gross margin was 46% for the second quarter, up from 44% last year. The gross margin improvement was notable given the higher mix of large project revenue for the quarter. Adjusted EBITDA was $30.6 million for the quarter, up from $23.8 million last year, an increase of 29%. Volume growth, gross margin improvement, and disciplined cost management partially offset continued investments in growth initiatives. Adjusted EBITDA margin was 23.2% during the second quarter, up from 20.8% last year. GAAP earnings per share for the quarter was $0.45, up 61% from $0.28 in the prior year. Adjusted earnings per share was $0.55, up 45% from $0.38 last year. Second quarter orders were flat compared to the same period last year. On an organic basis, bookings declined 4% year-over-year, primarily driven by rail and transit following last year's significant surge. Momentum from F.A.T.I., where we continue to benefit from broader decarbonization trends helped offset the organic decline. Our overall book-to-bill ratio for the quarter was 1.0x, down modestly from the prior year, consistent with timing variability in project awards. Backlog increased 17% on a reported basis and was up 4% organically due to the positive book-to-bill in the quarter, combined with project timing. Turning to performance by geography. Year-over-year sales in USLAM were up 8% compared to the prior year, driven by the ramp in several large CapEx projects. Revenue in Canada increased by 10%. Trends in EMEA remained strong with revenue doubling, driven by solid performance in our organic business and contributions from F.A.T.I. In contrast, APAC experienced a 4% decline, primarily due to ongoing uncertainties surrounding global trade policies with China. Moving to Slide 10 for an update on our balance sheet and liquidity. Working capital increased by 10% to $172 million at the end of the quarter, driven by F.A.T.I. higher inventory in preparation for fall heating season and materials purchased in advance of tariffs. CapEx was $3.1 million during the quarter compared to $1.9 million last year, which includes capital investments to support growth initiatives. Free cash flow during the quarter was $4.4 million, down from $6.7 million last year as we invested working capital in inventory build, increased project activity, and the timing of shipments. We repurchased $6 million in shares during the second quarter, bringing our total shares repurchased since the start of fiscal '25 to $36 million. We currently have $39 million remaining under our current authorization as of the end of the quarter. We ended the quarter with net debt of $110 million and a net leverage ratio of 1.0x. In summary, we continued our financial discipline during the second quarter and remain focused on maintaining a strong balance sheet. We have $129 million in total cash and available liquidity as of quarter end, providing us with ample financial flexibility to execute on our balanced capital allocation strategy, which remains focused on driving growth, both organically and through strategic acquisitions, while balancing opportunistic share repurchases and debt reduction. With that, I will turn the call back over to Bruce. Bruce Thames: Thanks, Jan. We're obviously very encouraged by our second quarter results and the accelerating momentum across our markets, particularly the move of several large projects from engineering to execution. I'm proud of our team's disciplined execution on margin initiatives, including swift and effective actions to mitigate the impact of tariffs, combined with meaningful progress on our margin expansion efforts. With this momentum continuing into our fiscal third quarter, we are on track to deliver a strong second half to our fiscal year. Based upon the improving visibility in our business, we are pleased to raise our full year 2026 financial guidance for both revenue and adjusted EBITDA. As we detail on Slide 11, our revised fiscal 2026 financial guidance calls for revenue in a range of $506 million to $527 million, representing 4% growth at the midpoint. We are raising adjusted EBITDA guidance to a range of $112 million to $119 million, representing 6% growth at the midpoint. Our guidance continues to assume that the current tariff structures remain in place and any future announcements do not have a notable positive or negative impact on input costs or customer sentiment and the improved business trends we've seen are sustained. As I've outlined in the past, we remain highly focused on effectively managing the factors within our control. As you can see here on Slide 12, we've made significant progress in our 3D growth strategy over the last 5 years, driving double-digit top line growth with adjusted EBITDA growing at 2x the rate despite the contraction in large CapEx spending we experienced in fiscal '25. Turning now to Slide 13. We believe we are strategically positioned to benefit from several powerful secular drivers, including reshoring, electrification, decarbonization, power, and data centers. We're in an extremely strong financial position with more than sufficient financial flexibility to continue pursuing our strategic priorities, including the disciplined allocation of capital, all with an ongoing focus on generating long-term value for our shareholders. That completes our prepared remarks. We are now ready for the question-and-answer portion of our call. Operator: [Operator Instructions] And the first question comes from the line of Justin Ages with CJS Securities. Justin Ages: I wanted to start on the large CapEx side, which was a nice surprise there. In the prepared remarks, you mentioned a couple of LNG projects in North America and some momentum. Are you expecting more in the same business, more in LNG there? Or is there some other large CapEx projects that are kind of coming into focus? Bruce Thames: Yes, Justin, last quarter, we spoke about 5 projects we won in LNG. And certainly, that's an area where we're seeing growth. And so we really focused when we came into the year on about -- our backlog was up about 29% year-over-year. We really were -- had a big backlog of work in engineering. Since we've established a global engineering center in Mexico and have staffed that up, and that team has begun has become productive. And what we're seeing there is those projects move from the design phase into execution, and we saw a couple of those move forward in the second quarter of this year, which led to our CapEx -- large CapEx revenues being up 41% year-over-year. So we do expect that flow to continue through the back half of the year. And as we look forward, our LNG pipeline is up 140% year-over-year when we look at those opportunities. So we are seeing some robust activity in the LNG market. Justin Ages: And then shifting to the digitization. Nice update you guys hit that 50% growth that you laid out from the 58,000. Can you just give us a little more detail on what drives those efforts? Is it additional sales? Is it really the tip of the spear that differentiates your product from competitors? Bruce Thames: Yes. So I think it's actually a few things. One is, it is the tip of the spear, and it really helps differentiate us from the competition and improves our win rate so that we can grow the installed base. It also increases really the customer engagement throughout the life cycle of the asset, which really helps us to capture those recurring revenues over time. So that's one of the big benefits that we see from the digitization effort. And the things we highlighted this quarter is we built this platform of both software and hardware, and we're now leveraging that across a wide range of Thermon solutions in the marketplace. So thus far, we've really introduced it into the industrial heat tracing end markets and product lines. It's also now being offered in our commercial line of heat tracing products, which we just launched in the last year with the EVO controller. And then we're also moving that into rail and transit for switch heating, particularly around our Hellfire units. And then our most recent launch of the Pontus and Poseidon load banks include these software and hardware tools in these units as well. So we really see this as being an enabler across a wide range of our solutions in the marketplace. Operator: And the next question comes from the line of Brian Drab with William Blair. Brian Drab: Gross margin is really solid in the quarter, obviously. But that was also in a quarter where you had some of the CapEx projects stepping up. Can you talk about that dynamic, maybe the margins in some of the bigger projects that are coming through? And I mean, is everything else that you're doing offsetting maybe some lower margin big projects? Or do these projects have really good margins? Jan Schott: Brian, this is Jan. I'll take that question. Yes, you're actually spot on. We did have, I guess, large projects, as you know, typically don't have as good a margins as our rest of our projects. And so we did have an unfavorable impact from those. But offsetting that this quarter were just we had increased volumes, so operating leverage from that. We also had our Thermon Business Systems productivity gains that we continue to see really help our margins really be solid. We had pricing that we saw flow through in the quarter. So we did see a benefit from that. Our tariff mitigation efforts are absolutely helping. And obviously, those work in tandem with price and then new product introduction. And so I think you'll continue to see -- we're very focused on, I would say, the adjusted EBITDA margin, not so much the gross margin. And as you saw, I think on Slide 3, our trailing 12 months gross margin is at 45%. We did see higher this quarter, and it was really due to all those contributing factors. But we'll continue to push for continued expansion in our margins. And I think our aspirational goal is to get to 24%. The midpoint of our revised guidance is at 22.4%. Brian Drab: So in terms -- I know you said to focus on EBITDA margin, but can I ask though, for the second half of the year, directionally how to think about gross margin? And I guess the 22.4%, it looks like for EBITDA margin, that means kind of sustaining this -- at least sustaining this 23% level is probably the goal for the second half of the fiscal year? Jan Schott: Yes, absolutely. I think that would be the goal. For gross margins, I think we'll continue to see strong margins. If you look at that historical rate, I think that should be instructive for what we would expect for the balance of the year. Brian Drab: And then maybe I'll just ask one more for now. It's great to see these larger projects releasing or moving to execution in the LNG industry. I think you said 2 moved to execution, but there's 5 in the pipeline. What is the potential timing for the other 3 to move to execution? And then secondly, are there other large projects in the funnel that might release outside of LNG? Bruce Thames: Yes, Brian, I don't want to over-index on LNG. Those were the 2 larger projects we saw move forward this quarter. But if you look, and I would say more broadly, our business was up about 15% year-over-year. Our diverse end markets were up roughly 15% equivalent and oil and gas was up similarly. So this is not an outsized move in oil and gas. And so I'd like to make sure we don't over-index on that. So yes, there are a much broader range of projects that are beginning to move through execution, and they include a whole host of other end markets, whether that's -- we do have some in the chemical, petrochemical. We have some also in power, certainly in other areas around our other end markets as well. So we are seeing -- it's more broad-based move. And when we looked at last year, we did see a contraction in CapEx spending, and that was not in any given sector. It was fairly broad-based. And so the shift we're seeing now is also fairly broad-based when we see these projects coming back and moving to execution in the back half of the year. Brian Drab: And just really quickly, the data center opportunity and the medium voltage center opportunity are really new and building. How much of that impact the second quarter results? Or is that, that's really more just coming in the next few quarters, really? Bruce Thames: Right. That's a great question. There's 0 impact in the second quarter. And these projects -- this -- we're just beginning to book orders, which Tom had noted in the prepared remarks. So we won our -- secured our first order, which we're excited about. We've got a growing quote log that we feel we've got some high probability opportunities there. And then with medium voltage, we've secured our first 2 orders. Those are being built as we speak. And we're working to scale capacity in both North America as well as in Europe, so we can grow that business going into our fiscal '27. So we're excited about both of those areas for growth, and we're really well positioned with a differentiated product offering and a fairly narrow range of competitive -- when we look at the competitive landscape, we're really well positioned. Brian Drab: All right. Congratulations on the great results. Bruce Thames: Thanks, Brian. Jan Schott: Thanks, Brian. One clarifying thing I just want to point out is, obviously, the gross margin going forward will be dependent upon the mix. So that's kind of the -- if there were any headwinds, that would be it. Brian Drab: Understood. Not surprising, yes. Operator: And the final question comes from the line of Chip Moore with ROTH. Alfred Moore: Congrats as well. Bruce, I guess, I think we've addressed most of the key items. I guess for me, just maybe following up on your last comments around scaling capacity for medium voltage heaters and the opportunity in data center. Just how -- it seems like you have a lot of organic opportunity in front of you. How are you thinking about organic investment versus inorganic? And are you still tracking bolt-ons? And just what are your priorities here? Bruce Thames: Well, Chip, great question. First and foremost, our priority is investment in organic growth initiatives, and that has not and will not change. But we are fully funding that really through additions in our SG&A to be able to support the growth in that business as well as through CapEx spending to enable that growth by scaling our capacity in our factories. So that is all embedded in our guidance and underway. As Jan had noted in her prepared remarks, our balance sheet is in a really great position, and we have a strong pipeline of opportunities that we are very focused on really looking for those -- that next inorganic growth opportunity that will augment our 3D strategy going forward. And so we are very focused on really moving forward and looking at those inorganic growth opportunities. So really thinking about the business driving that organic growth, which we've identified these couple of key areas, but also really the inorganic piece is going to be important to continue to drive growth in the business going forward. Alfred Moore: And maybe one last one that just popping my head, Bruce. The government shutdowns out there, is there any risk of delays at all on projects or anything like that or any impact at all? Bruce Thames: Yes. We really don't have any exposure to government contracts. So it's really a nonevent for us. So it's really not a problem. Operator: And ladies and gentlemen, that does conclude the question-and-answer session. I would like to turn the floor back over to Bruce Thames for any closing remarks. Bruce Thames: Thank you all for joining us here today. We appreciate your interest in Thermon and looking forward to giving you an update for our third quarter in the January, February time frame. Thank you. Operator: Thank you. That does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Operator: Good day, and welcome to the Q3 2025 Walker & Dunlop, Inc. Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Kelsey Duffey. Please go ahead. Kelsey Montz: Thank you, and good morning, everyone. Thank you for joining Walker & Dunlop's Third Quarter 2025 Earnings Call. I have with me this morning our Chairman and CEO, Willy Walker; and our CFO, Greg Florkowski. This call is being webcast live on our website, and a recording will be available later today. Both our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for some of what Willy and Greg will touch on during the call. Please also note that we will reference the non-GAAP financial metrics, adjusted EBITDA and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics. Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations, and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC. I will now turn the call over to Willy. Willy Walker: Thank you, Kelsey, and good morning, everyone. Our third quarter financial results underscore an improving commercial real estate market and Walker & Dunlop's strong brand and market position. Pent-up demand for assets and a material increase in the supply of debt capital drove increased transaction volumes across our platform, generating $15.5 billion of total transaction volume on the quarter, up 34% year-over-year. Strong transaction activity across all capital markets executions, sales, debt financing, equity and structured finance, investment banking, research and appraisals led to third quarter revenues of $338 million and $0.98 of diluted earnings per share, up 16% and 15%, respectively, year-over-year. Adjusted EBITDA grew 4% to $82 million and adjusted core EPS increased 3% to $1.22. With the 10-year sitting just above 4% and a strong forward pipeline, we expect a gradual increase in commercial real estate capital markets activity to continue forward. The 34% increase in total transaction volume to $15.5 billion was led by an extremely active quarter of lending with Freddie Mac, up 137% to $3.7 billion, along with solid growth in Fannie Mae volumes, up 7% to $2.1 billion. It is important to note that while the growth in GSE lending and W&D's market share is fantastic, the mortgage servicing rights associated with our GSE business have decreased significantly due to the majority of our loans being 5-year loans versus 10-year loans. This shift, which began in 2023, has a large impact on the capitalized mortgage servicing rights we book, as Greg will speak to momentarily. But given the growth we are seeing from both existing and new clients to W&D, this shorter duration presents a huge opportunity for asset refinancing and/or sales over the next 2 to 5 years. Compounding this opportunity are the upcoming refinancings on the 10-year loans written in 2018, '19 and '20. As you can see on this slide, there is $31 billion of scheduled agency maturities in 2025, mostly comprised of 10-year loans originated in 2015. The level of agency maturity steps up to around $50 billion for both '26 and '27 and then increases dramatically to $97 billion in 2028 and $144 billion in 2029 as those later vintages of both 10-year and 5-year loans mature. And as we have seen in previous cycles where there appears to be a wall of loan maturities, assets will get sold and refinanced, pulling forward a large portion of the refinancing wall. HUD lending volumes were up 20% in the quarter to $325 million. And while the government shutdown is impacting HUD's ability to process business, the newly implemented efficiencies at HUD and increased borrower demand for HUD capital makes us bullish on the outlook for this lending business going forward. Our Q3 investment sales volume was very strong, up 30% to $4.7 billion and outperforming overall market growth of 17% according to RCA. While oversupplied high-growth markets such as Austin and Nashville, where our team sold $3.5 billion of assets in 2021 and 2022, are still struggling and not seeing much sales activity, gateway cities in their suburbs have operating fundamentals attracting capital. A good example of this is the $550 million multifamily portfolio we sold in Boston in Q3 and the $350 million financing we arranged for the buyer of that portfolio, reflecting the broad geographic coverage of our team that is driving our growth in 2025. And while suburban gateway and slower growth Midwestern cities have stronger supply-demand fundamentals today, the Sunbelt will come back due to job growth and lifestyle choice, and we have the teams in place to capture deal flow when that rebound occurs. Our investment sales platform has 26 teams across the country, including 4 national specialty practices and is well positioned to take advantage of an increase in activity across geographies as the next cycle gains momentum. There is still a tremendous amount of equity capital that needs to be recycled to investors before commercial real estate private equity funds can raise fresh new capital. As Slide 6 shows, there is over $600 billion of equity capital invested in historic funds for over 5 years that needs to be returned to investors and nearly $300 billion that was raised in 2021 and 2022 that is yet to be invested. This pressure to return capital and deploy uninvested capital is an important component part of what is driving increased transaction volumes in 2025. Our brokered debt financing team placed $4.5 billion in Q3, up 12% over Q3 '24. Debt funds, banks and life insurance companies are all active in the marketplace, increasing liquidity, which in turn is beginning to drive down cap rates. Our technology-enabled businesses of small balance lending and appraisals continue to grow with appraise revenues up 21% in the quarter and small balance lending revenues up 69%. We continue to invest in customer-facing technology like Client Navigator, our digital experience for W&D clients. We currently have over 2,700 clients actively monitoring their loans and properties through this portal. Similarly, our clients are increasingly using WDSuite, a new web-based software that provides instantaneous market and asset level insights. Galaxy, our proprietary loan database, continues to source new clients and loans for W&D with 16% of our transaction volume year-to-date being with new clients and 68% of our refinancing volume being new loans to Walker & Dunlop. Our success continuing to broaden our client base and win loans from our competitors is a testament to the powerful combination of our talented bankers and brokers, innovative technology and exceptional customer service. As you can see from every client-facing execution experiencing strong growth in Q3, W&D's people, brand and technology are well positioned in the marketplace and winning. We see the secular tailwinds behind our business, almost 3 years of pent-up demand, lower interest rates and the need to recycle capital to investors for future investment continuing over the next several years as the economy continues to grow and commercial real estate fundamentals improve. We are seeing very similar market dynamics in 2025 to what we saw after the great financial crisis in 2011, '12 and '13 and have built Walker & Dunlop to meet the market's needs and grow. I will now turn the call over to Greg to talk through our financial results in more detail. Greg Florkowski: Thank you, Willy, and good morning, everyone. As Willy just outlined, the continued momentum of the commercial real estate transaction markets drove growth across every one of our product offerings in Q3 '25. Both of our operating segments, Capital Markets and Servicing and Asset Management grew revenues this quarter, reflecting the strength of our overall business model as the market continues to improve. Diving into our segments, our capital markets team continued to build momentum, delivering volume growth across every product offering this quarter when compared to the year ago quarter. As a result, loan origination fees grew 32%, property sales broker fees grew 37% and MSR revenues increased 12% year-over-year. Over the past 2 years, we highlighted 2 trends in our GSE lending volumes. The first is a shift away from 10-year loan products towards shorter duration 5-year products. As this graph shows, back in 2020, 82% of W&D's GSE lending was 10-year or longer paper and 0% was 5-year. Fast forward to today, and those numbers have essentially inverted. Year-to-date in 2025, 23% of loans are 10-year or longer, while 60% are 5-year. The second trend we have seen over the past 2 years is tighter servicing fees due to the higher interest rate environment. Both of these trends continued this quarter, which led to lower valuations for our noncash MSRs. So even though the 64% growth in GSE lending volumes this quarter was fantastic, it only drove a 12% increase in our noncash MSR revenues compared to the year ago quarter. These clients are part of our ecosystem and their loans are now in our servicing portfolio, and we will be in the pole position to address those loans for our clients as they prepare to transact over the next 5 years. As shown on Slide 9, total Capital Markets segment revenues grew 26% year-over-year. Net income grew 28% to $28 million, and adjusted EBITDA improved 83% to a loss of less than $1 million. This segment's performance this quarter is a reflection of the team on the field and what they are capable of delivering as market conditions continue improving. We expect to see more quarters like this as momentum in the markets continue building. Our Servicing and Asset Management, or SAM segment grew third quarter total revenues by 4% year-over-year, as shown on Slide 10. Our $139 billion servicing portfolio continues to generate steady cash servicing fees that grew 4% this quarter. Our placement fees and other interest income also grew this quarter by 5%, even though short-term interest rates declined year-over-year. We experienced an uptick in loan payoffs this quarter, many of which we refinanced for our clients, temporarily increasing the balance of our escrow accounts and offsetting the year-over-year decline in interest rates. This is a nice surprise in Q3, but not something we expect to persist in future quarters. Overall, SAM segment net income declined 1%, but adjusted EBITDA grew 2% to $119 million. Turning to credit. Our at-risk servicing portfolio continues to perform exceptionally well with only 10 defaulted loans totaling just 21 basis points. We recognized a $1 million provision for loan losses this quarter compared to $2.9 million in the year ago quarter. The provision this quarter was driven by updated loss estimates on 2 previously defaulted loans as well as standard loss provisions for the growth in our overall at-risk portfolio. We continue to see strengthening operating fundamentals across the portfolio as rates come down, excess supply in certain high-growth markets get absorbed and national occupancy increases. While our portfolio performance is exceptional, and we feel extremely good about the credit quality of our book, we continue to investigate in collaboration with the GSEs, specific incidences of borrower fraud that took place largely as a result of changes in industry practices in the aftermath of the pandemic. We are currently in negotiations with Freddie Mac on the indemnification of 2 such loan portfolios totaling $100 million. While Freddie Mac and Walker & Dunlop jointly underwrote these loans, we have a long-standing partnership with Freddie Mac that requires us to repurchase loans or indemnify them if certain borrower documentation is determined to be fraudulent. Our current expectation is to use approximately $20 million of Walker & Dunlop capital to collateralize our indemnification of Freddie Mac for these loans, and we expect to take the credit losses associated with this portfolio in the fourth quarter. While loan buybacks and the associated losses are never welcome, we do not have other fraud investigations underway with either GSE and feel confident that the policies, procedures and new technology we have in place today protect us from the type of borrower fraud that transpired during and in the immediate aftermath of the pandemic from occurring again. As Willy just outlined, we have significant momentum heading into the fourth quarter and the strength of our pipeline and the macroeconomic environment has our core business on the path toward achieving our annual guidance for EPS, adjusted core EPS and adjusted EBITDA, absent any losses related to loan buybacks. We ended the quarter with $275 million of cash on our balance sheet, reflecting the continued recurring revenues from our SAM segment, combined with a rebound in capital markets activity. Our capital deployment strategy remains focused on organic growth opportunities through recruiting and retention, reinvestment in strategic areas of the business and continued support of our quarterly dividend. To that end, yesterday, our Board of Directors approved a quarterly dividend of $0.67 per share payable to shareholders of record as of November 21. As I said previously, we feel very good about our business model, credit outlook, market positioning and growth opportunities for 2026 and beyond. Thank you for your time this morning. I will now turn the call back over to Willy. Willy Walker: Thank you, Greg. As Greg just described, our business is very strong as we finish off 2025 and start looking ahead to the coming year. Our bankers and brokers are winning, driving strong transaction volume and revenue growth. And while our clients borrowing for shorter duration is putting downward pressure on noncash mortgage servicing rights, we are being set up for an extremely strong run of both cash origination fees and new mortgage servicing rights as the shorter duration loans of 2023, '24 and '25 come up for refinancing over the next 2 to 5 years. Our market share with the GSEs continues to grow. And as Fannie and Freddie get ready for potential public offerings, we expect to see their multifamily lending volumes increase. Similarly, we see HUD becoming a more efficient and competitive source of capital. We remain at the top of the league tables with Fannie, Freddie and HUD, and we see a tremendous amount of opportunity ahead as the Trump administration focuses on lowering the cost of housing in America. We saw the opportunity and necessity to be a scaled player in multifamily investment sales back in 2015. And after a decade of growth, our sales volumes have increased 40% in 2025, handily beating the industry average of 17%. We can still grow this group further in the United States, Europe as well as into new asset classes such as hospitality, retail and industrial. Investment sales is the tip of the spear with regard to real estate capital markets activity, and we will continue to invest in great talent for many years to come. We are focused on the continued expansion of our debt brokerage business. We split this business into 2 units earlier this year, one led by Aaron Appel, focusing on institutional clients and the other run by Alison Williams, focusing on middle market and regional borrowers. Both of these groups have a massive total addressable market of almost $3 trillion of refinancing volume based on our contractual maturities over the next 5 years. We will both add bankers and brokers as well as expand our investment sales business to make W&D as competitive in banking, the retail, hospitality and industrial sectors as we are in multifamily. Given the strong total transaction volume we closed in Q3 and the strength of our Q4 pipeline, it is clear that our bankers and brokers are meeting their clients' broad needs today. Year-to-date, our annualized average transaction volume per banker broker is $220 million, ahead of our 2025 goal of $200 million per banker broker and tracking towards our 2021 peak of $311 million. We see data becoming increasingly important to us and our clients. As I mentioned earlier, our Galaxy database continues to identify new clients and loans to W&D. Our client portal developed completely in-house provides our borrowers with data on their loans and portfolio of assets that we believe is unique and differentiating in the marketplace. And while there are multitudes of point solutions for technology and data in the marketplace today, we see the combination of our people, technology and data as the way to differentiate us today and going forward. Aggregating data from our Zelman research, brokers' opinions of value, appraisals, loan underwriting and servicing portfolio to identify trends and investment opportunities for our clients is where we will continue to invest. W&D is the 10th largest commercial loan servicer in the United States. We have invested heavily in people and technology and believe we have one of the best servicing platforms in the world. But we know there are economies of scale we can gain by expanding our servicing business by either buying mortgage servicing rights or increasing our loan origination capabilities significantly. Our fund management business continues to grow, but we need to raise more capital. In 2025, our team will invest just under $1 billion of capital in debt and equity investments, and over half of that deal flow was sourced by Walker & Dunlop bankers and brokers. We see great value in both our fund management professionals' ability to structure and deploy capital as well as our large distribution network of 225 bankers and brokers across the country who have placed $28 billion of capital year-to-date. We are extremely focused on growing our fund management business by raising additional capital vehicles to meet our clients' varying capital needs. We see the continued institutionalization of the commercial real estate industry as capital raising and technology become more differentiators. W&D has best-in-class point solutions in lending, property brokerage, research and appraisals with a very real opportunity to combine these service offerings into a scaled suite to the institutional investor community. Our capital markets group is increasingly selling more than one service to our clients, debt financing along with investment sales or fund valuation services along with research. The opportunities for growth in our industry with W&D's people, brand and technology are enormous. And the challenge and opportunity over the coming years will be to integrate our service offerings to meet the needs of our customers, particularly institutional investors, where we see capital and assets aggregating. Finally, our brand could not be stronger. The Walker Webcast is about to surpass 20 million views on YouTube and Spotify, placing it as the preeminent voice to the commercial real estate industry by a wide margin. Zelman research continues to expand its coverage universe and maintains its reputation as one of the most insightful housing research companies in the United States. And our bankers and brokers exceed their clients' expectations consistently, which in the services business is the best branding and marketing possible. W&D's net promoter score year-to-date is 86, a number well above the financial services industry average and a reflection of the exceptional people, technology and client focus of Walker & Dunlop. These are exciting times for our company. We see an enormous opportunity ahead to expand our capabilities, bring technology to our business that makes our clients and us more insightful and more efficient and continue growing to drive exceptional shareholders' returns. I'd like to thank our entire team for a terrific Q3, and I would ask the operator to open the line for questions. Thank you. Operator: [Operator Instructions] We'll go first to Jade Rahmani with KBW. Jade Rahmani: Just to start off with on the 2 new loan repurchase requests. So far this quarter, we have seen some of the agency multifamily lenders, particularly Greystone take charges, JLL and Arbor also have taken charges. W&D's credit has been pristine through this cycle. So this is a modest surprise, although I don't think it's huge. But just can you give any context as to how widespread the issue might be? I think the last repurchase requests you received were in 2024. Willy Walker: Yes, Jade, thanks for joining us. As Greg underscored, this is isolated to the portfolios that have been identified by us and by Freddie, so we do not have any other investigations underway with either GSE. And so we feel good about that. And at the same time, as Greg said, we never like it when this happens, but feel very good that we have the people, the processes and the systems in place to make sure that this doesn't happen again. Jade Rahmani: And in terms of credit trends within the portfolio beyond these select instances of apparent fraud, how has credit been performing? I know in the past, you've talked about 2x debt service coverage ratio in the Fannie portfolio, but are you seeing any credit deterioration at this point? Willy Walker: No. Actually, if you look at the provision for loss sharing in Q3 of last year at $2.9 million and it lowering to $1 million this quarter and Greg's comment as it relates to the overall performance fundamentals of the portfolio, it's exceptionally good. I would underscore the fact that our at-risk portfolio right now as it relates to defaulted loans is sitting at less than 20 basis points. If you look out into CMBS portfolios, the multifamily default rate in CMBS portfolios just eclipsed 7%. And so I think it's a testament to us and to the underwriting policies and procedures that the agencies have had in place for decades that has maintained such a pristine credit track record. And we feel extremely good about the underlying credit fundamentals of our portfolio, particularly with the amount of debt capital that has come back to the market as well as where interest rates and cap rates appear to be trending. Greg Florkowski: Just to add to what Willy said just real quick. I mean there's still really strong national occupancy and just fundamental tailwinds behind multifamily as a sector. So that just contributes to the strength of the portfolio. So it's not just our assets, but it just broadly, there's really strong tailwinds behind the sector that just continue to strengthen overall credit. So I think the repurchases are isolated relative to the broader credit of our book. Jade Rahmani: Just turning to volumes. Fannie Mae volumes seemed a little light and the strength was clearly in the Freddie business. Was there anything that weighed on Fannie volumes in the quarter? And do you expect to pick up in the fourth quarter? Willy Walker: As you know, Jade, from having covered us for quite some time, Fannie and Freddie sort of wax and wane as it relates to market participation and market volumes. And when one sort of steps in, the other one goes down a little bit. The nice thing for us is that we are #1 with Fannie Mae and our indication right now, there are no league tables that have come out year-to-date, but our indication is that we're right at the very top of the league tables with Freddie Mac as well. And so as a very large scaled agency lender, as one or the other is more competitive, we're going to benefit from getting more deal flow done with the agency that is doing more transaction volume at that time. And so we feel extremely good about where both agencies are today as it relates to annual volumes. As you know, neither Fannie nor Freddie hit their caps in 2024 or 2023. And it is very clear that both Fannie and Freddie are headed towards hitting their caps in 2025. The regulator has not given the cap number for 2026 yet, but there is a lot of talk about an increase in the cap. How much of an increase is to be determined, but we see that it's great that both agencies are headed towards hitting their 2025 caps and that my sense from having spoken with officials at FHFA that we'll probably see a cap increase in 2026. Operator: We'll take our next question from Steve Delaney with Citizens Capital Markets. Steven Delaney: Willy, my question was going to be would you see the possibility of a refi wave coming later this year as the Fed cuts and maybe the bond market rallies a little bit? It sounds like you're in one. And if you could comment on that -- those vintage, the post-COVID vintage loans, the nature of those transactions, do you think that those borrowers had a shorter mindset? In other words, was it more opportunistic money and that's why you're seeing some exiting of properties as opposed to simply doing a rate and term refinance? Just your thoughts on if the nature of the recent originations is really what's causing the prepayments that you're seeing now. Willy Walker: Sure, Steve, thanks for joining us. I think you have to underscore the recycling of capital as one of the major drivers of the market we're in today. Many, many of the large participants in the broader commercial real estate markets and more specifically the multifamily markets are fund businesses that have finite lives and have a tremendous amount of capital that needs to be recycled back to investors before they are going to be able to go and raise that next fund. And with essentially very limited to -- you can't say no deal activity in 2023 and 2024, but very muted deal activity in '23 and '24, we sort of arrived in '25 with a lot of people sitting there saying, I've got to start recycling capital back to my investors if I have a chance of going and raising my next fund. And so a lot of the sales activity and financing activity that we've seen in 2025 has not been because cap rates have been, if you will, exceptionally low or exceptionally exciting for someone to sell into. It's been that need to recycle capital that has driven the transaction markets. And what that's also done is it's closed off the bid ask. A lot of sellers have sat there and said, I don't really like the price that I'm selling at. And yet at the same time, they have to recycle that capital. So they have, to some degree, capitulated on the pricing of the market and allowed the buyer to step in and buy the asset at a price that they find to be attractive. And so throughout the year, we've seen that bid-ask shrink. The beginning of the year was much wider and it's gotten tighter and tighter. Interest rates have obviously played into that, making it so that both on the buy side, you're buying the asset at a relatively cheaper price. And we've also seen cap rates come down modestly. I think that what we're now looking at is with that transaction volume going on, you now have buyers and sellers back in the market. That bid-ask has come down, which just drives that transaction activity. And it's getting a lot of people off the sidelines, if you will. And so you know this, Steve, we're in a cyclical business. We have been in a down cycle for the last 3 years since the great tightening began. And we're now starting that next cycle, and it's not just happening at Walker & Dunlop. If you look at the commentary of all of our competitor firms on their Q3 capital markets activity, there is pretty widespread commentary that transaction volumes are picking up. I would also say that everyone has been very tempered in their commentary to say this is a slow build back to where we were at the end of the last cycle. I don't think anybody is saying there's some massive amount of activity that's going to happen in the upcoming quarter because I think everyone is quite honestly a little scared to get over their skis and say, hey, this is going to be game on. But we clearly, from looking at our transaction volumes from Q1 to Q2, Q2 to Q3 and what we're looking in our forward pipeline for Q4, are seeing a resurgence of activity in the real estate capital markets. Steven Delaney: Interesting. And it sounds like the loan product has definitely shifted to more demand for a 5-year term than a 10-year term, if I heard you correctly. What are you quoting a 5-year Fannie or Freddie multifamily loan at just the range of what you're quoting the coupon at today for 5 years? And how would that compare to the weighted average coupon in your servicing book? Willy Walker: Steve, well, I can tell you this, first of all, there are a couple of factors that play into that. One of the things that I think is an important data point is that the spread between a 5-year treasury and a 10-year treasury, last I looked at it, it was about 50 basis points. But if you actually do a 10-year loan versus a 5-year loan, it's actually only 15 basis points more expensive to the borrower. And so one of the big things that's going on in the market is, I believe, borrowers look at that 50 basis point spread between the 10-year treasury and the 5-year treasury and they say, well, I want to go short. But given where spreads are on 5-year agency paper versus 10-year agency paper, you're only 15 basis points more expensive going long than you are going relatively shorter. The other piece to your specific question is whether the client is doing a rate buydown or whether the client is just taking the existing rate and spread on top of it. But if you're taking the existing rate and the spread on top, we're doing a lot of financing in the high 4s right now. Last one I looked at yesterday was a 4.83% coupon on a 5-year deal. But that 4% to 5% number is also something that a lot of clients are sort of getting attracted to where they sit there and look at, hey, I can do a 5-year deal at a 4.78% coupon. And if I do a 10-year deal, that's going to push it up closer to 5%, I want to go with the lower one. The other piece to it, Steve, is the prepayment flexibility that a 5-year loan gives you versus a 10-year loan. What we're seeing a lot of borrowers do is sit there and say, I don't want to sell the asset today, but I probably want to sell the asset in the next 3 to 5 years. Therefore, let's go with a 5-year loan that gives us prepayment flexibility and a lower prepayment penalty in year 3 or opens up at 4.5, then go and lock in a 10-year instrument that is rate lock, that is prepayment protected for 9.5 years. And so one of the things that that says to me is that if they're buying that optionality today and only going with a shorter structure, that sales activity or refinancing activity that's going to come up in 2, 3 and 4 years is going to be quite robust because they're buying that optionality to do something with the asset in the next 3, 4, 5 years. So that's the reason why the shorter durations. We don't like the downward pressure it's put on our mortgage servicing rights, but we also are sitting there saying, wow, there's going to be a great opportunity in the next 3, 4 and 5 years as this 5-year paper from '23, '24 and '25 needs to either be sold or refinanced. Steven Delaney: A lot of transaction activity potential, it sounds like. Willy, new clients, that's been a focus of W&D, just trying to broaden out your brand and more touch points with the institutional multifamily community. When you look at your third quarter transactions, do you have any data as to on those transactions, can you estimate how many of those were with new clients to WD or repeat borrowers? Willy Walker: Yes. I cited that in my script, Steve, and I don't have the exact data point in front of me, but I think it's 14% were new clients to Walker & Dunlop and 60-some-odd percent were new loans to Walker & Dunlop. So the new loans are pieces of business with an existing Walker & Dunlop client, just a loan that one of our competitor firms had done that we refinanced or financed the acquisition for our client. So over 60% is new product to Walker & Dunlop. And then totally new clients, I think was it 14%? Steven Delaney: 16%. Willy Walker: 16%, yes. 16% were new clients to Walker & Dunlop. And so look, as you know, Steve, we operate in an exceedingly competitive market. We have great competitor firms that have wide distribution networks and in some cases, seemingly a banker and broker on every corner. And so the opportunity for W&D is to go and attract new clients and bring new loans and new sales opportunities to our platform. And as our Q3 numbers show, we did just that. And I would also say, as our growth numbers show, we are outstripping a number of our competitor firms as it relates to growth in our capital markets executions, from aggregate volume numbers. Steven Delaney: Just one final thing for me, Willy, big picture. The S&P is up 16% or so year-to-date 2025. You're putting up good numbers, but W&D share is down about 18% year-to-date '25. What do you think people are missing? I mean this is a strong report. Rates are headed down, not up, that generally is a good thing for real estate-related firms. I know you're probably frustrated by it, but I don't see the negative bear case for W&D shares. I think my notes reflect that. So I'm not saying anything that's not out there on the street. But it just seems to be a disconnect between the way your shares are trading and where the market is and where the rate outlook is. Willy Walker: So Steve, a couple of things. One, and clearly, as the largest individual shareholder in Walker & Dunlop, I take your comments very seriously. Two, as having been fortunate enough to be CEO of this company for all 15 years of its public life, I've been around this too long to let it frustrate me and really just focusing on what we need to do to execute as a company. Third thing I would say is, look, Q1 of 2025, given where rates went at the end of 2024, was a very slow start to the year. As I hope investors can see, we have been building momentum in Q2 into Q3. And Greg's and my commentary talk about a forward look on Q4 that looks quite good. And I think that '26 is going to present to us and all of our competitor firms a very big opportunity to continue to grow in the capital markets area. The fourth thing I'd say, Steve, is that, look, some of our big competitor firms have steady Eddie real estate services businesses that are not as cyclical as the capital markets businesses are and have provided them with significant ballast in their financial performance for '23 and '24 and into 2025. But those businesses are not nearly as high growth as the real estate capital markets are. And so if you look at some of our larger scale competitor firms, they've done very well as capital markets transaction volumes have been way down in '23 and '24 and started to come back in '25. We are a real estate capital markets pure play for all practical purposes. And we better get the benefit of the growth that we are seeing coming to us in '26 and '27 as the capital markets reflate. And that's on us to go and perform and put up the numbers. And so I appreciate you pointing out where we stand, and I also appreciate the positive outlook you have on W&D and our forward performance. But we also know it's up to us to go address the market and put up the numbers going forward to make it so that our investors are benefiting from that growth and from that performance. Operator: At this time, there are no further questions. I will now turn the call back to Willy for any additional or closing remarks. Willy Walker: I just want to thank everyone for joining us this morning. Thank the W&D for a fantastic Q3. And I wish everyone a very nice day and end of the week. Thank you very much, operator. Operator: Thank you. This does conclude today's conference. We thank you for your participation.
Operator: Greetings, and welcome to Interparfums Inc.'s 2025 Third Quarter Conference Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to Karin Daly, Vice President at The Equity Group and Interparfums' Investor Relations representative. Thank you. You may begin. Karin Daly: Thank you, operator. Joining us on the call today will be Chairman and Chief Executive Officer, Jean Madar; and Chief Financial Officer, Michel Atwood. As a reminder, this conference call may contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors may be found in the company's filings with the Securities and Exchange Commission under the headings Forward-Looking Statements and Risk Factors. Forward-looking statements speak only as of the date on which they are made, and Interparfums undertakes no obligation to update the information discussed. Interparfums' consolidated results include two business segments: European-based operations through Interparfums SA, the company's 72% owned French subsidiary; and United States-based operations. It's now my pleasure to turn the call over to Jean Madar. Jean? Jean Madar: Thank you, Karin. Good morning, everyone. Consistent with what we started to see in the second quarter, sales continued to moderate in the third quarter as macroeconomic conditions remain uncertain. We are leaning further into innovation across our portfolio, focusing on product enhancement and new launches that better meet the dynamic preferences of consumers around the world. These efforts are backed by compelling advertising and promotional support, increase brand awareness, drive consumer penetration and strengthen our overall competitive position. As announced last month, third quarter and year-to-date sales were up 1% for both periods, with European-based operations sales rising 5% for the first quarter, building on top of last year's momentum, plus a stronger euro compared to the dollar, while U.S.-based operations sales declined 5% for the third quarter, excluding Dunhill. For our largest brand, Jimmy Choo Fragrance sales surged 16% during the quarter, largely driven by the I Want Choo fragrance family and also Jimmy Choo Man. In addition, the 6% quarter-over-quarter growth in Coach fragrance sales was fueled by its established lines and the launch of Coach Gold, while Montblanc fragrance sales dipped slightly due to innovation phasing, and Lacoste fragrances are on track for $100 million in sales this year. I would like to note that in the first 9 months of 2024, sales by U.S.-based operations rose 11% with the addition of Roberto Cavalli into our brand portfolio, setting a high bar for this year. In 2025, we are further capitalizing on this newer brand through the successful launch of Serpentine, the new feminine fragrance from Cavalli. Additionally, we are seeing increasing consumer demand in Donna Karan fragrance adjacencies such as the very popular deodorants. We also had new products roll out late in the third quarter that will mostly support fourth quarter sales in our U.S.-based operation, which include La Mia Bella Vita for GUESS, Sublime Leather from Ferragamo, two new extensions for DKNY, a new subcollection of Roberto Cavalli called Marbleous, plus the Just Cavalli duo, Give Me Magic, and Abercrombie & Fitch Fierce Reserve. We started Phase 3 of the distribution of Fierce rollout in May to additional countries, including the U.K., and launched Fierce and Fierce Reserve together at nearly 50 different points of sale. We see the momentum accelerating and look to further the brand's reach. The third quarter was also a milestone for us with the introduction of our first ultra-luxury direct-to-consumer offering, the [ 10-tank ] Solférino collection. Our flagship boutique opened in the heart of Paris' luxury district, and we are now selectively building relationships with approximately 40 retail stores, rolling out the brand thoughtfully. By next September, we have set our sights on 100 doors with the goal of product placement in 500 stores by the end of 2030. As we refine our craft in luxury and artisanal fragrance, we will leverage the insights we gain to elevate and better serve the other brands within our portfolio. We invite you to discover the passion behind Solférino that you can see it in our website, our first fully owned, direct-to-consumer e-commerce channel. So fragrance sales are accelerating across digital platforms as e-commerce has firmly established itself. In fact, according to Euromonitor, fragrance has roughly 50% market share within the beauty category on Amazon. We are seeing similar trends as e-commerce platform continues to be a bright spot for us. Our business on Amazon is strong. Divabox and TikTok Shop allow us to market and transact smaller sized products, increasing our visibility to consumers looking to play in prestige and luxury with more affordability. All told, the influencer magic of social media plays a powerful role in driving both traffic and purchases on Amazon. Another important but relatively small channel for us is travel retail, which grew 13% in the third quarter compared to last year, driven by Lacoste, Jimmy Choo, Coach and GUESS, as well as others in our portfolio. The popularity of our products across traveling consumer is helping us in securing more shelf space and expand SKU presence at duty-free venues. We anticipate incremental growth in our travel retail business going forward. Turning to other key operational updates. We are always looking for ways to improve efficiencies and streamline our supply chain to help manage cost pressure and support long-term growth. We are confident in the steps we have recently taken, including transitioning to 100% third-party providers for packing, shipping, warehousing, and order fulfillment. We expect this to be completed by the end of the year. We are also actively shifting our manufacturing closer to the point of sale for certain U.S. products produced SKU sold primarily in Europe and other regions. These operational improvements will help us navigate the ongoing geopolitical or macroeconomic uncertainties with more agility while allowing us to maintain strong service levels. Regarding tariffs, our view remains largely consistent with that of 3 months ago. We have successfully implemented many of the interventions we had previously identified to limit the expected impact for imports into the United States. Our immediate actions and strategic supply chain initiatives have proven effective, and our last remaining step is to implement a more cost-effective approach, leveraging the first sale rule for the finished goods that we've brought into the U.S. that are made in Europe by our European-based operations. This will require additional IT development, which we expect to have implemented by the second quarter of 2026. As noted previously, we also began implementing pricing actions in August, and we are now starting to see the effects. Early indicators show that these higher prices will help offset higher input cost in dollars, but will still likely result in some gross margin erosion. We are also being more pricing -- we're also seeing more pricing in the fragrance and cosmetic market, namely in the U.S., where we saw unit prices increase during the third quarter by an average of 5.9%, up from 1.2% at the end of June. During the month of September, unit price increases averaged 7.2% for the industry, indicating 5% to 6% pricing mix making its way to the consumer, which will likely slow overall growth. Of note, we have only taken pricing on select brands, mostly prestige and luxury, as lifestyle brand consumers tend to be more sensitive to price increase. At the company level, our 2% average price increase will continue to take effect through year-end and into 2026. At this time, we do not plan to implement any further pricing actions unless a significant change in the market occurs. On the inventory front, some retailers are using AI and other tools to optimize their inventory levels. While store level sales have been growing, we are not yet seeing the same strength in new orders as sell-through outpaces sell-in. That said, we are ready to move quickly to make sure retailers have our products on their shelves, should they choose to replenish. Before I turn things over to Michel, I am proud to share some great news. Women's Wear Daily has named Interparfums the Beauty Company of the Year in the Public Company category. This recognition is truly rewarding and reflects the strength of our brands, the creativity of our teams and the enduring partnership we have built with fashion houses, distributors and retailers around the world. So I was at this event to accept the award on behalf of our talented team and leadership, and I look forward to continuing to explore new ideas and help shape the world of fragrance together with each of you. So with that, I will turn it over to Michel. Michel? Michel Atwood: Thank you, Jean, and good morning, everyone. As reported, we delivered net sales of $430 million for the third quarter, resulting in a 1% increase for both the 3 and 9 months ended September 30, 2025. The impact of foreign exchange aided our top line performance, contributing to 2 points of growth in the third quarter and 1% on a year-to-date basis. But the stronger euro also increased our cost base in the rest of the P&L and our balance sheet. Organic sales, excluding FX and Dunhill, declined 1% in the third quarter but rose 1% for the first 9 months of the year. Gross margin for the first 9 months expanded by 80 basis points to 64.4% from 63.6% during the prior year period. This was driven by favorable segment, brand and channel mix in the first 9 months of 2025. In the third quarter, however, gross margins declined by 40 basis points to 63.5%, as these favorable tailwinds were more than offset by the impact of higher tariffs on our U.S. imports, which represented about $6 million for the quarter. Although we implemented price increases and also tariff interventions, these price increases happened later in the quarter and only had a minor benefit on the results for the quarter. If we exclude the tariffs, gross margins would have improved by 100 basis points. SG&A expenses as a percentage of net sales were 38.2% and 42.4%, respectively, for the third quarter and first 9 months of 2025 as compared to 38.9% and 41.8% for the prior year periods. The decrease during the quarter and increase year-to-date reflect a more even distribution of A&P activities over the course of 2025, which totaled $66 million or 15.3% of third quarter sales and $186 million or 16.9% of year-to-date net sales, respectively. We continue to invest in A&P activities ahead of our growth and in line with our expected sellout trends, and we will continue to do so in the fourth quarter. Overall, consolidated operating income and margin improved for both the quarter and year-to-date compared to prior year periods. Operating income was $109 million for the quarter, a 2% increase, resulting in an operating margin of 25.3% or a 30 basis points expansion from prior year. On a year-to-date basis, operating income increased by 2% to $243 million, with an operating margin of 22% or 10 basis points improvement versus prior year. Now looking below the operating line. We reported a loss of $7.7 million for the first 9 months of 2025. And this is pretty close to what we had last year, where we had a loss of $7.1 million. The year-over-year change primarily reflects a couple of factors. First, we have higher losses on foreign currency. We lost $4.6 million compared to $3.1 million in the prior year period. And as you know, the significant swings in the euro exchange rate throughout the year have helped our top line, but have led to larger than usual FX losses. The second factor was the impact on marketable securities, where we recorded a loss of $2.5 million in the first 9 months of 2025 compared to a loss of $800,000 in the first 9 months of 2024. Conversely, and thanks to the strengthening cash positions, changes in interest expenses and interest income were favorable year-over-year with net interest expenses of $1.8 million during the first 9 months of this year as compared to a net interest expense of $2.9 million in the prior year period. Our consolidated effective tax rate on a year-to-date basis was 23.5%, down 20 basis points from 23.7% in the prior year period as we benefited from a onetime favorable tax gain of $2 million in the quarter following a positive outcome from prior year tax assessments. And essentially, it was a mutual agreement procedure that we successfully got through. These factors, combined with our disciplined execution and cost management, led to third quarter net income of $66 million or $2.05 per diluted share, which is a 6% increase over last year's third quarter. And for the first 9 months of the year, net income is consistent at $140 million, with diluted earnings up modestly $0.02 to $4.36. Moving to our two business segments, starting with European-based operations. As Jean pointed out, net sales rose 5% and 6% on a reported basis and 1% and 4% on an organic basis for the first 3 and 9 months ended in September. Gross margin was 66% for the quarter and 66.6% year-to-date compared to prior year periods of 66.2% and 66.3%. The slight quarterly decline reflects tariff impacts on our European operations, which were partially offset by pricing gains in the United States and favorable brand and channel mix. While SG&A expenses increased 1% and 5% for the quarter and year-to-date, respectively, SG&A as a percentage of net sales declined by 110 basis points and 40 basis points, respectively. A&P expenses totaled $44 million for the quarter and $133 million on a year-to-date basis, representing 15% and 17% of net sales. Overall, net income attributable to European operations as a percentage of net sales exhibited strong growth, with net income margin expanding 230 basis points for the quarter and 50 basis points for the year. Turning to our United States-based operations. Net sales declined by 5% and 6%, excluding the phaseout of Dunhill for the 3- and 9-month period. The phaseout of Dunhill Fragrances was completed in August 2024. So at this point in time, we've completely lapped that event. Gross margin declined by 110 basis points in the third quarter due to transitional tariff impacts and brand and channel mix, but expanded by 80 basis points to 59%, largely due to the discontinuation of the low-margin Dunhill sales that impacted the prior year period. On the SG&A side, SG&A decreased 4% for the quarter and 2% for the year as we put in place strong cost containment measures. However, SG&A as a percentage of net sales rose to 39.7% and 44% for the first 3- and 9-month period, reflecting really, the lower sales. A&P expenses represented 16% of net sales for the quarter and year-to-date basis, representing $21 million and $53 million, respectively. Overall, net income attributable to United States operations declined 14% to $21 million for the quarter and 20% to $39 million year-to-date, primarily reflecting these lower sell-in. At September 30, our balance sheet remains strong with $188 million in cash and cash equivalents and short-term investments and working capital of $688 million. Accounts receivable was up 3% from last year's third quarter, slightly ahead of growth, driven by channel mix and foreign exchange. We continue to have a strong collection activity. We've also made meaningful progress on inventory management this quarter. Inventory levels as of September 30, 2025 decreased 6% from 2024 third quarter as we remain focused on executing on inventory reduction strategy. The composition of our inventory has also improved with a higher mix of finished goods relative to components. This shift positions us well to continue to drive inventory efficiencies as we get into the year-end. By effectively managing our working capital in line with sales, year-to-date operating cash flow increased $68 million, up $18 million from prior year period, reflecting 38% of net income compared to $50 million or 28% of net income in the same period last year. Obviously, the cash always is higher in the run up until the last quarter of the year and should get better at the end of the year. We also took advantage of our stronger cash position and the recent drop in the stock price to continue our share repurchase program. Year-to-date, we have repurchased $7.5 million in shares and will continue to evaluate additional share repurchases if the stock price remains below what is believed -- what we believe is the intrinsic value. As we have communicated in the past, our fully owned French subsidiary, Inter Parfums Holding SA, essentially an empty shell, will merge into our French subsidiary, Interparfums SA, which is a public entity. Since IPH hasn't conducted any business, we do not expect this merger to have any material impact on our shareholders. Following the completion of the merger next month, our company, Interparfums Inc., will continue to own roughly 72% of Interparfums SA, but this will now be a direct ownership as opposed to an indirect ownership and will supply -- simplify our corporate structure. Moving to our current year guidance. And as per our earnings release yesterday evening and reflective of current market dynamics and year-to-date trends through September, we are refining our full year 2025 outlook. We now expect sales of approximately $1.47 billion, representing 1% year-over-year growth, and diluted earnings per share of $5.12, which is in line with 2024. Additionally, while we will provide more formal full year 2026 guidance on Tuesday, November 18, we currently anticipate moderate top and bottom line growth in that year, generally in line with what we are seeing this year. We anticipate a return to stronger growth in 2027, driven by enhanced innovation, including the development and distribution of our newest licenses, Off-White, Longchamp, as well as Goutal. While demand has moderated in several international markets, our core business and fundamentals remain strong. We have a robust pipeline of innovation, enduring partnerships with global distributors and retailers and a resilient consumer base. Overall, we remain confident in the strength of our business model and our ability to deliver sustainable performance and long-term value, as we have for more than 4 decades. Jean Madar: Okay. Operator: [Operator Instructions] Our first question comes from the line of Ashley Helgans with Jefferies. Sydney Wagner: This is Sydney on for Ashley. Just curious if you can share a little bit more about what you're seeing heading into holiday maybe that gives you confidence or caution there? And then in terms of the price increase, I would love to hear what feedback you guys received from retailers as well as the consumers. Any extra color there would be helpful. Jean Madar: I can try to answer on the holiday, what do we see for the holiday. We had a strong October. We continue to sell gift sets in October. Gift sets will arrive in stores in November or December. And our forecast for November is also quite strong. So it means that retailers are continuing to buy. The inventory at store level is not high. Iwas -- we are monitoring this in department store on a daily basis. Amazon sales are starting to pick up. But of course, this type of purchase will be done in the last 2 weeks of the year. So this year, we are not worried for the holiday season. Pricing, the second part of your question is about pricing. We took a very modest pricing compared to other companies. And it was, I will say, quite well accepted. We didn't increase prices across all our brands. We selected the most prestige, the most elevated. This is where we think there is more elasticity. And we did not increase prices on the more democratic lines that we have or the more lifestyle brands that we have in the portfolio. But we didn't see too much resistance, neither from retailers, nor our consumers. Michel Atwood: Yes. Maybe just to build on Jean. I mean, ultimately, I think everybody was expecting that with the impact of tariffs, there were going to be inevitably, some of that was going to be passed on to the consumer. I think clearly, we've seen this across the board and particularly in the U.S. in the third quarter. As I was saying before, we're seeing before year-to-date June, unit pricing, which reflects, obviously, pricing, mix and other factors was up by about 1.2% versus prior year. And we've clearly seen an acceleration in the third quarter. Our unit pricing is up close to 6% and if you really zoom into September, it's close to 7%. So definitely, there's been a lot of pricing that's been taken. It's not -- it is very selective from brand to brand, but generally speaking, we are seeing that acceleration. And it hasn't really significantly impacted units. Unit sales are roughly growing about 1%. So the market growth is driven by pricing again in this third quarter. Sydney Wagner: That's helpful. If I can maybe just poke one more in there. And apologies if I missed, but there was some talk last quarter about just shipment timing maybe shifting between Q3 and Q4. Maybe I missed if you guys mentioned kind of where that ended up shaking out? Jean Madar: Michel? Michel Atwood: I mean, we've certainly seen a little bit less holiday sets being sold into the third quarter relative to what we normally see. And we have seen some of that pick up during the month of October, but it isn't significant. I think the main thing here, really, Ashley, is -- Sydney, sorry, is that we continue to see a bit of a disconnect between sell-in and sell-out there. There is -- continues to be a couple of points difference. The markets are still up. The market actually in the U.S. for the third quarter was up 7% and is up 4% on a year-to-date basis. So consumption remains very, very healthy. We're just seeing -- continuing to see a small disconnect of a couple of points between sell-in and sell-out. And not only for us, but also for our competitors. I'm sure you've all seen all of our competitors have now published their earnings. And pretty much everybody, with the exception of maybe Coty, which was an outlier on the way down, and [ Lauder ], an outlier on the way up. Everybody has been hovering around 2%, which is pretty consistent in what we posted. So overall, I think we are seeing at a macro level, this continued destocking that's impacting us. By the way, this isn't any different than what we're doing as well because if you look at our inventories, our inventories are also down as we're trying to get more efficient with our inventory. And of course, everybody is basically doing that. Operator: Our next question comes from the line of Susan Anderson with Canaccord Genuity. Susan Anderson: I guess maybe if you could just talk about kind of looking out over the next 2 years, you have a number of new brands rolling out. I guess, how should we think about just that growth profile in terms of what will be driving the growth? Do you think that the combination of these new brands, I guess, how much growth are you expecting them to drive as well as just continuing to grow your existing brands, whether that be the smaller ones or the larger ones? Jean Madar: Yes. I can try to answer. So when you look at the portfolio today, we have added two -- excuse me, three important license or purchase of trademark. One is Off-White, and we will see sales of Off-White in 2027. We bought also the business of Annick Goutal, which is a prestige line of fragrance. And you will start seeing some business in '26, but more in '27. And more important, I think the largest potential is with the license that we signed with Longchamp. Longchamp is a great bag manufacturer. As you know, we have a great journey with Coach. And we think that Longchamp has a great brand territory that we can exploit for fragrances. Longchamp will be -- can be 3 to 5 years, $100 million business. And that's what we are doing. So 2026 will be, I will say, modest because -- the growth will be modest because we will be working for the important launch at the end of '26, beginning of '27. Michel? Michel Atwood: Yes, I would just also say that we have also added quite a lot of brands, quite a lot of large brands over the last couple of years with Cavalli, Donna Karan, Lacoste, and [ the year before ], Ferragamo. At this point in time, if we look at the portfolio that we've added these are large brands, and they're growing -- but obviously, the smaller brands in our portfolio are kind of pulling us down. So there is going to continue to be some work on cleaning up the portfolio and -- so that we can really focus on the largest brands that will drive the business more sustainably going forward. Susan Anderson: Okay. Great. And then... Jean Madar: We're still seeing that GUESS, Coach, Jimmy Choo and Montblanc can go at a good pace. Susan Anderson: And maybe if I could just add one more on the model. I guess for fourth quarter, how should we think about gross margin now that the price increases have flowed through? I think you said if it wasn't for the tariff, third quarter would have been better by 100 bps. So I guess should we expect that to be fully offset now in fourth quarter on the gross margin front? Michel Atwood: Look, it's a great question. The reality is we've done a really great job in realigning our supply chain and looking at tariffs. There is one big item that is -- takes a lot of time to do, which is all the U.S. stuff -- all the European stuff that we import into the U.S. It's a pretty sizable business. And we've been hit not only with 10% tariff, but it's been up to 15%. It's going to take us a bit of time to basically get the cost of those tariffs down with the first sale rule, as Jean pointed out in the prepared remarks. That's going to, I think, continue to impact us in the first -- in the fourth quarter and in the first quarter of next year. It should get better in the second quarter. So no, I am expecting gross margins to slightly erode I'd say probably about 50 bps, something similar to what we saw in the third quarter. Operator: We've reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Atwood for any closing remarks. Michel Atwood: All right. Thank you very much, and thank you, all, for joining our call today. With this being our final conference call of the year, Jean and I extend our warmest wishes for a safe and joyful holiday season and healthy and fulfilling new year. I would like to mention that we will be hosting the Canaccord Genuity team at our corporate headquarters on December 4 for their annual [ Beauty Bus ] Tour. If you would like to participate, please feel free to reach out to the Canaccord Genuity team. If you have any additional questions, please contact Karin Daly from The Equity Group, our Investor Relations representative. And thank you, and have a great day. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Welcome to Devon Energy's Third Quarter 2025 Conference Call. [Operator Instructions] This call is being recorded. I'd now like to turn the call over to Mr. Chris Carr, Director of Investor Relations. You may begin. Christopher Carr: Good morning, and thank you for joining us on the call today. Last night, we issued Devon's third quarter earnings release and presentation materials. Throughout the call today, we will make references to these materials to support prepared remarks. The release and slides can be found in the Investors section of the Devon website. Joining me on the call today are Clay Gaspar, Chief Executive Officer; Jeff Ritenour, Chief Financial Officer; John Raines, SVP, Asset Management; Tom Hellman, SVP E&P Operations; and Trey Lowe, SVP and Chief Technology Officer. As a reminder, this call will include forward-looking statements as defined under U.S. securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast. Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay. Clay Gaspar: Thank you, Chris. Good morning, everyone, and thank you for joining us. Let's begin with Slide 2. With outstanding execution and innovation from every part of our organization, Devon delivered another outstanding quarter. I'm proud of our team's performance. We exceeded the midpoint of guidance on every key metric, including production, operating costs and capital. These results mark our strongest performance of the year, highlighting the exceptional quality of our assets and our unwavering commitment to operational efficiency and cost control. Building on this performance, we continue to advance our business optimization plan, firmly on track to generate an incremental $1 billion of annual pretax free cash flow. As we enter the fourth quarter, we have already achieved more than 60% of our target, underscoring both the effectiveness and urgency of our approach. These initiatives go beyond cost reductions. They are fundamentally reshaping our business by enhancing margins and boosting capital efficiency across our portfolio. The output of these compounding efforts show up in our strong preliminary outlook for 2026, which Jeff will discuss in more detail. Despite persistent macro headwinds, these achievements directly contributed to our resilient free cash flow as we returned over $400 million to shareholders in the quarter and retired $485 million of debt, demonstrating our focus on delivering meaningful value to our shareholders. Beyond business optimization, we continue to unlock significant value throughout our portfolio. While getting into the details on a later slide, our teams have capitalized on a multitude of opportunities to drive additional value for the organization. Collectively, these achievements reinforce Devon's momentum and position us exceptionally well for the remainder of 2025 and into 2026. Let's flip to Slide 4 and take a deeper look at the quarter. Our relentless focus on production optimization continues to drive our outperformance. With oil production exceeding the midpoint of guidance by 3,000 barrels per day, the outstanding efforts of our teams to reduce artificial lift failure rates and improve workover efficiencies resulted in a 5% reduction in operating costs compared to the start of the year. Additionally, effective cost management drove our capital investment 10% below the first half run rate. These accomplishments, combined with other ongoing initiatives, led to robust free cash flow of $820 million in the third quarter and enabled us to deliver substantial cash returns to our shareholders. Moving to Slide 5. Our consistent track record of disciplined execution and tireless pursuit of capital efficiency is evident. Quarter after quarter, we drive meaningful improvements to our outlook. This momentum is reflected in our updated guidance, where we've raised our full year production expectations every quarter this year while reducing capital by $400 million since our preliminary guidance. These are not isolated wins. They result directly from our steadfast commitment to operational excellence, our culture of continuous improvement and a rapid adoption of leading-edge technologies across our portfolio. Now looking at Slide 6. This continuous improvement is also resulting in top-tier performance versus our competitors. Our well productivity stands in the upper echelon of our peers, reflecting the strength of our asset portfolio and the execution of our teams across every basin. On the right-hand side, our disciplined approach to capital allocation is evident in our industry-leading capital efficiency, setting us apart in a highly competitive space. These achievements highlight the power of our advantaged portfolio and the rigor of our capital allocation process and the ability of our people to drive superior results. And with our extensive inventory, we are well positioned to continue this strong performance moving forward. Turning to our business optimization initiative highlighted on Slide 7. Our teams are outperforming expectations and delivering results well ahead of schedule. We have already captured more than 60% of our ambitious $1 billion target. When we originally launched this initiative, our focus was for year-end 2025 was $300 million in value uplift. As shown on the left side of the slide, we are on pace to double that milestone this year alone. This exceptional progress is highlighted this quarter by our significant progress in capital efficiency and production optimization on the right side, and we are fully confident in our ability to deliver these substantial cash flow improvements as we advance towards 2026. Driving this rapid progress is our outstanding execution. With greater visibility and confidence in our 2025 full year production volumes, we anticipate a sustainable increase in free cash flow of $150 million resulting from incremental 20,000 BOE per day above our initial baseline when this initiative began. This reflects further acceleration from our outlook from last quarter, highlighting the urgency of our efforts. When we announced the plan in April, we recognized that the market wouldn't immediately price the aspirational $1 billion of incremental free cash flow in our share price. We knew we would have to earn it. While the plan is still in flight, I'm encouraged that Devon's stock is starting to feel a bit of relative appreciation to our peers. That said, I believe that we have much more ground to gain, and I look forward to earning that value in time. Slide 8 showcases key examples of the initiatives our teams are pursuing to meet targets in each category. These represent some of the most impactful efforts currently underway. As our teams proactively implement these initiatives, we remain confident in our ability to achieve our targets and maintain clear line of sight to our objective. Turning to Slide 9. I'd like to highlight several portfolio optimization actions we've taken on this year, which are delivering an uplift of over $1 billion to enterprise NAV. Importantly, these gains are in addition to the improvements through our ongoing business optimization initiatives. Early in the year, we signed an agreement to dissolve our joint venture in the Eagle Ford, giving us control of our development and the ability to reduce well costs and significantly enhance returns. In Q2, we completed the sale of the Matterhorn Pipeline and subsequently acquired the remaining interest in Cotton Draw Midstream. Last quarter, we executed 2 strategic gas marketing agreements that expanded our natural gas sales portfolio into premium markets. In Q3, we acquired approximately 60 net locations in New Mexico for $170 million, increasing our runway of high-return opportunities in Delaware. And finally, we've benefited from the Water Bridge IPO, which now provides a public marker for our investment valued at greater than $400 million. These actions showcase our team's initiative and strategic thinking to create shareholder value. As we execute our business plan, we will seek further opportunities to optimize capital allocation, efficiency, costs and asset mix. We remain committed to continuous improvement, innovation and technological leadership, taking decisive steps to strengthen our operations and deliver strong shareholder returns. With that, I'll hand the call over to Jeff. Jeffrey Ritenour: Thanks, Clay. Turning to Slide 10. Devon delivered another quarter of strong financial results. In the third quarter, we generated operating cash flow of $1.7 billion. After funding capital requirements, free cash flow totaled $820 million. This robust free cash flow generation enabled us to return significant value to shareholders, including $151 million in dividends and $250 million in share repurchases. We remain committed to our capital allocation framework, balancing high-return investments with substantial cash returns to shareholders. Moving to Slide 11. Devon's financial strength and liquidity continue to set us apart. We ended the quarter with $4.3 billion in total liquidity, including $1.3 billion in cash. Our net debt-to-EBITDA ratio remains low at 0.9x, underscoring our commitment to a strong balance sheet. As part of our disciplined capital return framework, we accelerated the retirement of $485 million in debt this quarter, completing the repayment ahead of schedule and generating approximately $30 million in annual interest savings. With this action, we've now achieved nearly $1 billion towards our $2.5 billion debt reduction target. Looking ahead, our next maturity is our $1 billion term loan due in September of 2026. We remain focused on executing our debt reduction strategy and maintaining the financial flexibility that supports Devon's value-enhancing growth. Beyond debt reduction, we also used cash on hand to acquire all outstanding noncontrolling interest in Cotton Draw Midstream, saving $50 million in annual distributions and secured additional resources in the Delaware, as Clay mentioned earlier. These timely transactions reinforce the value of maintaining an investment-grade balance sheet and ample liquidity. As we approach 2026, we're determined to accelerate our operational momentum, prioritizing per share growth, maximizing free cash flow and making targeted reinvestments for sustained success. Slide 12 highlights the key attributes supporting our strong preliminary outlook for 2026. Given ongoing commodity price volatility, we're taking a disciplined approach to capital planning. We intend to maintain consistent activity levels to keep production around 845,000 BOE per day with oil production at approximately 388,000 barrels per day. With macroeconomic uncertainty and an appearance of a well-supplied oil market, we do not plan to add incremental barrels to the market at this time. To support this production profile in 2026, we anticipate capital investment of $3.5 billion to $3.7 billion, a reduction of $500 million compared to our maintenance capital levels just 1 year ago. Importantly, we can fund this program below $45 WTI, including the dividend, providing significant flexibility. This disciplined plan positions us to generate strong free cash flow at current prices and deliver a free cash flow yield that exceeds the broader market. Regarding free cash flow allocation, our financial framework provides flexibility to deliver market-leading cash returns to shareholders and achieve our debt reduction objectives. We'll continue to target share repurchases of $200 million to $300 million per quarter, and we'll retain free cash flow beyond share repurchases on the balance sheet to efficiently reduce net leverage. Complete 2026 guidance will be provided on our February call after the budget is finalized with our Board. In summary, Devon had all the key attributes to thrive in today's environment and create value well into the future. Our high-quality portfolio provides a solid foundation while our disciplined strategy keeps us focused on growing per share value and generating free cash flow. With a strong balance sheet, we are positioned to deliver lasting value and confidently navigate whatever the market brings. With that, I'll now turn the call back over to Chris for Q&A. Christopher Carr: Thanks, Jeff. We'll now open the call to Q&A. [Operator Instructions] With that, operator, we'll take our first question. Operator: Our first question comes from Neil Mehta with Goldman Sachs. Neil Mehta: Yes. Thanks so much for the visibility as we look into 2026. And I think the capital efficiency and the cost savings is really starting to materialize, including in the guidance. So maybe that's where we start off, which is where we are in the business optimization program and the $1 billion. You gave us a little bit of color on Slide 8, but kind of unpack what's left to do in the journey. And if you end up surprising to the upside relative to the initial guide, where could that be? Clay Gaspar: Yes, Neil, I appreciate it. This is Clay. We're incredibly proud. This was a big, hairy, audacious goal. When Jeff and I started first contemplating, one, what was the metric we wanted to focus on, and that was sustainable free cash flow and then how audacious should it be and what kind of time frame should we put it around? I can tell you there was a tremendous amount of discomfort around the organization and just amongst Jeff and I on how do we get there from here. But what we knew, I mean, deep in our soul was that you get the flywheel starting to turn, and there's so much that continues to come our way. Right now, we have over 80 parallel work streams on different ideas. So the progress that we've made essentially in 1/3 of the time to accomplish 60% of the results, I can tell you, I'm even more encouraged about what this leads to. The most important measure of success will be locking these earnings in and building into the culture of the organization, benchmarking, hunger for more creative ways of creating value. And like I said, there is much more to come from this. Trey, you may jump in and just throw a couple of pieces of color of ideas that you have. Robert Lowe: You bet. I appreciate the question, Neil. We've -- Clay mentioned the 80 work streams that we have ongoing. The early results that we saw, a lot of them show up very quickly in the capital side of our business on the drilling completions operations. Over the last quarter, last kind of 4, 5 months, we've seen a lot of new ideas arriving from our production department. And we continue to see those starting to show up now in our forecast and what's going forward. One of the examples I mentioned even a quarter ago was our focus on automating and using our technology stack to help us with our downtime. We've made a ton of progress over the last 3 months on that one and scaled that across the organization. And now we're working on the next phase of using even more kind of AI to underpin what we're trying to do to continue to look at our faults and what causes those faults. And we're going to see those type of examples show up. We estimate over $10 million on that work stream in 2026, but that shows up and that's sticky, like Clay said, and we'll see that in our base production. And those are the types of things that we're looking forward to in the future. All of that is underpinned by really a desire across our employee base to use technology. At this point, essentially all of our office-based employees are using AI to help them with productivity gains. And we're right now on the very tip of what we call Wave 2 and Wave 3 is where you're implementing that AI in our work processes. So a lot of momentum there, a lot of excitement across all of our organization to continue to move the ball down the field, and everything is looking good. Neil Mehta: Appreciate the color, guys. And then as you think about setting that CapEx budget for '26, you probably took a view on different product lines on the services side. And just talk about -- we're trying to isolate the structural cost improvements, which you talked about in the answer to the first question versus more of the cyclical stuff. So can you talk about the service environment right now and which product lines you're seeing deflation and which ones -- which of the cost items you're seeing flat to inflation? Clay Gaspar: Neil, we feel really good about our positioning ahead of what could be a really challenging 2026. We look like the market is exceptionally well supplied, maybe potentially oversupplied. And so as a kid that grew up on the Gulf Coast, we know how to prepare for a hurricane. And when the storms come and you make sure you got your balance sheet right, you got your operations really buckled down. You got the teams focused on the right things, and then that helps drive through those troubling times. So when I think about what could come from 2026 and how we think about this preliminary guide, we've taken out any assumptions of inflation or deflation, really kind of time stamp where we're at today. We don't know where commodity prices are going to go in subsequent activities and therefore, subsequent deflation. So just consider that flat to where we're at today, and then we're prepared for whatever comes our way from a macro standpoint. Operator: Our next question comes from Arun Jayaram with JPMorgan. Arun Jayaram: I was wondering if you could maybe elaborate on what you're doing to kind of manage your base production. You highlighted in the release that it's leading to maybe 20 MBOE per day of production uplift and a pretty meaningful improvement in cash flow from those efforts. And maybe talk about your views on the sustainability as we think about go forward 2026 beyond. Clay Gaspar: Thanks for the question, Arun. This, I think, is really important for us to spend a little time on. So I really appreciate the angle on this one. We -- it's pretty easy to quantify savings on that side of the equation. It's harder to quantify these wins. And we've been very clear from the beginning. This is not just a cost reduction program. This is a value enhancement program, and that should come on both sides of the ledger. This what you're talking about is more value enhancement. And I can be honest with you, it's really hard to measure how much downtime would we have had theoretically, how much are we gaining incrementally from the actions, but that's exactly what this attempt is. We're trying to be exceptionally credible. At the same time, we know that this is a hard number to precisely quantify. I'll ask John to dig in on a couple of things that we're doing to measure this, quantify this and then how we're seeing wins. John Raines: Yes, Arun. I appreciate the question. I think Clay hit it well. When you look at the full year, we've had a really strong production beat. And the first thing I would say on that is when you look at that production beat and you break it down, we certainly beat on our wedge. We've had some outperformance on our wells. We've had a little bit of acceleration. But overall, the biggest part of that production beat comes from our base, and we feel that, that's very measurable. Now we've got, and I think Clay said earlier, over 80 work streams on our business optimization. We've got a ton of these that go towards the base. I'm going to talk about a few that I think have contributed the most this year. We've got a combination of technology and good blocking and tackling. I'll start with a project that I'm very proud of that we've deployed in the Delaware Basin. Really, this deploys some next-generation technology. You've heard me talk about it before. But this is our smart gas lift project in the Delaware Basin. What we're seeking to do here is essentially to deploy AI models that continuously optimize the optimal rate of gas injection for gas lift wells that sit on centralized gas lift systems. This is a project that we piloted back in Q2. And we saw tremendous results here. We saw a 3% to 5% uplift. And we talked about moving to a pilot 2 on that. We saw success that was so good that we've moved essentially into full deployment of that in the Delaware Basin. And we expect to be complete roughly by year-end on that. The beauty of this project is we also have application in the Williston Basin. We have application in the Eagle Ford. And so this is going to be a project that's going to have ongoing sustainable results to our base production, and we're super excited about that. Probably a couple of other projects I'll hit on, and Clay mentioned this in our opening remarks, but we've had a tremendous focus on workover optimization this year. I'd say this year, this really started last year. We're looking at every which way that we can get better on our workover operations from operational efficiency all the way to safety. We took advantage early in the year. We made some changes in the organization to focus on this. We've got leads that work together to look at best practices across our basins. And when you look at what we've done there operationally, we've looked at advanced KPIs to manage our rig fleet. We've looked at design optimization. We've looked at equipment standardization. And really, we've looked at planning optimization. Not only have we been able to pull a ton of cost out of the system, but we've been able to lower the amount of time that we're spending on pad with these workovers. And essentially, what we've seen is we're getting our wells back quicker. And when we try to break down how much base contribution this had or the contribution to the base beat, we think it's over 2,000 barrels a day net production that we're seeing so far this year. And importantly, we think that's sustainable. I think maybe the last example I'll provide, we've had a really tremendous focus on failure rate reduction and optimization. We've had this throughout the portfolio. I'll brag on the Rockies team a little bit here. Over the course of the last 18 months, we really looked at our artificial lift failures. We did some very intensive look backs on that front. We did some proactive redesign there. And when we look back at the reduction in failure rate, we're tracking towards something that's 25%. And so again, that's a good example of a project that takes cost out of the system, but it also increases our uptime pretty significantly. And so a lot of really good projects in the queue like that, but we think these are all importantly, very sustainable to the base production overall. Arun Jayaram: Maybe just a follow-up. Your Rockies production has been trending maybe a little bit better than we had been modeling. In fact, if you look -- you grew your oil 7,000 barrels a day sequentially and you're relatively flat versus the 4Q 2024 number. So maybe talk to us a little bit about what's been driving that and maybe how the overall integration with Grayson Mill assets has been going? John Raines: Yes, I'll start with the integration of the Grayson Mill assets. That integration is roughly complete. It's gone really well. We've had a lot of bidirectional lessons learned there, everything from midstream to the base operations to learning more and more about the reservoir, how to drill these wells, how to complete these wells. So I can't say enough good things about how that integration has gone. When you talk specifically about the production, you're seeing a few things there. One, again, on the wedge, we're seeing well results that meet or exceed our expectation. And so we've continued to be very pleasantly surprised with the good production we've seen, the good well results, especially as we focus on the western side of the play. But Neil -- or excuse me, Arun, a lot of what I just said around the base is really what's driving that sequential improvement. And I would say the Rockies team has really led the way on that. That artificial lift failure reduction that I talked about as a huge driver for us in the Rockies. And specifically, we've seen our workover rig count in the Rockies come down the most and probably the biggest contribution to the base come from the Rockies. So really proud of the work they've done, and I can't emphasize enough how important that base uplift has been for us there. Clay Gaspar: Yes. Arun, I just want to jump in on John's comments. As we talk about the workover rigs, especially, a lot of this motivation, I can tell you, was around safety. The workover rigs was something the industry was really struggling with. And with this hyper focus, we found incremental value, cost savings, production efficiency and maybe most importantly, safety improvement as well. So really proud of all the teams that are working on that, and that's been kind of around the industry focus. So great progress on that. Thanks again for the questions, Arun. Operator: Our next question comes from Neal Dingmann with William Blair. Neal Dingmann: I was late last quarter. Clay, my first question is just on M&A. Specifically, I couldn't help but notice. I mean, you guys did a great job on the ground game being active on New Mexico lease sales. So I'm just wondering, with that said, do you all anticipate the ground game such as this, maybe in New Mexico or other states around other plays continue to represent a significant portion of your M&A? Clay Gaspar: Thanks for the question, Neal. Yes, I would say this is very important. We've done a lot of this work quietly kind of on the backs of trades, 40 acres in, 40 acres out. I mean, just hard work every single day that can be incredibly value creative. We've had some more opportunities with state lease sales and upcoming federal lease sales. That's definitely something we want to participate. We'll look at it objectively as we do all incremental investments, but really excited about that opportunity and definitely something we want to play an active role in. Clearly, we have. And we think we have -- with the flywheel, the machine that we have running in the Delaware Basin, in particular, I think it's a great opportunity for us to leverage not just the skill sets, the momentum that the team has, the technology, the benefit from the business optimization, all of those things, but also the mechanics of being there, boots on the ground every single day has a great ability to scale. So we think we have every right to be on the front end of that and successful thus far. Neal Dingmann: Great. Great point. And then that leads me to my second question, Clay. I can't help but notice just how much you continue to advance the Delaware, not only just better wells, but you continue to recognize more resource just undeveloping -- kind of developing more rock. So I guess with that said and just how well you're doing there, does that cause you to think about differently maybe one of your other plays like the Anadarko or PRB where you have less scale and 1 rig and I'd suggest investors are not giving you full credit. I mean why -- any thought about potentially reallocating selling something and reallocating into the more -- even more in the Delaware where you continue to see all this upside? Clay Gaspar: Yes, Neal, as you know, we look at this stuff all of the time. Our Board -- this is an imperative that our Board has for us to be thinking about all of the art of the possible. And that certainly means we're not going to be in these 5 basins exactly as constructed for the indefinite future. Objectively, we need to think about what's the right opportunity for us for how these positions would fit given the market demands, but also thinking about what the opportunities are to continue to scale and grow and make sure that we've got a sustainable value-creating business going forward. When you look back at the 50-plus year history of Devon, and I would say any organization that survived 50 years in this very tough business, we have reinvented ourselves a number of times along the way. We always will remain objective about what that could mean going forward. And again, this is regular conversations that we have with our Board as we should about thinking the longevity of creating long-term shareholder value. It's just fundamental to what we do. Operator: Our next question comes from Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: Clay, I wonder if I could come back to the business optimization for a second. I think I've maybe been confused about something, and I'm looking for some clarity. You have some of the legacy midstream contracts rolling off. But my understanding is it's beyond the time line of the $1 billion target. So I'm thinking EnLink specifically. So can you tell us what's included in the remaining $400 million? And it sounds like there might be an upside case for that based on some of these longer-dated contracts. Sorry if I'm getting that wrong. Clay Gaspar: No, I think you're exactly right, Doug. I think there is upside. One of the things that we debated early, I can tell you the original construction from the team that was presented to Jeff and I as we were thinking about what could this look like? It was actually a 3-year look, and that includes some other things that we know we're going to have in kind of year 3 of this opportunity. I can tell you there's additional wins in years 3, 4, 5 and for the foreseeable future. We've really focused on '25 and '26 wins. And as you pointed out, there are some really material specifically in the gas contract world that comes out further than that. I'll ask Jeff to dig into some of those opportunities. Jeffrey Ritenour: Yes, Doug, just to be clear, so in the business optimization guidance that we rolled out to get to the $1 billion of free cash flow starting in January of 2027. The bulk of that, that relates to the commercial opportunities is what we talked about in the previous quarters, which is reduced fees on gathering, processing, transportation and fractionation. Most of that's on gas and NGLs, specific to the Delaware Basin. So the lion's share and bulk of that really resides in the Delaware. T. Hat's where you're going to get this incremental uplift, if you will, of the commercial opportunities that we highlighted specific to the $1 billion. As Clay just said, beyond 2027 and beyond, there'll be other opportunities across our portfolio where we could see some incremental benefit. But in the $1 billion, the real driver of that is what we're seeing in the Delaware specific to our gas and NGL contracts. Douglas George Blyth Leggate: That's very helpful. I guess it would be a bit of a stretch to ask you to quantify the upside at this point, but maybe that's for another call. My follow-up is a little self-serving, I'm afraid. And I just want to make sure I'm not misinterpreting or overstating this. But if I look back to the legacy commitment from when you were still COO, Clay, you used to talk about 70% of your free cash flow coming back to shareholders. It seems that your presentation deck has adjusted that a little bit to now include debt reduction in your shareholder returns. Is that the right interpretation? Because obviously, we're big fans of that. I just wanted to clarify with you if that's how you're thinking about it. Clay Gaspar: Yes, I appreciate that. I mean I think it is a fundamental piece of how we think about returning value to shareholders. And certainly, ahead of what could be a pretty choppy year in 2026, I think we want to make sure that we are thinking about debt, debt structure, how we capitalize the company and that we're prepared for anything that comes ahead. So there was an opportunity for us to take the $485 million down. We certainly consider that part of, again, returning cash in various forms to shareholders. And obviously, we had an illustration this time that included that. So yes, I appreciate your support over the years for debt reduction. This is a very -- it's a challenging business. We think the more that you can be prepared for the storms, the storms turn into real opportunities. And I think that's where Devon is positioned today that when these challenges come ahead, we're going to be front-footed and on the -- have an opportunity to really be -- to turn them into a value-creating opportunity rather than just a defensive posture. Douglas George Blyth Leggate: Sounds like an M&A question, Clay, but I'll leave it there. Clay Gaspar: Thank you, Doug. Appreciate it. Operator: Our next question comes from Scott Gruber with Citigroup. Scott Gruber: I want to come back to the production optimization bucket. great gains there. I think the bulk of that effort hits production and therefore, a reduction in your maintenance CapEx needs. I think there's also an LOE benefit as well. How does that split? And we see your LOE rolling lower. How should we think about the LOE cost in '26? Clay Gaspar: Yes, Scott, that's a great question. And it is -- this manifests in a few different categories, and some of them are cost reductions. As you mentioned, LOE, we've seen a significant improvement quarter-over-quarter. We'll continue to see benefits there. It shows up, obviously, in the maintenance capital requiring us to drill fewer wells. I think our original plan versus the plan we're executing now, we're actually drilling 20 fewer wells this year because of these kind of benefits, essentially lowering that burden of maintenance capital and as a side benefit, prolonging the really high-quality portfolio that we have. I might ask John to see if he has anything else to add to that. John Raines: Yes, As we originally contemplated this, you're absolutely right. There's a component of our production optimization target that's LOE -- there's a component that is production uplift. There's even a little bit there that is pulling capital out of the system. What I'll tell you right now is the way that we're looking at the $150 million, that's essentially all of the production uplift at this point in time. We have had some success on LOE over the course of the year. I think if you look back to Q1 and you break it out from the number we disclosed, LOE plus GPT, we're sitting about $6.50 a barrel. I want to say this quarter, we're sitting just above $610 a barrel, so about a 6% improvement year-over-year. LOE is pretty sticky and it lags. So as we go into 2026, we expect ongoing reductions on LOE, and you'll see more LOE contribution show up within production optimization. But essentially, what we're taking credit for up to this point is that base uplift that I mentioned earlier. Scott Gruber: I appreciate that color. And with the efforts reducing your well count how do we think about the TIL count that's embedded in your '26 preliminary guide here? Clay Gaspar: Yes. I think that's obviously contemplated as we get both more efficient on how quickly we can execute, drilling, completion, building facilities and then the effectiveness of those completions and how they contribute. Again, we're in a base capital mode -- excuse me, a base oil production mode and the lower maintenance capital is certainly reflected by that preliminary $3.6 billion guide, which again is a substantial improvement from where we were 12 months ago when we were providing a preliminary guide for 2025. So we are winning significantly on that. That's showing up in the numbers. I continue to be encouraged by the work that we're doing and the great efforts of the team and how this is showing up and will continue to show up in time. Scott Gruber: But should we think about the '25 TIL count kind of less 20 as a starting point for '26? Is that fair? Clay Gaspar: Look, I don't know if we want to get into details of that. But here's what I would tell you is take the preliminary guide, start with the numbers that we're guiding on 2025 as of today. And I think that's a good kind of relative application and allocation. Again, we've mentioned no additional deflation is baked in. So I think that's a good starting point for assumptions. And then obviously, when we come back to you early in the year with firm guidance, we'll have a lot more details to share with you then. Operator: Our next question comes from Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: Kind of going back to M&A, there's been a lot of industry interest in the Anadarko and specifically M&A in the Anadarko. And maybe a 2-part question there. I mean, being located there in Oklahoma, what do you make of the interest in that basin? And what do you think is driving kind of the renewed interest? And does the level of interest kind of make you reconsider your -- the Anadarko's place in your portfolio? Clay Gaspar: Yes, Kevin, would say on the first question, obviously, it's gas oriented. It's positioned well. It's not backed up behind Waha. So there's some structural advantages of the Mid-Continent, the Anadarko Basin that we benefit from today. And certainly, we're very aware of that, and we take great pride in that. I'll go back to my earlier comments. We consider everything all the time. Our Board is very inquisitive and very thoughtful about how do we build the right term -- right long-term shareholder opportunity value set. How do we think about the portfolio. You have to remember, we're always consuming the front end of our portfolio. So how are we backfilling with quantity and quality of the portfolio to make sure that we have a very substantial and solid 10-year runway in front of us. All of those things are considered. And so as markets change and we see other things, we have interest, we have interest in other things, all of that certainly comes into play, but no additional details to share with you on that today, but I appreciate you asking. Kevin MacCurdy: Got you. And then as a follow-up, I really like the details on Slide 9. I think that highlights the value creation that you've had that doesn't always kind of show up in the production numbers. I guess a question on Waterbridge. Is there any operational reasons that you would keep that equity interest? Clay Gaspar: Yes, Kevin, I'd probably put it in the same category. We've done a lot of deals kind of adjacent to our core business. Think about something like Matterhorn, where we entered that opportunity. The key there was really specific to Matterhorn, making sure that we had gas takeaway from the basin. That was the phenomenal or the fundamental importance that we did. By underwriting that, we ensured that, that pipe was built. We have a significant position on that. We've retained that volume on the pipe. We also benefited from an equity position. We made a very, very substantial return on that. We're very proud of that. But again, the objective was making sure that, that pipe was built and making sure that we had our ability to get our gas to market. Similarly, with Waterbridge, the main objective there is making sure that we're thinking a lot about a super system -- we reserved poor space. That's very proactive in our industry. John's probably tell you a little bit more about that when I hand it to him. But I can tell you, the really fundamental and important piece of this was to make sure that we have our water taken care of in the Delaware Basin. And through this JV, this partnership, we've secured that. Now as a very beneficial byproduct, we have a substantial ownership in a publicly traded entity that's done very well. There's no reason we have to hang on to it. By the same token, it's a great investment. And I would tell you, we're not -- we have to sell either in that position. So it's option value for us. We have a lot of that in our organization, and we continue to evaluate that just as we do with other things in our portfolio, and it's a regular part of the conversation we have with our Board. John, anything else you want to add? John Raines: Clay, I think you covered it really well. I would say the relationship there remains very important to us. Operationally, we work with those guys every day. We've got a very multifaceted water management effort in the Delaware Basin. That's both to manage cost but manage future risk associated with water. I've talked about this before on our calls, but our first call on water is always to go to recycle. We've got a big recycle operation in the basin. In New Mexico, we've got a large water midstream presence. We probably don't talk about enough. That gives us a lot of flexibility there. We've got a lot of strategic offloads. Many of those offloads are WaterBridge. And then when you get into Texas, we really leverage our WaterBridge relationship to give us diversity of options across the play there. So we feel really good about how that's working operationally. Operator: Our next question comes from Kalei Akamine with Bank of America. Kaleinoheaokealaula Akamine: I want to start with the Wolfcamp B drilling program for this year, and maybe this one is for John. So production in the Delaware has been holding up quite well this year. Can you kind of compare how the Wolfcamp B results are comparing to your expectations? And then for 2026, do you anticipate this zone comprising a similar proportion of the program? John Raines: Kalei, appreciate the questions. I would say Wolfcamp B is performing very well relative to our expectations for the year. You probably heard me mention this on the last call. When you look at 2025, we've got a very diversified program as far as the zones that we're targeting for the full year. We're looking at about 30% Wolfcamp B or deep Wolfcamp, about 30% Upper Wolfcamp, about 30% Bone Spring and the remainder in the Avalon. What you're really seeing, you're going to see some volatility in terms of zone mix each quarter. A lot of our Wolfcamp B wells have come on in the first quarter and really the first half of the year. So we've had a little bit of a run at seeing how those wells are performing. And generally speaking, I'd say they're mostly meeting our expectations with quite a few of those wells beating our expectations. What I think you can expect from us going forward for 2026, it's too early to get in and talk specifically about zone mix throughout the year. But I think Clay said earlier, you can expect some stability, some consistency in how we're thinking about our overall Delaware program. And as we've shifted more into this multi-zone co-development, from a well productivity standpoint, we took that trade-off to go a little bit lower this year in exchange for better NPV overall and for a longer inventory runway. But I think you can expect that well productivity to be very consistent going forward for the next couple of years. Clay Gaspar: Yes. And if I could add, I'm going to ask Tom just to add a little bit more about our D&C efficiency that we continue to see in the Delaware Basin. I mean, I think it's very important as we think about all of these additional zones. The Wolfcamp B is just a touch deeper. But as we start expanding to the geographic edges and up and down the zone, so to speak, that efficiency really contributes as well. So Tom, just maybe a little bit on how we're thinking about on the efficiency gains there. Thomas Hellman: Yes, Clay. It's been really interesting this year. We've been really leaning into benchmarking in the Delaware Basin and using the AI tools on top of that. We have both AI tools that help us on sort of the new school, where we can predict -- use the AI to look at the parameters, the drilling parameters that really help us predict how to drill faster on the current well. And we're even using AI tools right now to help us trip faster and drill curves faster and even running casing faster, all about 30% faster. Each one of those saves us millions of dollars. And now in the Delaware Basin, we have a new record at about 1,800 feet per day. That really screens well versus all of our fastest peers. So Clay, it's looking really good, and I think the AI tools and the benchmarking is really coming through for us. Kaleinoheaokealaula Akamine: That's awesome. I appreciate that detailed answer. My follow-up is on the lease sales. So yesterday, that sale was a state sale, but this presidential administration has put federal lease sales back on the table, and they should occur with a pretty steady cadence. How are you guys thinking about those? And do you anticipate that being a part of your cash allocation priorities for'26? Clay Gaspar: Yes, great question. And I think, as I mentioned earlier, I think this is something we should be able to compete exceptionally well. We've got an existing footprint, the momentum of the organization, the efficiencies Tom was just talking about around D&C, the infrastructure that we have, including Water Bridge, the relationships that we have with the gas midstream partners. And then, of course, the existing infrastructure of the people applying this business optimization, the technology puts us in a really good position to be super competitive. So when we look at those, you bet, we'll be participating in the process. There's some really interesting land. We're thrilled to have the BLM open up some of these opportunities. And there's some pretty material lease sales coming up. So yes, we -- as we've shown on the last lease sale, we want to be part of the process. And at the same time, we want to be very objective about how do we create value, full cycle value from these opportunities. So yes, count us in as part of the process. And as long as -- alongside everything that we're doing on the ground game, including trades, small acquisitions, ground floor leasing in all the basins we're doing. We just see a real interesting opportunity coming in the Delaware. So definitely leaning in that direction. Operator: We have no further questions. And so I'd like to turn the call back over to Chris for closing comments. Christopher Carr: Yes. Thank you for your interest in Devon today. If there are any further questions, please reach out to the Investor Relations team. Have a good day. Thanks. Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Open Text Corporation First Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Greg Secord, Head of Investor Relations. Please go ahead. Greg Secord: Thank you, and good morning, everyone. Welcome to Open Text's [ Fourth ] Quarter Fiscal 2026 Earnings Call. With me on the call today are Open Text's Executive Chair and Chief Strategy Officer, Tom Jenkins, together with James McGourlay, Interim Chief Executive Officer; Steve Rai, Executive Vice President and Chief Financial Officer; and Cosmin Balota, our Senior Vice President and Chief Accounting Officer. Today's call is being webcast live and recorded with a replay available shortly thereafter on the Open Text Investor Relations website at investors.opentext.com. Earlier yesterday, we posted our press release and investor presentation online. These materials will supplement our prepared remarks and can also be accessed on the Open Text Investor Relations website. Now turning to the upcoming investor events. I'd like to take the opportunity to invite institutional investors and financial analysts to join us at Open Text World 2025 Investor Track on Tuesday, November 18 in Nashville. The Open Text World Conference is a unique opportunity for investors and financial analysts to learn about our latest product innovations and with full conference access, allow open dialogue with our customers and partners on site. The conference keynotes and investor track will also be available by webcast virtually. Open Text will also be participating in the following investor conferences. On November 21, we'll attend the Needham Tech Conference virtually. And on November 24, we'll be at the TD Technology, Media & Telecom Conference in Toronto. On December 2, we'll be at the Bank of America Leveraged Finance Credit Conference in Boca Raton and on the same day, we'll also be at the UBS Global Technology and AI Conference in Scottsdale, Arizona. On December 8, we'll be at the Raymond James TMT and Consumer Conference in New York. And then finally, on December 10, we'll be heading to the Barclays Global Technology Conference in San Francisco. We look forward to meeting with you at one of those events. And now on with the reading of our safe harbor statement. During this call, we'll be making forward-looking statements relating to the future performance of Open Text. These statements are based on current expectations, assumptions and other material factors that are subject to risks and uncertainties, and actual results could differ materially from the forward-looking statements made today. Additional information about the material factors that could cause actual results to differ materially from such forward-looking statements as well as risk factors that may impact the future performance results of Open Text are contained in Open Text recent Forms 10-K and 10-Q as well as in our press release that was distributed earlier yesterday, which may be found on our website. We undertake no obligation to update these forward-looking statements unless required to do so by law. In addition, our conference call may include discussions of certain non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to their most directly comparable GAAP measures may be found within our public filings and other materials, which are available on our website. And with that, I'll hand the call over to James. Christopher McGourlay: Thanks very much, Greg. I would like to welcome everyone on the call today. Joining us today is Tom Jenkins, Executive Chair and Chief Strategy Officer. I also want to give a warm welcome to Steve Rai, who joined Open Text as Executive VP and CFO in October. Steve brings a wealth of experience from technology and software. He is based in our Waterloo, Ontario headquarters. Also joining on the call is Cosmin Balota. I want to thank Cosmin for his leadership as Interim Chief Financial Officer, and Cosmin has now resumed his role as Chief Accounting Officer. The entire Open Text team is committed to delivering secure information management products that let our customers curate and enable agentic AI with their content. We have a tremendously strong and deep customer relationships. It is because of this that we have such incredible and loyal installed base. Now let's get into our Q1 fiscal '26 results. Q1 total revenues, ARR, adjusted EBITDA margin, adjusted EPS are all above Street expectations. As you saw with the Q1 performance, we are continuing our momentum from last quarter, especially in our core content business. We remain focused on sales execution, having just completed a major product cycle. We believe we are in the market with the right products at the right time. Turning to our cloud performance this quarter. Q1 cloud revenue was $485 million, up 6% year-over-year, which is well on track towards our F '26 outlook range of 3% to 4% growth. Cloud bookings continue to remain strong as we saw Cloud cRPO up 6% year-over-year. More importantly, our long-term cloud RPO is up 16% year-over-year, and total cloud RPO is up 11% year-on-year. Our other measure of cloud performance is enterprise cloud bookings, which were up 20% year-on-year in Q1. This puts us in a good position towards achieving our F '26 outlook range of 12% to 16%. We closed 33 deals greater than $1 million in Q1, which is up 43% year-on-year. We had key wins in the quarter with ALTEN, Australia Department of Health, Core42, Optiv Security and mh Services. In September, we provided additional disclosure on our main business -- businesses, which we break into product categories. This disclosure is in our IR presentation on the website and allows you to better track the performance. Tom will speak more about the tremendous opportunities in our core information management for AI business. For Q1, you can see that Content being our largest business continues to lead our growth in Cloud. Content Cloud grew 21% year-on-year in Q1. This was driven mostly by bookings won in financial services, energy and utilities as well as telecom verticals. We saw strength in retail, automotive and manufacturing verticals which also contributed to our business network positive growth in Q1. We are pleased with our Enterprise cybersecurity business growth this quarter and mainly driven by a few sizable wins. Our product offerings continue to be recognized by industry experts such as Gartner, and we are establishing key partnerships that are important for content management and agentic AI. We're excited about our upcoming Open Text World event being held in Nashville from November 17 to 20. Thousands of our customers and partners and other stakeholders will join in person to see our latest product offerings and innovations, especially our Aviator and agentic AI solutions in action. We will also showcase our sovereign cloud, keeping our customers data local and secure. We are very excited to see how our customers unlock the power of their own data using Open Text products to foster innovation and spur growth. As we look ahead to the rest of fiscal year, we are not changing our fiscal '26 annual outlook. Please remember that we are an annual business and that results can fluctuate quarter-over-quarter. With that said, we expect Q2 total revenue to be between $1.275 billion and $1.295 billion and the adjusted EBITDA margin to be between 35.5% and 36%. We continue to see strength in our Content business going forward. For the second half of fiscal '26, we expect revenue to skew higher towards a strong Q4. There is typical seasonality that we see in Q3, but the momentum from our new product cycle is expected to come mostly in the latter part of fiscal '26 and beyond. We continue to expect ARR to return to growth in fiscal '26 with Cloud growth outpacing maintenance declines, while customer support revenue is on track to meet our fiscal '26 annual outlook. We are seeing some of our customers making faster decisions to shift their workloads from on-premise into the cloud. We have always given our customers the choice of where they want to deploy and note that the on-premise deployment is still being sought after in heavily regulated industries and governments. To conclude my remarks, I want to take a moment to thank our Open Text team across the company for their professionalism, dedication and hard work during this period of change as well as our partners, customers and shareholders. Finally, I would like to thank Tom Jenkins and all of the members of the Open Text Board of Directors. Their support to both myself and all of our employees has been tremendous. This is an exciting time for Open Text. We're in a great position financially and operationally. We are in the right markets of secure content and data that trans-agentic AI. When I stepped in as Interim CEO, my main priority was to take care of our customers and carry forward our initiatives and deliver our fiscal '26 annual outlook. We had a great start to Q1, which sets us up nicely for the rest of the year and beyond. With that, I will hand the call over to Steve Rai, our EVP and CFO. Steve Rai: Thank you for the kind introduction, James. It's great to be here. Good morning, everyone, and thanks for joining the call. I'm 1 month in at Open Text and very excited to contribute to the tremendous opportunity ahead. Over the past few weeks, I've spent a lot of time with James and Tom and the extended team, and I'm in full support of the company's vision and direction. I look forward to working together with them to deliver on this. Cosmin Balota, our Chief Accounting Officer, who was the Interim CFO before I joined, is on the call today, and he will discuss the highlights of our Q1 financial results. I would like to thank Cosmin personally for his unwavering support, insights and maintaining a steady ship through the transition. For those of you who may not know me, my last role was as CFO at BlackBerry, where I was deeply involved in the company's corporate technology and organizational changes. I'm truly energized to join Open Text at this stage in its journey and will be based in our global headquarters in Waterloo, Canada. Since joining, I've been very impressed with the professionalism and passion from everyone that have met across the organization. I see a company with solid financial fundamentals with expanding margin and free cash flow and excellent foundational technology. Open Text supports an impressive global enterprise customer base and is poised to capture a broad-based step change in the market for training and adoption of agentic AI. I look forward to putting my deep experience in technology and transformation to work with such a dedicated team. With that, I'll hand the call to Cosmin to discuss our Q1 highlights. Cosmin Balota: Thank you, Steve, and good morning, everyone. Let me start by saying that in Q1, we continued our momentum from last quarter, particularly from growth in cloud revenues, led by our Content product category and through overall margin expansion. Total revenues for the quarter were $1.3 billion, which was an increase of 1.5% year-over-year. This growth exceeded our expectations for Q1 and was mainly driven by Cloud and License revenues. In the quarter, our Cloud revenues of $485 million were up 6% year-over-year. This growth was mainly attributed to strong demand in our Content product category, which makes up approximately 40% of our overall business and grew 21% year-over-year in Cloud and 3% in total revenues, as outlined on Slide 6 of our investor presentation. Customer support revenues of $587 million were down 1.5% year-over-year, while our ARR or annual recurring revenue was $1.1 billion, which was an increase -- sorry, an increase of 1.8% year-over-year. ARR was 83.2% of total revenues, which was a slight increase compared to the 82.9% in the same quarter last year. Moving to profitability. Q1 GAAP-based gross margins was 72.8% or 76.5% on a non-GAAP basis, which were up 100 basis points and 60 basis points year-over-year, respectively. These increases were mainly due to Cloud gross margins growing 280 basis points year-over-year and 270 basis points on a non-GAAP basis. Adjusted EBITDA for the quarter was $467 million, which is a 36.3% margin and was up 130 basis points year-over-year. This improvement was mainly driven by higher revenues, which, as I mentioned, was primarily from continued growth in Cloud and our Content category with additional benefits realized from the expanded business optimization plan and improved gross margins. The costs and benefits associated with the business optimization plans and other savings initiatives, as outlined on Slide 19 of our investor presentation, and they have not changed since the prior quarter. The strong margin performance in Q1 resulted in an adjusted EPS of $1.05, which was up 12.9% year-over-year. Q1 free cash flow was $101 million, which was a significant increase of $218 million year-over-year. As you may recall, in Q1 of last year, we made a onetime tax payment, driven by the gain on sale from the AMC divestiture. This concludes my summary of the Q1 fiscal '26 financial highlights. And with that, I'd like to hand the call back to Steve. Steve Rai: Thank you, Cosmin. The results in Q1 demonstrate the resilience of Open Text's business supported by the strong financial position of the company. Along with our portfolio-shaping initiatives and announcing the recent sale of our eDOCS business. This solid foundation supports our capital allocation strategy of consistently paying a growing dividend, buying back shares, reducing debt and reinvesting in growth. I'm a month in and looking forward to continuing my engagement with the Open Text team and meeting our investors and analysts. I'm excited to work with James and Tom and the rest of the executive team and Board to carry out our strategic objectives. With that, I'll hand it over to Tom. Paul Jenkins: Thanks, Steve. Good morning, everyone. Before I get started, I'd like to thank Mark Barrenechea for his 13 years of dedicated service to our company. His leadership scaled and developed our company as a leader in enterprise information management. And Steve, a very warm welcome to you, and welcome to Open Text. You've only been here for a month, but I appreciate having you here on the call today. Since we made our announcement on August 11, we've met with hundreds of shareholders and analysts and investors. And it's been great for me to renew all the acquaintances. And I thank all of you who said that I haven't aged a day since the last time you saw me, I wish that was true. This has allowed us an opportunity to communicate to you a simpler strategy for the company to unlock the value that Open Text has. We're going to concentrate on our core business units and enterprise information management and specifically those that provide the training for the new area around enterprise artificial intelligence. You'll hear us use the term at agentic AI as well and more on that in a minute. After all, it makes sense for us because Open Text is one of the biggest -- we think it's the biggest, but it's certainly one of the biggest corporate data and metadata vendors in the world with hundreds of connectors to legacy and current data sets. That's a powerful asset inside Open Text for AI, and we plan to unlock it. We'll do this first, though, by selling off all our noncore business units and using those proceeds to further create shareholder value. And that's really our end goal. And so in a way, what is old is new again, we're going back to our historical roots of being a content management company, except this time, we have additional products in business networks and machine management, wrapped in an enterprise-class security layer. That will be our core business. We already have the global scale, the go-to-market sales force, the product line in these businesses and the core of our core, which is the Content Management business, is also our largest business unit at about 40% of our total revenue. And it also happens to be the fastest growing with, on average, more than 20%. Cloud growth over the past few years. So it was a pretty obvious strategic decision by the Board to take these actions. We now have the entire company from the Board, the exec management team to our 20,000-plus strong global workforce aligned and locked into achieving our FY '26 objectives and beyond. We're going to stick to our plan. There are early signs that we may be even going faster towards the cloud as the year goes on. And as we shed the noncore units, our Cloud Content business will be soon the dominant share of all of our revenue sources. That's our goal. We'll keep reporting our business unit breakout as we go through this journey so that you can track right along with us our progress towards that goal. So speaking of progress, if you take our August 11 release and some of the short-term priorities that we said we would address. I'm pleased to report we've addressed almost all of them. We've had a very busy 90 days and the next 90 days will be just as busy. As I mentioned, we started by providing additional transparency with all of the revenue breakout performance for our business units. We did this in early September so that you could track along with us on our progress. That's where you saw the strength of the Cloud growth. In fact, last year, Content Cloud grew 17%. And this quarter, it grew 21% year-over-year, and that's the acceleration I was referring to. So clearly, our Content Management customers are moving even faster to the cloud, and this will start to change our revenue mix slightly in our plan, but it's an indication that we're moving faster to becoming a fully cloud-centric company. Now of course, we appointed Steve Rai as our permanent CFO. And he, of course, has a solid background in financial and operational reporting. And even more so, with his background at BlackBerry, he has a lot of experience in portfolio shaping. So we welcome that wisdom to the management team. This was followed by our first announcement of a noncore business unit sale within the analytics business, as has already been mentioned. It's an on-premise piece of software. So that will help the pivot towards cloud even further as we shed the noncore units. We also talked about the refreshment of the Board. And recently, we appointed a new Board member, George Schindler. He's the former CEO of global IT consulting giant, CGI. He's a fantastic addition to the Board, brings valuable perspective and now includes other members that we've announced in the past year, such as the senior partner in technology and telecom from Accenture, the Chief Human Resources Officer of Hewlett Packard, the CIO of Cisco, among just the new members that we've announced in the past year. So we're quickly retooling everything at Open Text. Yesterday, we published our Q1 fiscal '26 results that demonstrates the resilience of the business and the continued demand for Content Cloud and AI. We're focused on the right market at the right time. It leaves us with one major priority remaining, which is to find a permanent CEO. Their search is ongoing, both internal and external candidates, and I'm pleased to note that we have had many world-class candidates step up and put the hat in the ring for consideration by our search committee. Our goal is to find a leader whose solutions focused and to help us elevate to the next phase of Open Text's journey. In the meantime, I'd like to thank James for stepping in as Interim CEO. He's been a steady hand leading the operations of the company and to Cosmin for leading the financial group. As you can see from the results, they've both done a great job stepping up on short notice. Open Text is on a solid financial and operational foundation of growing long-term margin and free cash flow. And we're committed to unlocking shareholder value through our capital allocation strategy, which will include reducing debt, paying a dividend, share buybacks and tuck-in M&A. And with all of this, we're committed to providing investors with clear, simple, transparent metrics so you can better understand our business and performance and follow along with us on this journey. Let's turn to our strategy now and how Open Text plays an important role for our customers in agentic AI. We provided some slides. And obviously, we're also going to speak at our user conference and Analyst Day next week, as James had mentioned. So a lot more detail to come, but we thought we'd give you an overview of what you'll be seeing next week. And it really falls around a recent MIT study on agentic AI, which indicated that the importance to productivity that AI must be trained by specific content that can only be found inside the firewall of organizations. Keep in mind that many of the world's first most amazing GenAI products like ChatGPT and Perplexity and [ Claude ] were all primarily trained on public information. Now public information only represents about 10% of the world's information. About 90% of that information is behind the firewall. In fact, many years ago, Open Text wrote a book called Behind the Firewall that described where all this information is and how you find it and how you use it. Now of course, most of that was built as records management and archive for regulated industries, and Open Text was the leader in all of that. So that positions us with an enormous access to all the data. And so as you know, we have hundreds of thousands of organizations all throughout the world that we've built these systems for over the past 35 years. That's really the gold mine for customers that are seeking to build productivity-related agentic AI. So we'll provide a lot more information on that. But where does that apply to Open Text? Well, Open Text in enterprise information management, it's got data stored in 3 major business units that we've broken out for you today in Content, our ITOM and our business networks. These products, our users are able to use their own data to train agentic AI that's way more powerful for anything that's available in the public domain. So that's why we call this enterprise artificial intelligence in the same way that we used to call it enterprise information management and before that, enterprise content management. So what is old is new again, and we're returning to our roots. And we think that there's an enormous demand for this as we go forward. Now we're also seeing an interesting change around proprietary clouds. And in the case of governments, they call it a sovereign cloud. Users don't want to lose the keys to their castle. AI is very different than just storing data. And our users are starting to find that they want to be very careful how they construct clouds that use AI. They want to make sure that they're inside the firewall. So we're noticing that the domestic telecoms throughout the world are starting to take a more substantial role in the supply chain for these proprietary clouds. And I think you'll see in the future, Open Text get more involved with those telecoms throughout the world as those channel opportunities present themselves. It's interesting because we're finding that major corporations that went to the cloud actually don't have an IT capacity internal to their companies anymore. And that's why they're seeking alternatives where they can maintain a proprietary AI, but do it on a managed service basis through ourselves, other vendors and the telecoms, as I have mentioned. Now these trends, they're going to be a major topic of our upcoming user conference. James has mentioned that we'll be having later this month in Nashville as well as the Analyst Day. Now we're also going to have a new book called enterprise artificial intelligence available that explains all these concepts in much more detail, both to yourselves as well as our users. So in closing, what lies ahead for Open Text is perhaps the greatest opportunity in the history of the company. We hope that you'll follow us on that journey as we take our core businesses and focus on them. We're going to train agentic AI with all that content. Our Board committee continues to make the divestitures of the noncore business, and our Board identifies and on boards our new CEO. So with that, could the operator please open the line to have questions. Operator: [Operator Instructions] The first question comes from Richard Tse with National Bank Financial. Richard Tse: So Tom, you're embarking on a pretty ambitious strategy here. I just kind of want to get your thoughts in terms of what you think Open Text's competitive edge is and content as you make this pivot to leveraging your data for AI because there are a number of companies in the marketplace. Paul Jenkins: Yes, the competitive edge, you don't create competitive edges overnight, as you know. That competitive edge was built over 35 years. We're the only company that has the hundreds and hundreds of data connectors. You had to be around back in 1995 to be able to have a connector into word perfect and into the Lotus Notes and then the Lotus 1, 2, 3 and all that stuff. And the reality is that legacy data is critical to training agentic AI. And we have all of those connectors, whether it's in business networks, whether it's in IT operations management or in human content. And that stuff gets built up over decades. You had to have been there at the time. And so all that source code, all of that plumbing is buried inside our products, whether it's SAP archives that are written directly in ABAP, that kind of stuff, you just can't make up later. You had to have been there at the time. So that's the part that really gives us a huge competitive advantage. I think the other part that we're going to find play out in the market is that we offer a hybrid mix. We offer on-prem through license as well as in the cloud and managed services. So there's a mix that users can pick because as you go to build these AI systems, that information is located throughout corporations in many, many different attics, so to speak, throughout. And we're equipped to be able to do that. Richard Tse: And my second question has to do with the Content business. Thank you for that segmented disclosure. It obviously is growing at a pretty rapid rate, certainly on the cloud side. Can you maybe give us a bit of color in terms of the mix of where that growth is coming from? Is it sort of AI readiness? Or is it something else because for mature markets, granted its sort of off a small base on the cloud piece, but still curious to see how that's playing out. Paul Jenkins: Yes. I'll defer this to James. But I will say one thing when a CIO approaches this problem, the first thing that they have to do is they have to curate their content in general. That's why I think you're seeing a lag in some of the adoption of AI because even though we had COVID and even though we created a lot of digital pieces inside our organization, the reality is we were doing that in a hurry during COVID. Getting this in an organized fashion, that takes a lot of content management. It takes a lot of archival, a lot of records management. So a lot of organizations were simply getting digitally ready. They had never been asked to do this before. They were keeping all that data for regulatory reasons. Now they're starting to present that data in real time and ready so that they can do training. So I'll leave it to James to talk about the very specific parts. Christopher McGourlay: I think you covered it pretty well, Tom. We're seeing our customers looking at moving into the cloud for a number of reasons, including the managed capability that we offer, curating their data for AI readiness and just overall simplification of the management of the system for them. So customers are moving quickly. We're seeing new customers coming in, coming on board, jumping directly into our cloud offering, as you would expect in this day and age. But it's across the board, we're seeing a shift to cloud in the customer base. Operator: The next question comes from Kevin Krishnaratne with Scotiabank. Kevin Krishnaratne: Maybe, Tom, just on that last point on the data readiness and can appreciate the sort of decades worth of content that you're managing for your customers. Is that -- like can you just talk about maybe -- is there a sweet spot in terms of how far back customers need to go? You talked about all the data that you've got to train agentic. But I'm wondering like how relevant is data from 30 years ago versus, say, 5 years ago? Is there -- again, just sort of a sweet spot that you're seeing in terms of how far back -- how much data customers are bringing in to think about their agentic AI training purposes? Paul Jenkins: Yes, that's a great question. And even to go further, we could say that there were early attempts to create synthetic data where you would take 5 years of data and just simply replicate it to try and fake out some form of agentic AI training. The reality is, I think the person who did this analysis the best was Larry Summers, who is, of course, now on the Board at OpenAI and former Harvard President when he was doing the analysis of how the Fed had made such an error during COVID. And when he went to look at the Fed models, he discovered that they had gone back 20 years. And you can go on YouTube and watch this. It's a fascinating presentation and analysis by Larry Summers. And basically, he looked at them and he said, you didn't go far enough back. You had to go to where the black swan was, which was in the '70s. And that's why you missed it. And it's an interesting point because what you're doing when you're training GenAI, you're going back looking for patterns. And so if you have the data, you go back as far as you can because you're looking to get the pattern of the black swan. That's what a corporation wants to be able to see. Where are those anomalies. And so quite frankly, you can't go far enough back. If you've got the ability to go back 35, 40 years, you're absolutely going to do that because your AI will be more accurate and quite frankly, wise. And that's the race. There is no such thing as data that is not useful. The more you have, the better off you are. Kevin Krishnaratne: That's super fascinating. Maybe switching over to Steve, welcome to the team. If you think about the Q2 guide on revenue, it's a range. It does imply a scenario that could see quarter-over-quarter decline. So I'm just wondering if you can maybe talk about the drivers that would get you on the one hand down to the bottom of the range and on the other hand, the top end of the range. Can you just talk about expectations for the coming quarter? Steve Rai: Well, I think it's the most critical item for the quarter and the rest of the year and beyond is this theme that we -- that Tom has been talking about and James commented on. I mean, focus -- I'm new on the scene, right? But what's so compelling to me as -- from what I look at is you look at content and those -- and the core pieces that kind of feed into that and -- and that -- and then take a look at the cRPO, right? That current remaining performance obligation, that is just really kind of going to -- that's what's carrying everything here. That is the biggest component of the business. And from a -- what -- where Q2 is versus the second half, we haven't changed our annual outlook. So there is going to be some degree of shift from the other elements of the business, but that trajectory is the key trend to watch. Paul Jenkins: Yes. And don't forget that the thing that we don't know is what's the mix of revenue caused by how fast people are going to the cloud. As you know, the revenue reporting for cloud gets distributed when we make a contract 3, 4, even 5 years as opposed to license, which gets recognized right away in that quarter. So that's part of the issue that we don't know what the mix of that revenue will be. We sure do have the customers, though, it's just that what buckets of revenue will that go into quarter-by-quarter. That's the thing that we think we're seeing an even faster move to the cloud. Operator: The next question comes from Stephanie Price with CIBC. Stephanie Price: Maybe just a follow up on Kevin's question around the Q2 guide, and I appreciate the color on the go-forward strategy. In terms of EBITDA growth in the second half, the reiterated guide implies a pretty significant step-up in H2. Just curious about what's driving that growth? Is it primarily transformation initiatives? Or any color on that, Steve, and welcome would be great. Steve Rai: Yes. I'll let the others jump in. But certainly, there's a lot of the portfolio reshaping, the very significant business optimization initiatives that have been underway for some time and continue to be -- I mean, that's a $0.5 billion run rate improvement since the program was what was announced that we're working on. So a significant portion of that, call it, 1/3, I understand was realized last fiscal year. There's another 1/3 approximately that's built into the plan for the current year, and then we continue to work beyond that. So all of those things really drive that improvement. Stephanie Price: Great. And then, Tom, maybe just an update on the divestitures initiatives. Congratulations on eDOCS. How should we kind of think about the cadence of divestitures over the next several quarters here as you look to divest 15% to 20% of the overall revenue? Paul Jenkins: Yes, that's a great question. We've been grappling with that and talking to Steve about the right way to do it. Clearly, there are multiple business units here that are noncore. And I think what you'll see is we'll establish a pace of doing one per quarter because it does take a lot of effort. If you think about what Steve just said, as we divest a unit, there's parts that do not go with the unit sale that we then have to restructure. So it's a nontrivial exercise. We're going to do it methodically. And I think you'll see us generally be done within the next year. That's sort of what our overall goal is. But yes, you'll see a drumbeat of this. It will not be all at once. that would be irresponsible. We want to stay very disciplined on our EBITDA and keep -- as you know, the company is very disciplined when it comes to EBITDA. We'll make sure that we do this in a methodical fashion so that we don't get big changes in EBITDA. So that will guide us. We'll have to ask everyone's patience while we do it, but we don't want drama. We just want to have it in a real constant drumbeat as we go through the year. Operator: The next question comes from Steve Enders with Citi. George Michael Kurosawa: This is George Kurosawa on for Steve. Maybe one follow-up on the divestiture point. Steve, I think one of the things that jumped out to us on your resume, your time at BlackBerry was your involvement in divestitures with that organization. Maybe any thoughts on your approach or playbook? What do you feel like is similar or different coming into the situation? Steve Rai: Well, the primary difference that we've got here is the core represents the largest and fastest-growing piece of the business. So that is a great position to be in. And then beyond that, just given the kind of the landscape that Tom painted, everybody realizes we're on the cusp of a major step change in terms of AI and agentic AI, in particular, developing. And we've got -- this company has got AI of its own. But in addition to that, that access to all the information to training it. I mean that training ground and providing that access to it is, I mean, what a phenomenal time to kind of -- again, this is 35 years in the making, a great position to be in to kind of capitalize on that market picture. George Michael Kurosawa: Got it. Okay. Great. I appreciate that color. And then I also appreciate the additional disclosure on the business unit side. I think the Content Cloud side really jumps off the page, it's been well discussed. I think the other thing that caught our attention maybe on the flip side was the cybersecurity enterprise piece, particularly that cloud component declining. I know it's small, but I think we were kind of interested in the cross-sell opportunity there. So surprised to see that moving in the wrong direction. Just any color or commentary on what's happening in that business and your outlook there going forward. Christopher McGourlay: Look, I think it's fair to -- it's James speaking. I think it's fair to say that we're working extensively on that business. And we've made several investments in the product development since we acquired the product lines. We are seeing great success as we're moving forward. And we will start to see those cloud numbers coming up with investments in specific regions. But I can look at various deals that we've done with large strategic banks where we've sold content and cloud and security together. So we are seeing success in our cross-selling efforts. We're expanding those efforts, and you'll see us continue to expand those efforts as we go through this year and beyond. Operator: The next question comes from Samad Samana with Jefferies. William Fitzsimmons: This is actually Billy Fitzsimmons on for Samad. I want to double-click on Content Cloud because it's important. And when we think about the 21% Content Cloud growth in the quarter, how would you break down that growth between, call it, net new customer wins, seat expansions, ARPU expansion for selling additional modules in the base? And then cloud conversions in your existing base. And what I'm kind of getting at here is when we think about cloud versus non-cloud, Open Text has always made a point to support customers where they are. And so just so we're all clear, were there any, call it, shorter-term tailwinds to the Content Cloud growth rate from you guys using either carrot or sticks to incentivize your existing on-prem customers to move to the cloud? Or would you more categorize this as customer-driven and that they're choosing to transition because of their AI readiness? Christopher McGourlay: So first of all, I would character this as -- characterize this as a joint effort between Open Text and customers. As you said, we're selling to our customers where they want to be. We allow our customers to make that choice, and that's where we go. We don't have a program in place that incentivizes customers to move into the cloud. We're not pushing people to the cloud. This is really a joint effort and a joint decision as we go forward. There's nothing exceptional that I can -- that comes to mind in the quarter that would drive that growth other than the concerted effort of our sales team selling. Paul Jenkins: I think there's also a really big point buried inside that question. We, as a company, are focused on shareholder value. How do we make the most profit and the installed base has a tremendous amount of ARR, what we would classically call maintenance. It's very lucrative for the company. We're not in a hurry to see that leave. And quite frankly, neither are our customers. Our customers are very -- if they didn't broke, don't fix it. And so we're not in a hurry. I know other vendors because they want to categorize everything into the cloud or converting, we don't see the wisdom of that, not for our customers and not for ourselves. They're happy to actually pay us more under the old way, and we're happy to take it. So I think you'll see that this, as James says, is a partnership ongoing between our users and ourselves. But we're not dogmatic on this. We're just driven by how do we make the most amount of money and the most amount of money is by doing what customers want. William Fitzsimmons: Makes perfect sense and crystal clear on that. And maybe if I can ask one to you, Steve. I'll leave this pretty open ended, but it's only been a month or so since you joined, and this is your first earnings call. Can you just talk through kind of what are your initial priorities as CFO? Steve Rai: Well, obviously, understanding the priorities on the part of our customers, understanding the products. Obviously, there's been some very significant strategic initiatives recently announced, and the Board obviously has been very involved in that. But the big things are the primary trend that we've been talking about with content leading the growth and wrapped with all the business optimization initiatives, and that's really the top line, but bottom line, I mean, those are the most significant and most impactful items. So that's where I'm focusing and just obviously getting to know the team and how we do things. Paul Jenkins: Steve is certainly not bored. There's a lot of balls in the air, and he's just in a perfect position. We had a meeting early in and I said, Steve, what do you think? He said, go faster. And I think that characterizes Steve for us. He's a veteran, been around, he sees what we're doing, just go faster. Operator: The next question comes from Stephen Machielsen with BMO Capital Markets. Stephen Machielsen: So with respect to the ITOM business, you clearly had some strong cloud growth, albeit off of a small base. What would your expectations be for stabilizing total ITOM revenue? Like is this something you hope to accomplish as you exit this year? Or is it still TBD? Christopher McGourlay: I think we're -- I think we'll say at this point, it's still TBD. I mean we are working on stabilizing as we go along. And obviously, you can see the growth coming in on the cloud. There's some great product features, benefits that are coming out in our upcoming releases. We're seeing stronger demand from our customers. So yes, we're working towards stabilizing. I'm not willing to put a date on it at this point in time, but we are progressing well towards that end. And we're winning some great deals against some strong competition. So we've got really positive plans for ITOM and a key part of the portfolio. Paul Jenkins: I think what you'll see at Analyst Day and also at the user conference, although we break out these units as ITOM and enterprise security and content, you're quickly seeing us evolve into a go-to-market strategy where we're training all content for agentic AI. You'll see us go to market where the ITOM, which is really machine-generated content for agentic AI, you'll see business networks, which is really transactional content for agentic AI and then the original content server business, which is human-generated content, all of those components are going to come together in an offering from us because our users, when they go to train agentic AI, they don't think of it as ITOM or the way we as vendors would break it up in the historical way of creating content. They just think of it as content, a big data pool. And so you'll see us go to market where we would in the past call that cross-selling. We're coming to the market now to give our users what they need, which is really all of the data, not select data that previous vendors had but rather all of the data. I think this is a very important thing you'll see us go-to-market with starting with next week with Analyst Day. Stephen Machielsen: All right. We'll look forward to it. My second question is the Q2 revenue guide seems to imply a double-digit decline in license. Can you provide some color on that dynamic? Is it reflective of clients transitioning from license to cloud? Or is there some other dynamic or factor to point to? Paul Jenkins: So this is what I was referencing before. We're really driven by the selection that our customers are making. As James has said, we don't have a definitive target. We simply show up and say, here's the menu. Would you like this on-prem? Would you like this as a managed service. So in many ways, that mix is really a reflection of how quickly customers are going to the cloud. And quite frankly, last quarter, they chose cloud more than they did license. That could change next quarter because there is that other dynamic going on where the need for a proprietary cloud or a sovereign cloud that will have an element of on-prem, and it will have an element of wanting license revenue. So it's not something that we can predict with absolute precision. We think overall, though, that the trend line will continue just like what you saw this quarter into the following quarters. But that variability quarter-to-quarter is really hard to really nail down. James, what's your... Christopher McGourlay: I think you covered it great, Tom. Paul Jenkins: What we're seeing ... Christopher McGourlay: That's what we're seeing. We're seeing our customers move to cloud. There's some large deals out there, some variability in when those deals will happen on the license side. But the main driver is that customers are moving to the cloud. Those are bigger deals, but they're spread over time, and that's the impact on the quarter. Operator: The next question comes from Seth Gilbert with UBS. Seth Gilbert: Maybe another one on the 2Q revenue guidance that you outlined. 2Q usually seasonally stronger than 1Q with the December year-end -- calendar year-end. Maybe can you help us out a little bit, is cloud services, is that line going to be less than the 6% because there's a fine mix if you kind of play with license in the previous question and if you play with cloud. And maybe trying to help us understand for modeling purposes where those 2 will kind of be in 2Q, I think, could help squash a lot of investor fears. Steve Rai: I would kind of start with -- we haven't revised the outlook for the full year. So there is some element of larger deal timing, particularly on the license front because the rev rec is more upfront on that. But this is why at the outset, and I think we've covered in some of our IR presentation as well, that if that's a trade-off and the customer chooses to go to the cloud rather than signing up for a license deal with more upfront rev rec, keep an eye on the RPO because that's where that trade-off and that customer choice ends up and particularly the current RPO, which is the next 12 months. So it's that -- it is a positive shift for the long term to see it. But obviously, there's that near-term accounting rev rec impact. So that's how I guide you to kind of view that. Seth Gilbert: Got it. And maybe as a follow-up, recognizing you have not changed your full year guidance, which was good to see. So maybe this is a question about a little bit further out. But can you talk about how you're thinking about the changing revenue mix to impact margins maybe at a high level? Paul Jenkins: Yes. No matter what the revenue mix, we are committed to the margin. We've always been a very disciplined operator. So there will be no change to the margin regardless of the revenue mix. We will adjust as we go along. And it's like Steve said, some of this from a rev rec point of view, all the so-called dump truck still has the same amount. It's just that we're letting some of it out slower in one of the scenarios with cloud. But the dump truck still has the same amount of dirt in it. So it's just -- as we meter it out, we will make sure we maintain our margins. We've got a long history of being a very disciplined operator. Operator: I will now hand the call back over to management for closing remarks. Please go ahead. Paul Jenkins: Thanks, everyone, for joining us today. We're excited about our fiscal '26 and all the opportunities in front of us. We hope you'll join us at Open Text World in Nashville on November 18 for our Analyst Day. We'll go into more detail on some of the things that we talked about. As Greg noted, we'll be out in the field quite a bit at many investor conferences through the fall spending time with you and looking forward to you hearing your feedback. Thanks again for joining us today. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the MasterCraft Boat Holdings, Inc. Fiscal First Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Alec Harmon, Director, Strategy and Investor Relations. Please go ahead, sir. Alec Harmon: Thank you, Stephanie, and welcome, everyone. Thank you for joining us today as we discuss MasterCraft's fiscal first quarter performance for 2026. As a reminder, today's call is being webcast live and will also be archived on our website for future listening. With me on this morning's call is Brad Nelson, Chief Executive Officer; and Scott Kent, Chief Financial Officer. Brad will begin with an overview of our operational performance. After that, Scott will discuss our financial performance. Brad will then provide some closing remarks before we open the call for questions. Before we begin, we would like to remind participants that the information contained in this call is current only as of today, November 6, 2025. The company assumes no obligation to update any statements, including forward-looking statements. Statements that are not historical facts are forward-looking statements and subject to the safe harbor disclaimer in today's press release. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude items not indicative of our ongoing operations. For each non-GAAP measure, we will also provide the most directly comparable GAAP measure in today's press release, which includes a reconciliation of these non-GAAP measures to our GAAP results. There is also a slide deck summarizing our financial results in the Investors section of our website. As a reminder, unless otherwise noted, the following commentary is made on a continuing operations basis, and all references to specific quarters and periods will be on a fiscal basis. With that, I will turn the call over to Brad. Bradley Nelson: Thank you, Alec, and good morning, everyone. We delivered results that exceeded our expectations despite continued geopolitical uncertainty and a dynamic retail environment. Our team continues to execute our key operating initiatives and maintain disciplined cost controls, which contributed to our performance in the quarter. Pipeline inventory levels improved year-over-year, reflecting our balanced approach to dealer health and focus on driving sustainable growth. Q1 net sales increased $3.6 million or 6% year-over-year, and adjusted EBITDA rose nearly $3 million, a margin improvement of 380 basis points. As always, I want to thank each of our team members and dealers for their focus and partnership, which has provided us with a solid foundation from which to build for the rest of our fiscal year. Regarding channel inventory, we maintained the progress made over the past year with pipeline levels ending the quarter 27% improved from prior year. Dealer inventory levels are on track with our expectations, and inventory turns remain aligned with pre-COVID levels at this point in the year, supported by disciplined production planning and proactive pipeline management. From a distribution perspective, we continue to fine-tune our presence in key markets, consistently evolving our network and capitalizing on opportunities to add strong partners globally. While retail variability continues, early industry indicators have not changed our expectations for the year of down between 5% and 10% for our MasterCraft segment. The Pontoon category remains highly competitive with retail softness persisting due to elevated interest rates and promotional activity. Overall, while near-term interest rate cuts provide us with cautious optimism, continued macroeconomic strengthening and sustained breakout in demand would further support meaningful order growth. Our flexible operating model and targeted dealer support programs position us well to respond to evolving retail dynamics and deliver on the full year. Now turning to our brands. We remain encouraged by recent operational and quality trends within our MasterCraft brand, which were echoed by our dealer network during our annual dealer meeting held in late September. The energy and excitement for our brand reinforce confidence in our strategic direction and product road maps. In the quarter, we launched the first model of the all-new X family, the X24 to our dealers, followed by a successful consumer debut. This groundbreaking model ushers in the next generation of premium ski-wake products, featuring advanced technology and elevated design, reinforcing our commitment to differentiated innovation and category leadership. The timing of the X24 launch builds on the momentum of our ultra-premium XStar family and further positions MasterCraft at the forefront of the premium ski-wake segment. Initial dealer and consumer response has been strong, building anticipation for delivery of the full platform of models. We remain disciplined in ramping production throughout the year to ensure quality and demand alignment. In addition to product innovation, we continue to strengthen our brand through strategic partnerships and industry involvement. As an example, our recent partnership with the World Wake Association reflects our standard of delivering premium experiences, welcoming new riders, fostering a vibrant community around water sports while showcasing our latest innovations like the new X24. Turning to our Pontoon segment. Our Pontoon segment delivered meaningful progress with year-over-year improvements in operational execution despite broader market challenges. Crest's model year 2026 lineup was well received at our recent dealer meeting. The refreshed portfolio includes multiple new products, most notably the rebranded Conquest line, which modernizes the offering while honoring Crest's history legacy. We also introduced the Conquest SE, a new model designed to expand our addressable market at a more accessible price point. Combined with the successful addition of several new distribution points in key markets across the U.S., Crest is well positioned to capitalize on growth opportunities as market conditions improve. Our new Balise offering, which now includes the third model in the series, the all-new Halo, launched within the quarter, is garnering excitement and delivering a new level of differentiated consumer experience. While we remain measured in our near-term expectations given broader market dynamics, our focus is on building a foundation of future growth. Our strategy for the Pontoon segment remains centered on delivering differentiated products that elevate the on-water experience, supporting and strengthening our dealer partners and continuing to deliver marked operational improvements. Across the company, our financial position remains strong, and our strategic growth initiatives are fully resourced. Our flexible operating model and consistent cash flow generation are enabling us to invest confidently throughout the cycle. We continue to advance differentiated innovation across our business, returning capital to shareholders through EPS-accretive share repurchases and remain disciplined in evaluating inorganic opportunities. With that, I'll turn it over to Scott to review the financials. Scott Kent: Thank you, Brad. We are pleased with this quarter's performance, delivering results above our expectations for both net sales and earnings due to the strong operating performance of both of our segments. Focusing on the top line, net sales for our fiscal first quarter were $69 million, up $3.6 million or 5.6% year-over-year. The increase was primarily driven by pricing, favorable auction sales, lower dealer incentives and in alignment with our planned production cadence for the first half of the year. Gross margin improved 420 basis points over prior year to 22.3%, a result of strong cost management and operating performance across both segments, pricing and favorable mix. Operating expenses were $11.6 million for the quarter, an increase of $0.8 million when compared to the prior year due to senior leadership transition costs and timing of compensation and commercial activities. We continue to tightly manage discretionary spend and operating expenses remain well controlled. Turning to the bottom line. Adjusted net income for the quarter was $4.5 million or $0.28 per diluted share. This compares to adjusted net income of $1.9 million or $0.12 per share in the prior year, calculated using an effective tax rate of 23% in fiscal '26 compared to 20% for the prior year period. We generated $6.7 million of adjusted EBITDA for the quarter compared to $3.8 million in the prior year. Adjusted EBITDA margin was 9.7% compared to 5.9% in fiscal '25, a 380-basis-point improvement over the prior-year period. We ended the quarter with $67.3 million in cash and short-term investments, no debt and ample liquidity. We expect to deliver positive free cash flow for the year. We believe our debt-free balance sheet remains one of the strongest in the industry and will continue to benefit us as we progress through fiscal '26. We repurchased over 100,000 shares totaling $2.3 million in Q1, reflecting our continued confidence in our long-term outlook. This brings cumulative repurchases to 3.2 million shares and $76.5 million since we started the share repurchase program, a 20% benefit to Q1's adjusted EPS. We continue to prioritize returning capital to shareholders and expect to deliver total repurchases above prior-year levels by the end of the fiscal year. As we look ahead, based on our fiscal Q1 performance and current expectations, we are raising the earnings and adjusted earnings per share ranges of our full year guidance. For fiscal '26, consolidated net sales are expected to be between $295 million and $310 million, with adjusted EBITDA now expected to be between $30 million and $35 million. Adjusted earnings per share between $1.18 and $1.43. We continue to expect capital expenditures to be approximately $9 million for the year. For the second quarter of fiscal '26, consolidated net sales are expected to be approximately $69 million, with adjusted EBITDA of approximately $5 million and adjusted earnings per share of approximately $0.16. Keep in mind, our lower wholesale shipments in the first half remain consistent with our initial production plans for the year as we prioritize the introduction and ramp of our new generation of X family products. In the second half of our fiscal year, we plan to ramp up production as we execute our new product initiatives and maintain readiness for seasonal demand. To that end, our wholesale and financial plan is disciplined and provides us with the ability to deliver year-over-year growth despite continued market uncertainty. I will now turn the call back to Brad for his closing remarks. Bradley Nelson: Thanks, Scott. Our team executed well during the quarter despite retail uncertainty. We delivered solid results supported by disciplined production planning, dealer engagement and the early success of our new product launches, including the X24 and the refreshed Conquest lineup. These innovations reinforce our commitment to quality, performance and delivering the best consumer experiences in our industry. From a capital allocation standpoint, we are in a strong position, fully funded for our strategic initiatives and continuing to return capital to shareholders through our share repurchase program. Our flexible operating model and highly variable cost structure remain key advantages, allowing us to adjust production as needed to support dealer success and align with retail demand. We are managing the business for the long term. And while near-term uncertainty persists, underlying trends continue to move in our favor. As the market stabilizes, we are well positioned to capitalize on any future upswing and drive sustainable growth across our brands and continued value creation for shareholders. Operator, you may now open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Craig Kennison with Baird. Craig Kennison: I wanted to ask about the current marine consumer. Any details you can shed on -- any light you can shed on the retail trends this quarter and into October? And then just I'm really looking for a sense of how the consumer is behaving in this market with rates moving lower, but still a lot of uncertainty in the year. Scott Kent: Yes. You mentioned rates. Obviously, rates, I think, is a positive thing for the industry as we see them go down. We'll obviously have the backdrop of some of the macroeconomic and job growth, et cetera, that we'll have to pay attention to. Early SSI for Q1 has obviously showed the industry a little bit down. I think we performed really well in Q1. Initial views are we are gaining share in that quarter. I think it's a reflection of all of the focus we've had on new product and as well as some of the dealer growth we've had and changes we've made there. So we still are in line for -- assuming that we'll be down in the 5% to 10% range for retail for the full year. So Q1 didn't change any of our opinions about where the full year comes in. And frankly, I just need to kind of perform generally speaking, how we perform in Q1 for the rest of the year to stay within that 5% to 10%. Bradley Nelson: Also, Craig, we're still doing pretty well with premium buyers out there, and we're seeing that in our portfolio demand. And we're just looking for that sustained retail momentum, and we're hearing the same thing from our dealer network. Craig Kennison: Yes. And regarding your dealer network and then your retail outlook, have the additions you've made to that network, will that result in maybe outperforming the industry? And is that embedded in the 5% to 10% decline you expect? Scott Kent: Yes. I would -- yes to all of that. Yes, we certainly believe that the dealer changes we made are helping us gain the share. It's that along with our new products and product innovations, and we do think that should continue. I mean, we have certainly had that as part of our strategy to make those changes, and I think we're finally starting to see some of the results. Bradley Nelson: Dealers remain cautiously optimistic. I don't think that comes as a surprise to anyone. Some of the macroeconomic conditions can dampen sentiment somewhat, but overall, cautiously optimistic remaining. We're not hearing a lot about canceled orders, and we've not seen significant dealer failures to this point. But again, until we see more sustained retail momentum, we expect some continued cautiousness. Operator: Our next question is from Eric Wold of Texas Capital Securities. Eric Wold: A couple of questions. I guess, first question, kind of following up on the last one. Can you just give us kind of update on your sense of kind of the cadence of how you expect kind of retail to progress through your fiscal year? And kind of on the kind of the rate cut question, I recall from the last call, you were not embedding any benefit from rate cuts in your guidance. Is that still the case? And is that kind of based on you kind of want to see the benefits of how those are flowing through to dealers and consumers before you kind of make that assumption or kind of maybe kind of update your thoughts on that? And then I have a follow-up. Scott Kent: On interest rates, we -- obviously, there's a benefit to both us and our dealer on lower interest rate costs from a financial perspective. And we only embed in our forecast and planning the rates that have already happened. So the rate cuts that have already occurred are certainly factored in, but not necessarily future rate cuts. And obviously, the longer in the year those go, the less impactful they'll be for our P&L anyway. Obviously, love that interest rates are coming down. I think it's a great thing for the industry. It's certainly a psychological, I think, benefit to our customers when interest rates go down. But do keep in mind, a lot of the rates that the consumers actually pay are really more based on longer-term rates and will probably take a little longer to come down than the short-term Fed rates. Bradley Nelson: And Eric, on the cadence of the year, we're pleased with the results from the fiscal first quarter, and Q1 is one of our tougher comps year-over-year, so even better. Scott mentioned projecting down, retail being down in the 5% to 10% range. We still see that. But the way our revenue ramps throughout the year, of course, we're in a low seasonal pattern now. And until boat shows, it's a little bit dark in terms of how we're going to sense the market. But in the second half of our fiscal year, we're confident in a nice ramp there, driven by the launch of our new X Series products, starting with the X24. We are in early low-rate production in that model. So far, dealer sentiment and hunger for that product is high, and we anticipate strong consumer demand, which will ramp into our second half, which is embedded into our outlook. Eric Wold: Got it. Appreciate it. And then kind of the last question. You mentioned you're kind of obviously looking at M&A opportunities out there while still pursuing the share repurchase program. Can you talk about your comfort level with leverage now that you've got obviously a clean balance sheet. How high would you be willing to go in the short term to pursue an acquisition? And then how quickly would you need to or kind of want to work that leverage back down? Or would you be willing to kind of keep a certain level of leverage kind of on the balance sheet kind of longer term? Bradley Nelson: Sure. Thanks for the question. We work really hard to keep a balance sheet that gives us flexibility. And of course, we're going to direct capital within our capital allocation framework and our strategy there for the highest returns for shareholders. So that, of course, includes share buyback. That includes maximizing results in our core business. And certainly, it includes evaluating with high scrutiny inorganic M&A. We do have flexibility to do that. We do have open processes there as we evaluate opportunities. In terms of the scale and the trigger points there, that's something we won't comment on, but we do maintain activity in that arena. Operator: At this time, we're not showing any further questions in the queue. [Operator Instructions] Okay. I'm showing no further questions in the queue. This now concludes our question-and-answer session. Thank you for your participation in today's conference call. This does conclude the program. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Cineplex Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. I will now hand the conference over to Rayhan Azmat. Please go ahead. Rayhan Azmat: Good morning, everyone, and thank you for joining us to discuss Cineplex's Third Quarter 2025 results. I'm Rayhan Azmat, Vice President, Investor Relations, Corporate Development and Financial Planning and Analysis. Joining me today are Ellis Jacob, our President and Chief Executive Officer; and Gord Nelson, our Chief Financial Officer. I remind you that certain statements being made are forward-looking and subject to various risks and uncertainties. Such forward-looking statements are based on management's beliefs and assumptions regarding the information currently available. Actual results may differ materially from those expressed in forward-looking statements. Information regarding factors that could cause results to vary can be found in the company's most recently filed annual information form and management discussion and analysis. Following today's remarks, we will close the call with our customary question-and-answer period. I will now turn the call over to Ellis Jacob. Ellis Jacob: Thank you, Rayhan, and good morning, everyone. I'm pleased to share our 2025 third quarter results with you today. After a softer start to the year, the second and third quarters delivered steady performances driven by a consistent supply of high-performing diverse titles with growing consumer demand for premium experiences. While there were strong contributions this quarter, attendance was down versus last year as last August had the record-breaking performance of Deadpool and Wolverine. We reported a third quarter box office per patron of $13.23, increasing by $0.04, supported by sustained demand for premium-priced products. Concession per patron was $9.65, down 2%, primarily due to the Labor Day weekend promotion, which included discounted offers on tickets and popcorn. Taking a closer look at content in Q3, there were standout performances across a variety of genres, including action, horror and anime. Franchise titles like Superman, The Fantastic Four: First Steps and The Conjuring: Last Rites delivered record-breaking results, all becoming the highest grossing titles within their franchise. Beyond franchises and sequels, the third quarter had a nice blend of original content that performed exceptionally well. Standout original horror film, Weapons exceeded expectations and topped the box office for 4 consecutive weeks in 2025. And F1, The Movie, continued its strong theatrical run into Q3, making it the biggest Apple original film ever. Our alternative content offering continues to demonstrate solid results, driving audience engagement and diversifying our programming slate in ways that resonate with evolving consumer preferences. Anime Call Classic Demon Slayer: Kimetsu no Yaiba Infinity Castle became the highest grossing foreign language film in history, both domestically and at Cineplex. Its massive fan following and deeply loyal global audience made it a strategic win for our alternative content portfolio, driven in large part by our ability to engage a varied and diverse audience. International cinema accounted for 13.6% of our box office in Q3, up from 9.3% last year, a testament to our growing ability to find and attract the right audiences for these films. Punjabi language comedy, Chal Mera Putt 4 delivered impressive results, becoming one of the highest grossing Punjabi films in Cineplex history with approximately 80% of its domestic box office attributable to our circuit. This reflects our industry-leading approach to film scheduling and our success in attracting high-value audience segments. International cinema also draws key retail demographics sought by advertisers, which is becoming a growing and unique offering for our cinema media team. In addition to the variety of content drawing moviegoers to theaters, consumers are also choosing a more immersive experience. We're using predictive analytics in our marketing efforts to match a moviegoer to a premium experience while also leveraging our loyalty program to reward moviegoers who choose an enhanced experience for the first time. Nearly 45% of our third quarter box office came from premium experiences, highlighted by the fact that our 3 highest grossing films in the quarter generated over 60% of their respective box office performance from these formats. We started the fourth quarter with Taylor Swift: The Official Release Party of a Showgirl, which energized the typically quieter period and reinforces the power of varied programming to bring audiences into theaters. Artists are increasingly turning to the theatrical experience as a way to unite fans and create shared cultural moments, positioning our theaters as dynamic venues for more than just movies. Our LBE business continues to play a part in our broader entertainment strategy, offering guests fun full social experiences in our venues nationwide. In Q3, LBE revenue reached a third quarter record of $34.6 million, up 11.3% year-over-year, driven by the addition of 3 new locations. Macroeconomic headwinds impacted food and beverage spending, resulting in same-store revenue declining 3.3% and same-store location margins delivering 21%. These locations are demonstrating resiliency in a more challenging environment while new venues are continuing to ramp up. Despite Q3 results being below our expectations, we remain optimistic as we enter our typically busier fourth quarter. With the heightened demand for groups and events activity in Q4, we are focused on building momentum and driving performance across our Palladium and the Rec Room locations. As we look at our cinema media business in the quarter, despite a softer advertising market, it continues to perform well. Cinema Media Q3 revenues increased by 6.1% to $19.2 million despite the decrease in attendance. This growth was primarily driven by an increase in Showtime revenues, which continues to be a key driver of advertiser engagement. Cinema media per patron reached $1.59, a 16.1% increase over the prior year, reflecting the diversity of the film slate during the quarter and strong sales despite a challenging media environment. Titles with broad appeal to key consumer demographics helped to track incremental advertising spend even in a relatively slower market. We also continue to leverage our expertise in data and analytics to optimize campaign performance and drive revenue growth. Last month, we announced we have entered into a definitive agreement to sell Cineplex Digital Media to Creative Realities, Inc. for gross cash proceeds of $70 million, subject to customary closing adjustments. This strategic transaction unlocks meaningful value for shareholders and immediately strengthens our balance sheet, providing capital for opportunistic share buybacks, debt reduction and general corporate purposes. Importantly, Cineplex Media will continue as CDN's exclusive advertising sales agent for its digital out-of-home networks across Canada, ensuring continuity for our partners and clients. CDM has grown into an industry-leading digital solutions company over the past 16 years, and this transaction reflects our commitment to optimizing our portfolio and delivering long-term value. Before I close, I'd like to provide a brief update on our appeal of the Competition Tribunal decision regarding our online booking fee. We filed our notice of appeal in 2023. At that time and with consent of the Competition Bureau, the Federal Court of Appeal granted us a stay of the administrative monetary penalty imposed against us. This stay will remain in effect until the Federal Court of Appeal has made a decision in our case. Our appeal was heard by the Federal Court of Appeal on October 8, 2025. We continue to believe that we complied with the letter and spirit of the law, and we anticipate a decision sometime in the first half of next year. Looking forward from April through September, box office revenues reached 110% of the same period in 2024. While August faced a tough year-over-year comparison due to the exceptional performance of Deadpool and Wolverine, July 2025 emerged as the second highest box office month since the pandemic, trailing only the Barbenheimer phenomenon. This signals positive momentum as we enter the fourth quarter. Looking ahead, the remainder of 2025 looks promising. While October is typically a slower month in the theatrical calendar, November and December are shaping up to be strong with a robust slate of highly anticipated titles, including Predator: Badlands, The Running Man, Wicked: For Good, the sequel to last year's Austin-nominated Wicked, which is already generating early buzz and fan anticipation with very strong presales. Zootopia 2, Five Nights at Freddy's 2, Avatar, Fire and Ash, the third chapter in James Cameron Epic Saga and The SpongeBob Movie: Search for SquarePants. We are also seeing increased interest in theatrical releases from streaming platforms with Netflix announcing that multiple titles will have an exclusive theatrical run before they hit their service. Some of these titles include K-pop Demon Hunters, Frankenstein, Jake Kelly and the latest from the Knives Out franchise Wake Up Dead Man and Knives Out Mystery. Cineplex Pictures is contributing to this momentum with the fourth quarter lineup that includes the Housemaid starring Sydney Sweeney and Amanda Seyfried and the third film in the Now You See Me franchise. Our diversified business model and commitment to delivering premium entertainment experiences and the strong film slate ahead positions us well for continued success into the fourth quarter. Before I close, I'd like to announce that Kevin Johnson, CEO of WPP Media Canada and President of WPP Canada has been appointed to the Board of Directors. Mr. Johnson is a recognized leader in the Canadian media and advertising industry and has more than 2 decades of experience driving growth and innovation with his deep expertise in marketing strategy and new business development. I will now turn the call over to Gord Nelson, our Chief Financial Officer, to walk you through the financials in more detail. Gord Nelson: Thank you, Ellis. I am pleased to present a condensed summary of the third quarter results for Cineplex Inc. For further reference, our financial statements and MD&A have been filed on SEDAR+ and are available on our Investor Relations website at cineplex.com. Our MD&A and earnings press release include a complete narrative on the operational results. So I'll focus on select highlights as well as providing commentary on liquidity, capital allocation priorities and our outlook. Before commenting on the financial results, I want to remind you that with the announced sale of CDM last month, its results are presented retroactively as discontinued operations. There is significant disclosure in our financial statements and MD&A related to this retroactive presentation and all amounts following will be from continuing operations unless otherwise stated. As Ellis mentioned, we were pleased to see continued consistency in box office performance during the third quarter, supported by a diverse mix of film content. This momentum reflects the enduring appeal of the theatrical experience and the strength of our premium offerings. Total revenue for the quarter was $348.9 million, an 8.7% decrease from the prior year. Adjusted EBITDA was $33.3 million compared to $47.9 million in Q3 2024. Our consolidated adjusted EBITDA margin was 9.6%, down from the 12.5% in the prior year. All of these metrics were impacted by the attendance decline as a result of the record-breaking performance of Deadpool and Wolverine in 2024. So let's take a closer look at our segments. Box office revenue in the Film Entertainment and Content segment was $159.5 million, down 8.8% from the prior year. Attendance for the quarter reached 12.1 million guests, were $0.5 million or 5% higher than Q2 2025. This represented a decline of 9.1% compared to Q3 2024, again, primarily impacted by the highest grossing R-rated film of all time, Deadpool and Wolverine, which drove exceptional results last year. Box office per patron or BPP, reached $13.23, supported by sustained demand for premium-priced products, which accounted for 44.7% of total box office. Concession per patron or CPP was $9.65, down 2% -- both the BPP and CPP metrics were impacted by a $5 promotional pricing offer during the Labor Day weekend on tickets and popcorn. While these programs drove incremental attendance and a positive net contribution over a typically quiet Labor Day weekend, the impact on BPP and CPP was approximately negative $0.32 and negative $0.12, respectively, as we did not have this program in 2024. So to reiterate, these programs drove incremental visitation and were a net positive contributor. The year-over-year BPP and CPP change for Q3 should not be read as an indicator of any future trends. During Q2, we saw our first quarter with CPP over $10, and we continue to see opportunity for growth in both these metrics. I also want to speak briefly about our other revenue line, which is comprised of many items attributable to our Film Entertainment and Content segment. During the quarter, other revenue was down approximately $7.9 million as compared to the prior year. The major contributors to this decrease include the following: at the end of 2024, we sold our online business, Cineplex Store. Other revenue included approximately $2.4 million related to this business in Q3 2024 and obviously, nil in 2025. Next, revenue related to our Cineplex Pictures business is based on their films released in any given quarter, and they typically have a limited number of films released in any given year. This quarter, revenue from this business was $1.5 million below the prior year. But looking back to Q2, as an example, revenue from this business was $1.5 million above the prior year. And as Ellis mentioned, we have a number of films being released in Q4 and would expect the revenue to be above 2024's level in Q4. For both the Cineplex Store business and Cineplex Pictures, these revenue declines are also offset by other operating expense reductions. And finally, breakage on our gift card and certificate programs was down approximately $3 million as compared to the prior year, primarily related to true-ups reflected in the prior year comparatives. These 3 items account for $6.9 million of the decrease. Segment adjusted EBITDA was $33.8 million with a margin of 11.4% compared to 14.7% in the prior year. The decline reflects lower attendance compared to the prior year. Importantly, through the end of Q3, Cineplex has exceeded prior year box office revenues of every month of 2025, except 2, reflecting a positive trend in both the consistency of film product and consumer demand for the theatrical experience. Cinema Media revenue for the quarter was $19.2 million, an increase of 6.1% compared to the prior year. Growth was driven primarily by increased demand for Showtime advertising. Our ability to deliver targeted impressions through premium content and audience analytics continues to differentiate our offerings in a competitive media landscape. Segment adjusted EBITDA was $15.2 million with a margin of 79.7%. As a reminder, the Media segment results now only include the results from the Cinema Media business and exclude the Cineplex Digital Media business. While the broader advertising market has been challenged this year, we are encouraged by our growth this quarter alongside longer-term interest from brands seeking high-impact audience-driven placements. Revenue in our location-based entertainment segment was $34.6 million, an increase of 11.3% compared to the prior year, driven by the addition of 3 new venues that opened in late 2024. Same-store revenue declined 3.3%, consistent with our full year expectations of a 3% to 5% decline as previously communicated. Given this revenue decline, same-store level EBITDA margin came in at 21%. Total portfolio store level EBITDA for the quarter was $5.8 million with a margin of 16.7%, down from the 24.4% in the prior year. The decline reflects the lower same-store revenue levels due to macroeconomic headwinds, consistent with the broader LBE landscape, alongside muted operating results from the 3 new build locations, which continue to optimize their operations. Looking ahead, we remain focused on optimizing performance across the portfolio and are encouraged by corporate event bookings heading into the traditionally strong fourth quarter. We have one remaining committed new location, which we expect to open in the first half of 2026. General and administrative expenses for the quarter were $20.2 million, representing a decline of approximately 2% from the prior year. Within this, LTIP costs totaled $2.7 million, reflecting a $1.4 million decrease from the prior year due to increased forfeitures associated with organizational changes. Subsequent to the quarter end, we announced the sale of Cineplex Digital Media for gross cash proceeds of $70 million, subject to customary closing adjustments. As mentioned previously, this reflects an approximate 10x multiple on 2025 estimated earnings and was highly accretive for us. Importantly, Cineplex Media will remain the exclusive advertising sales agent for all CDM operated digital out-of-home networks across Canada, ensuring continuity and value in our media business. We ended the quarter with $38.7 million in cash, a modest decrease from $42.1 million in Q2, reflecting seasonal working capital movements and capital expenditures. We continue to maintain full availability under our $100 million covenant-like credit facility with no drawings as of quarter end. Net cash capital expenditures for the quarter were $4.3 million, primarily allocated to maintenance and premium format upgrades. We continue to expect full year net CapEx to be in the range of $40 million to $50 million, consistent with prior guidance. Our capital allocation priorities remain disciplined and unchanged maintaining appropriate levels of maintenance capital expenditures, strengthening the balance sheet to achieve our target leverage range of 2.5 to 3x, making strategic investments to support long-term growth and providing shareholder returns over time. With respect to the CDM sales proceeds, we intend to allocate up to $18.5 million for opportunistic share repurchases under the recently extended NCIB, consistent with indenture limits and hold the remaining funds for potential debt repayment, pursuing additional buybacks or other corporate purposes. There was no activity under the NCIB during the quarter as we balanced our capital priorities and were restricted with the CDM transaction. With the proceeds from the upcoming sale, we are well positioned to act opportunistically in the quarters ahead. The past several months have demonstrated continued momentum in theatrical exhibition with box office revenues exceeding prior year levels in nearly every month in 2025. This trend reflects not only the strength and diversity of film content, but also the continued enthusiasm of audiences for the theatrical experience. The sale of CDM provides us with additional financial flexibility and our continued role as exclusive advertising agent for CDM's out-of-home networks ensures continuity in our media business. With a strong foundation, a clear strategy and a disciplined approach to capital, we are well positioned to deliver long-term value for our shareholders. We're excited about the path ahead and remain focused on executing our strategy. And with that, I'll turn things over to the conference operator for questions. Operator: [Operator Instructions]. Your first question comes from the line of Ryan Neal with TD Securities. Ryan Neal: This is Ryan in for Derek. So first, I'm just curious how you guys are expecting the 2026 slate to evolve. Do you think it's going to be sort of similar chunkier to 2025 or more balanced throughout the year? Ellis Jacob: 2026, we look upon it being a strong year, and there's a lot of distribution of product. We are excited because of Amazon who've committed to releasing close to a dozen movies. So overall, the big quarters are always the summer quarters and the December period. But I think you'll see it a bit more spread out than it was in 2025. Ryan Neal: Okay. Great. And given the strong slate next year in '26, has that translated into any increased conversations you've had with advertisers maybe looking to increase their cinema media spend? Ellis Jacob: Yes. And as the attendance goes up and as we know, when it comes to the advertisers, they are very focused on the awareness and the attention matrix. And to me, it's one of the few places left where you can basically get total attention for the audiences. So it will continue to get stronger and continue to grow. Gord Nelson: Yes. And Ryan, as we see it and we look at the landscape, when you look at the total media spend in Canada and you exclude digital spend, so all the sort of more traditional forms of advertising spending, cinema was up. So we were up year-over-year, where basically all other forms of advertising, the more traditional spend was down. So it's sort of evident of the kind of the compelling nature and what we provide to advertisers for a very effective campaign. Operator: [Operator Instructions]. There are no further -- apologies. We have a follow-up from Ryan Neal with TD. Ryan Neal: Yes. Just in terms of modeling and for modeling purposes, how do you think we should sort of record or think about depreciation moving forward following the sale? Gord Nelson: Yes. So depreciation -- so depreciation, really, I would say the latest quarter is the best indicator for going forward. We have restated the financial statements to include CDM as a discontinued operations. So the fourth quarter number would be the best indicator on a go-forward basis. Operator: [Operator Instructions]. There are no further questions at this time. I will now turn the call back to Ellis Jacob for closing remarks. Ellis Jacob: Thank you all again for joining us today. We look forward to sharing our fourth quarter results in early 2026 and hope to see you at the movies. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the DRI Healthcare Q3 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference over to Ali Hedayat. Please go ahead. Ali Hedayat: Thank you, operator, and good morning, everyone, and thank you for taking the time to join us today. With me are Navin Jacob, Chief Investment Officer; and Zaheed Mawani, Chief Financial Officer. I will begin the call by providing an overview of our operating highlights. Navin will then discuss our portfolio assets with an update on the market outlook and provide more insights on our recently announced acquisition of the Veligrotug and VRDN-003 royalties. Finally, Zaheed will discuss our key financial highlights before moving on to Q&A. We are pleased with our third quarter results, which reflect the continued strength and resilience of our portfolio, solid execution across our business and the early benefits of our transition to an internalized structure. The third quarter represented our first full quarter operating as an internalized company. I am pleased with the performance in the quarter as we delivered strong performance across all our key financial metrics. Our portfolio delivered double-digit cash receipt growth led by the Orserdu, Xolair and Rydapt franchises, partially offset by lower Omidria performance and the persisting headwinds from Vonjo. Given the continued underperformance of Vonjo relative to our forecast, we have taken the appropriate steps and have booked an impairment to reflect our new expectations for the asset's performance. We expect Vonjo to continue to grow off current levels, both in units and in revenue, but net pricing trends have impacted our forecast relative to our underwriting, which is reflected in our fair value adjustment. While this is disappointing to us, I want to highlight that the revenues to date for Vonjo plus our expected future receipts remain in excess of our original cost, a fact that speaks to our conservatism in underwriting and the intrinsically attractive risk characteristics of our asset class. In addition to strong cash receipt performance, we delivered solid operating margin performance with adjusted EBITDA of $36.7 million or 17% growth over the same period last year. When we embarked on the internalization process, we outlined our view that the management company costs that we were bringing on to the income statement would roughly offset the management fees at the current scale of the business and leave margins at the same level as they had been in the past. I'm happy to say we have demonstrated that in our first quarter as an internalized entity with adjusted EBITDA margins of 84%. With this achieved, the road to higher operating leverage as the business grows should be fairly evident. As we continue to optimize our internal platform, you should expect our cost to come down a bit further in the near-term, after which we will start reinvesting in growth to position the trust for long-term value creation, both on the top line and in our margin structure. The quarter also marked an exciting milestone with the approval of Ekterly on July 7, for which we have begun earning royalties on a 1-quarter lag. With the approval, Calvista exercised its option to receive a onetime $22 million payment, which increased our royalty rate on the first year of sales and also increases the sales-based milestone amount. Ekterly represents a meaningful long-duration asset for DRI with expected cash receipts extending through at least 2041. It's an excellent example of our ability to structure creative and mutually beneficial transactions that deliver long-term value for unitholders and our partners. Navin will provide more detail on our asset performance shortly. Turning now to our latest royalty transaction. On October 20, we were pleased to announce a transaction with Viridian Therapeutics to acquire synthetic royalty streams on a pair of very promising treatments for thyroid eye disease, Veligrotug and VRDN-003. We acquired the royalties for an upfront fee of $55 million, and our total investment is expected to be up to $300 million. Veligrotug has been granted a breakthrough therapy designation from the FDA, and we believe the product will be approved and come to market in the second half of next year. VRDN-003 has a pair of ongoing Phase III clinical trials for the same condition with the top line results expected in the first half of 2026. Together, these therapies represent meaningful progress in treating a disease that affects about 300,000 people in the United States and has a current market size of about $2 billion. I would like to take a moment to lay out the strategic and financial fundamentals of this deal and why it is a very attractive and accretive addition to our portfolio. First and foremost, we believe these therapies, once approved, will provide a meaningful improvement in the quality of life for those affected with the condition. This is core to our mission, and we are pleased to enter into a strategic partnership with Viridian to bring these innovative therapies to market. Second, this transaction illustrates our competitive niche and our ability to structure innovative deal structures to meet the bespoke needs of the counterparty while also providing us with a strong risk-adjusted return profile, meaningful upside optionality and attractive capital efficiency characteristics. Investing in pre-approval drugs inherently carries some level of risk due to the potential for clinical trial failure. While our extensive diligence leaves us with a high confidence in the approval of both therapies, we've approached this transaction with a structure that gives us a lot of downside protection around those approval risks and is in keeping with our overall enterprise risk framework. Navin will share more on the royalty tier structure shortly. In addition to closing the transaction, we took further steps to optimize our capital structure during the quarter. We continue to execute on our normal course issuer bid and acquired and canceled about 394,000 units, bringing our total for the first 9 months of the year to roughly 1.35 million units. In addition, we amended our credit lines to allow greater flexibility and to unlock the remaining gap between our effective capacity and the headline size of the overall facility. We are well-positioned to capitalize on the opportunity ahead of us and to continue to drive value for unitholders. I will now turn the call over to Navin Jacob, our Chief Investment Officer. Navin Jacob: Thank you, Ali. Regarding our existing portfolio performance, the table on Slide 7 shows the individual royalty receipts for the third quarter of 2025 compared to Q3 of last year and the previous quarter. Summarize, Orserdu continues to experience strong growth in the U.S. and internationally. Orserdu royalty receipts were up 51% year-over-year at $16.9 million versus $11.2 million in Q3 2024, driven by sales growth and the removal of certain deductions in Orserdu2, where we are now experiencing a higher royalty rate on a go-forward basis. We continue to monitor the ongoing clinical trials of Orserdu in early breast cancer indications as well as in the metastatic setting in combination with other therapies. These trials, if positive, could potentially expand Orserdu's label, which would represent upside to our acquisition forecast. Offsetting Orserdu strength were our Omidria royalty receipts, which decreased 13% from the previous year as a result of continued impact from the Merit-based Incentive Payment Systems program, or MIPS. Omidria royalties are received with a 60-day lag and thus Q3 2025 receipts reflect sales from May 2025 to July 2025. As mentioned previously, we are now observing stabilization in demand as physicians refine their usage patterns to avoid potential penalties tied to overutilization. We continue to anticipate a gradual recovery in Omidria sales heading into 2026. Turning to Vonjo. Royalty receipts for the quarter decreased 5% compared to the previous year due mainly to changes in U.S. reimbursement impacting gross to net adjustments with the IRA impact to Part D Medicare discounts that came into effect in 2025, as previously discussed. During the quarter, we recorded an impairment to our Vonjo royalty asset in the amount of $13.7 million, which was consistent with Sobi's decision to write down its Vonjo rights. Our impairment reflects negative competitive pressures in the U.S. myelofibrosis market and increased Part D discounts relating to the Inflation Reduction Act. Our adjustment aligns with Sobi's revised outlook. We remain encouraged by Sobi's ongoing life cycle management efforts, including the Phase III PACIFICA study expected to read out in 2027. Ekterly received approval in July. And while the first cash flows won't be received until the fourth quarter, leading indicators are suggesting a launch that is ahead of our acquisition forecast. It is important to note that by design, our portfolio of royalties is diversified across a broad range of therapeutic areas and mechanisms, which helps mitigate the impact of challenges in any single asset. This diversification supports the stability of our cash flows and enables us to continue deploying capital with limited exposure to any one investment. Turning to Slide 8 and our recent acquisition of a synthetic royalty in both Veligrotug and VRDN-003. We are thrilled with the opportunity to make this investment in the franchise and partner with the team at Viridian. Our deep research expertise supports our conviction that these products have the potential to be a treatment of choice for patients living with thyroid eye disease or TED. TED is a serious rare autoimmune disease that causes ocular inflammation and results in bulging of the eyes, redness, swelling, pain, double vision and can even be vision-threatening. In the United States, between 15,000 to 20,000 patients are newly diagnosed each year. In 2024, the TED market was approximately $2 billion with only a single approved product currently on the market. We expect the TED market to grow to over $3 billion and the Viridian products to capture a meaningful share of the total market. Once approved, Veligrotug will be the second approved biologic treatment for TED in the marketplace. It has the potential to improve patients' quality of life by requiring fewer doses and significantly less time for a full course of treatment. Veligrotug has met all primary and key secondary endpoints in its Phase III trials. This week, Viridian announced that it has submitted the biologic license application or BLA for Veligrotug to the FDA. Veligrotug has been granted FDA breakthrough therapy designation, which may accelerate the review process. Pending approval, we are optimistic for a potential U.S. launch in 2026. VRDN-003 is a monoclonal antibody very similar to Veligrotug, but with some modifications to its sequence that can provide novel convenience benefits such as self-administration via low-volume subcutaneous auto-injector. VRDN-003 is being studied in active and chronic TED in 2 Phase III trials, which are anticipated to read out top line results in the first half of 2026. Subject to positive outcomes and subsequent regulatory review, Viridian plans to submit a biologic license application by the end of 2026. Under the terms of the agreement, Viridian is entitled to receive up to $270 million of committed capital, which included an upfront payment of $55 million, followed by a series of stage gate milestone payments. In the near term, upon achievement of such conditional milestones, DRI would fund an additional $115 million. The balance of the funding, specifically $100 million is tied to longer-term milestones coupled with a $30 million funding opportunity to invest in future partnership opportunities as mutually agreed. We have a tiered royalty agreement, which applies equally on annual U.S. net sales of both Veligrotug and VRDN-003. We're entitled to 7.5% of net sales up to $600 million, an incremental 0.8% on sales above $600 million to $900 million and a further incremental 0.25% on sales above $900 million up to $2 billion. We have a soft cap at $2 billion, above which we did not receive any royalties. Following the first commercial sale of Veligrotug in the U.S., we will collect royalty receipts quarterly with a 1 quarter lag. During the third quarter of 2025, we tracked at least 6 royalty transactions totaling approximately $1.7 billion in aggregate value. In the same period, there were more than 40 equity financing completed by biopharma companies across the United States and Europe, raising roughly $6.6 billion. Year-to-date, we have tracked $5.5 billion in royalty transactions across more than 20 deals. This level of activity underscores the strength and breadth of the opportunity set in our market. There is no shortage of investment opportunities. If anything, the pipeline of royalty opportunities continues to expand. What constrains our activity is not deal flow, but our extremely disciplined investment framework, which protected us in a highly uncertain macroeconomic and policy environment in the first half of 2025. As we saw greater clarity in the second half of 2025, our investment framework allowed us to actively pursue the Viridian transaction. In summary, we deliberately pursue a small number of transactions each year, focusing on the ones that meet our highest standards in terms of asset quality and risk-adjusted return potential. We believe that maintaining the selectivity is essential to generating durable value for unitholders, managing portfolio risk and preserving capital for the most compelling opportunities when they arise. I will now turn the call over to our CFO, Zaheed Mawani. Unknown Executive: Thank you, Navin. We are pleased with our financial performance for the third quarter. We recorded $43.6 million in total cash receipts, a 12% increase over the same quarter last year. We recorded $48.7 million in total income, a 17% increase over the same period last year. Adjusted EBITDA was $36.7 million, a 17% increase year-over-year with our adjusted EBITDA margin for the quarter at 84%. Adjusted cash earnings per unit in the quarter were $0.55. For the quarter, we also declared cash distributions of $0.10 per unit. We continue to generate strong cash flow from our assets. Over the last 12 months ending September 30, 2025, we recorded royalty income of $192.7 million, plus the change in the fair value of financial royalty assets, the unrealized gain on marketable securities and other interest income for a total income of $198.4 million. After adjusting for receivables, the unrealized gain on marketable securities and the net change in the financial royalty asset, we achieved normalized total cash receipts of $190.4 million. Our operating expenses, management fees and performance fees totaled $34.7 million, net of performance fees payable, resulting in an adjusted EBITDA of $155.7 million and an adjusted EBITDA margin of 82%. We also generated adjusted cash earnings per unit of $2.25. As of September 30, we had $35.6 million of cash and cash equivalents. We also had $52.9 million of royalties receivable and $265.4 million of credit availability from our bank syndicate. Subsequent to the quarter end and as of October 17, 2025, the remaining credit available was $222 million, which reflects the $50 million drawn to partially fund the upfront payment of $55 million in connection with the Viridian transaction. Our capital capacity positions us well to fund the near-term potential Viridian milestone payments in addition to retaining financial flexibility to fund new deals. We continue to be prudent allocators of capital, and our focus remains on growing our portfolio through the attractive opportunities we are seeing in the market that Navin outlined earlier. In addition, we will continue to pursue all opportunistic capital deployment strategies to maximize value creation for unitholders. This includes continuing to allocate capital to repurchase and retire units through our share buyback program, further reinforcing our commitment to optimizing capital structure and returning value to unitholders. As of September 30, we acquired and canceled over 4.5 million units through our NCIB programs. We will continue to retain discretion in making purchases under the NCIB, if any, and in determining the timing, amount and acceptable price of such purchases subject at all times to applicable TSX and other regulatory requirements. All units purchased by DRI under the NCIB will be canceled. Finally, post-internalization, we will deliberately but thoughtfully seek opportunities to deliver cost efficiencies to contribute to our drive for profitable growth and are pacing well against our expectations on this front. With that, let's open the call for questions. Operator: Thank you so much for that. And before we get to the question-and-answer session, I'd like to remind everyone that we have a disclaimer for this call. Listeners are reminded that certain statements made in this earnings call presentation, including responses to questions, may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter, the Risk Factors section of the Annual Information Form and DRI Healthcare's other filings with Canadian securities regulators. DRI Healthcare does not undertake to update any forward-looking statements. Such statements may speak only as of the date made. Today's presentation also referenced non-GAAP measures. The definitions of these measures and reconciliations to measures recognized under IFRS are included in our earnings press release as well as in our MD&A for this quarter, both of which are available on our website and on SEDAR. Unless otherwise specified, all dollar amounts discussed today are in U.S. dollars. And again, I'll remind you that today, this conference is being recorded, Thursday, November 26, 2025. DRI's quarterly press results release and the slides of today's call will be available on the Investor page of the company's website at drihealthcare.com. Operator: [Operator Instructions] And our first question comes from Michael Freeman with Raymond James. Michael Freeman: Congrats on these results. My first question is on the Viridian transaction and the TED franchise. I wonder how sensitive your assumptions on these assets providing future cash flows to you, how sensitive your assumptions are on the approval of both assets. So, say, Veligrotug gets its approval and then we find that VRDN-003 does not for whatever reason. I wonder if you could just describe the sensitivity of your assumptions to that. Navin Jacob: Yes. It's Navin. So, thanks for the question, Michael. So, the way we structured this deal, which was very interesting for us and why we did it is that regardless of whether one asset or both assets are approved, it will be quite positive for unitholders. Quite frankly, if 003 is not approved, there is potential upside to our returns. And as such, that's why -- that was part of the reason why we felt compelled to construct this deal with Viridian. Ali Hedayat: And Michael, just to give a little bit more color on that, it's Ali. I think the right way to look at that is the whole package of assets are approved, we'll have a certain return on a bigger amount of dollars deployed. And if 003 is not approved, we'll arguably have a higher return, but on less dollars deployed. So, something to that effect. Michael Freeman: And I wonder if you could describe -- you described the landscape of currently approved assets to treat TED with one approved product. What could you tell us about the pipeline headed toward the TED landscape? Navin Jacob: Yes. Great question. In fact, there was -- so Amgen obviously has TEPEZZA on the market, which is roughly $2 billion -- annualizing at roughly $2 billion. They announced their results just last night or 2 days ago, continues to be annualizing at roughly $2 billion. They just launched Europe, which is interesting. But with regards to other mechanisms of action or other pipeline assets, Roche actually recently presented on their IL-6 a couple of days before we completed our transaction. That data looked subpar, substantially subpar to the anti-FGR1 receptor antagonist that we own in the form of the liquid target VRDN-003, both on the primary endpoint and on secondary endpoints, the IL-6 was significantly worse. In fact, one of the Phase III trials that Roche presented technically was -- did not hit statistical significance. So, there is -- there are some questions as to whether it will get approved. We actually had included quite a bit of market share for that asset in our forecast. So, let's see how it plays out. If it does not launch, there is potential upside to our acquisition forecast. With regards to other mechanisms, there is a fair amount of competition coming. There are anti-FcRn products that are coming, a couple of other IL-6s. However, given the weak data from Roche as well as some clinical -- some clinician investigators-initiated studies that were conducted for other IL-6. We're not particularly concerned about the IL-6 class. But despite that, we have included significant market share in our assumptions for future anti-IL-6s and/or FcRn assets. Operator: Your next question comes from Erin Kyle with CIBC. Erin Kyle: I wanted to first ask on Orserdu and maybe if you can just elaborate how we should be thinking about those sales into 2026 with Lilly competing drug receiving FDA approval in September? And then can you just remind us of, again, the competitive landscape there and if there are other competing drugs that will likely enter the market in the next year or so. I believe AstraZeneca and potentially Roche were also running trials for Orserdu. T Navin Jacob: Thanks very much for the question, Erin. So, with regards to Lilly's Imlunestrant, I think the brand name is Inluriyo, it is only approved as a monotherapy for second-line HER2-negative HR-positive ESR1 mutant breast cancer patients, which is the same indication as Orserdu. This is in line with our expectations, but there had been some expectations from others that it would get a broader label because of some of the combination studies that it ran. When that data came out, we felt strongly that it was unlikely to get that, and it did not. That's well within our expectations. From everything we see, Imlunestrant is at best similar to Orserdu. There is a small argument to be made that it is worse than Orserdu. Having said that, it is Lilly and they're a strong marketer. We're not gun shy on that fact. But with that said, Orserdu has a 2-year -- 2.5-year head start, which is very important in this landscape. And given the undifferentiated profile of Imlunestrant, we're not overly concerned with that. We have that built into our acquisition forecast. The other asset that was -- that has been positive is Roche's Giredestrant and other oral SERDs that will compete against Orserdu, and had data from the evERA trial. That Phase III trial was in combination with an older drug called Afinitor, so Giredestrant plus Afinitor versus the standard of care plus Afinitor. It's a very interesting study. Admittedly, the data did look good, and it did look good in both all-comers and ESR1 patients. With that said, when I say it looked good, it's the PFS data, it's not the OS data. But nonetheless, it looked good. However, Afinitor is a very old drug, and it's not really used frequently in second-line breast cancer, especially not for all comers because you have the CDK4/6 drugs that are used there. Furthermore, Orserdu is also testing this Afinitor combination. They're testing -- or rather Menarini is testing this combination of Orserdu plus Afinitor in a Phase II/III study. And so even if that combination starts taking over some market share, we do have some protection in the fact that very likely, the Orserdu plus Afinitor study will also be positive because on a monotherapy basis, we don't see much differentiation between Giredestrant and Orserdu. Erin Kyle: That's really helpful color there. And then I just wanted to ask on the portfolio weighting. So based on our math, after the Veligrotug transaction, we see our portfolio is now weighted a little over 20% to preapproval, which is, I think, a bit above the 15% weighting target we've discussed in the past. So just in terms of appetite for another preapproval deal or what that looks like, should we expect you to defer on any preapproval deals until Veligrotug is approved? Or how are you thinking about that? Ali Hedayat: Yes, Erin, I think the kind of adding in the gross value of Veligrotug, including all the milestones is probably the wrong way to do that weighting in the sense that the upfront payment is preapproval risk, but obviously, the larger payments are sequenced primarily on approval, right? So almost by definition, when we are making those larger payments, it's an approved drug, not a pre-approval drug. So, on our math, I would say the weighting of genuine preapproval risk right now is the $55 million upfront over our net book value of assets, and it's a sort of mid-single-digit number. And in terms of, I think, broader approach to preapproval, we've been doing a lot of work on a risk framework essentially to really categorize and systematize our approach to pre-approval. We are comfortable with exposure in that space, both because of the return characteristics because of the fact that it sort of anchors at higher returns, ultimately on the back-end approval deals, approved deals, if it's structured correctly, and it sort of gives us duration and various other favorable boost to the portfolio. I think we're well progressed on framing that, and I think we feel pretty good about the framework that we have in place. So, you should expect us to continue to be active in the space. I don't think it will go significantly above the parameters that we talked about before, but it's not something we're backing down from either. Operator: Your next question comes from Doug Miehm with RBC. Douglas Miehm: First question just has to do again with these -- I wouldn't call them new type of approach to the marketplace, but one where you're definitely going to have competitive advantage in terms of pre-approval products. And I guess my question is, in your conversations with investors and owners of the shares over the last 6 to 12 months since you've, let's say, started this approach, how would you say that those conversations have gone? Are people comfortable with these types of deals that you're putting in place? Are they starting to recognize that given the duration, the quality of the assets, they're going to be okay with this approach? I'm just trying to get in their heads. Ali Hedayat: Doug, thanks for the question. I think there's a couple of ways to look at the direction of travel of the business. I think broadly speaking, we have been focused on maintaining high risk-adjusted returns. And I think to use a very broad word, what has become evident over the past 18, 24 months is that if you're targeting a point on the graph of risk-adjusted returns, the complexity under that has gone up. And you can define complexity in many different ways. You can define it as the structure of the transaction. You can define it as more synthetics versus traditional. You can define it as pre-approval. But I would say the mix of all of those things is probably higher for a given return than it was 2 or 3 years ago. And I think that is really what we are communicating to our investors. So, we are not saying it's all sales out for solely preapproval or all sales out for solely synthetic or super complex deals. But in general, to sort of achieve the great risk-adjusted returns the team is achieving, we find that we're being much more competitive when we're taking on situations that are complex, that require a lot of structuring that may have aspects of preapproval that may be synthetic. And we've been very transparent about that. I think our investor base is receptive and understands that. But when you look for a reason as to why the business has a competitive niche in what is a sector where many of our competitors are larger and better resourced, I think it is exactly our ability to execute on transactions like the Viridian one, where we have structured it in a way that is extremely well thought out, where we have taken synthetic risk, where we have managed in, I think, a very clever way the pre-approval aspects of the transaction. So, we have to outrun other people by doing a better job of those things, and I feel we're demonstrating that we can do it. Y Douglas Miehm: I just have a follow-up housekeeping item here. So, when you think about the royalty receipts that were generated by Orserdu this quarter relative to the income that was recognized in Q2, it was lower. And I know there can -- and that sort of thing. But I am curious, are we starting to see evidence of the marketplace pointing towards other products now that they're approved? Or was this simply a case of true-ups from quarter-to-quarter? Y Ali Hedayat: Sorry, Doug, one thing to keep in mind here is obviously the dynamic between our cash receipts and our recognized revenues, right? And I think you will see the impact of some of the Orserdu outperformance in the coming quarter in the sense that we've basically accrued that revenue into the receivables, but not put it through the top line yet, which is our traditional accounting. So, on our adjusted cash receipts, adjusted EBITDA, you are not seeing the impact of the performance of the drug right now. Operator: Your next question comes from Tania Armstrong with Canaccord Genuity. Tania Gonsalves: Congrats on a nice quarter. A couple for me. First, on the Viridian assets. I'm wondering if you have any insight into how Viridian might price those in the U.S. I know one of the big pushbacks against TEPEZZA is pricing, which is why it hasn't performed well in other international markets. And maybe just following along that line of thinking, if you can also comment on why you decided to pursue just the U.S. rights and not other international markets. Navin Jacob: I think you answered the question yourself, Tania, it's a very thoughtful question. That's exactly why we only pursue the U.S. just given the pricing power that we have here in the U.S. and our expectation is that it's priced in line with TEPEZZA. Tania Gonsalves: And then on your total income CAGR, I know you've previously given out guidance for this. I think the last update was kind of a mid- to high single digit through 2030. With these new potential assets in your, I guess, however you're baking in that risk adjustment, where do you anticipate that CAGR being? Ali Hedayat: We're going to update that guidance in the fourth quarter. I would say it's probably a fair statement that we're feeling pretty good about that, just given layering on of these new assets and the performance of the back book. Tania Gonsalves: And then lastly, we did see a bit of a tax recovery come this quarter. I'm just wondering if we should be modeling any kind of tax impact going forward now that the internalization is complete. Unknown Executive: I'll take that one, Tania. No, I think at this point, just given it was relatively material over there, Tania, I wouldn't sort of guide you to start putting that into your forecast. But as we know more through the internalization, if there's going to be another sort of provision that we need to make more regularly, then we'll update you accordingly for your models. Operator: Your next question comes from Zachary Evershed with National Capital Bank. Zachary Evershed: Congrats on the quarter. So just another one on the internalization process here. With this being the first quarter, would you be able to give us an idea of what normalized OpEx might look like, including the cost reductions you mentioned at the top of the call? Ali Hedayat: Yes, Zach, I'd point you to a couple of things. So, I think it's Page 18 or 19 of the MD&A. We have a walk-through of what we would consider sort of one-offs related to the quarter. I think it sums up to about $1.1 million. So that's really comprised of some severance and a few other bits and pieces, a transitional service agreement with our prior manager to deal with some issues that they were handling for us, and we have, at this point, internalized into our operations as well as some tail end of costs related to the internalization advisory work itself. And all of that is going to sort of fall out sequentially, I would say we're also, as a result of our restructuring efforts running at a lower run rate of overhead costs in the fourth quarter, both in terms of our headcount and in terms of our office lease. Unfortunately, our beautiful office on the top floor of First Canadian is going to fall prey to our optimization efforts, and we're moving into a new space, which we're excited about, and it's going to be great for the team, but it's also much more economic. So, I think as we go into the fourth quarter, you'll see sort of all of that fall through to costs. What I do want to caution you on is that it's probably the low point of our cost in the sense that our intention is to reinvest some of that back into growth and hires on the investment team and elsewhere in the organization. So, I wouldn't sort of run rate where we're going to come out at the end of the fourth quarter or the first quarter as our cost base. But I do think it's going to be overall a better mix of margins than we originally anticipated when we internalized. And certainly, that will scale as the business scales. Zachary Evershed: That's really good color. And on your Vonjo outlook, you aligned with Sobi's. What kind of hit to pricing or change in competitive environment do you think there would need to be to generate an impairment on Vonjo1? Navin Jacob: Yes. We feel very strong. We feel pretty good about that Vonjo1 acquisition -- and the forecast associated with that. I can never say never about any asset, but we feel pretty confident about where that forecast stands right now for Vonjo1. Operator: Your next question comes from Justin Keywood with Stifel. Justin Keywood: Nice to see the results. Does the FDA move to accelerate biosimilar development impact your view of future opportunities? Or perhaps are there any points of risk within the portfolio, maybe not today, but in the medium or longer-term? Navin Jacob: No. Very frank, very simply, most of our terms expire when the key patent that we believe is the strongest. When that patent expires, most of our -- most terms expire at that standpoint -- at that time point. And so, we don't rely on sort of the post-LOE tail to fund any of our acquisitions. That is not part of our assumptions. Having said that, 1 or 2 assets may go past the LOE, and that's pure upside, but that's not a driver for us. Justin Keywood: And then on the Viridian transaction, there was subsequently a financial raise and the pro forma cash balance is very healthy for that company, almost at $900 million. So, this was subsequent to the royalty transaction. Does that impact the way you're looking at the outlook for the asset given the healthier cash balance to go to market? Navin Jacob: No, that's an excellent question. There's 2 positive impacts from that. Number one, well, 3, I could argue 3. The first is it just creates a much healthier company, right? Viridian as an entity is much healthier and that reduces any tail end risk that we may have or sort of second standard deviation, third standard deviation risk we have around the credit risk of Viridian. So now they're a super healthy company. That's number one. Number 2, from the perspective of having a well-funded launch, Viridian is extremely well funded now and ready to go. We know that team. They're an excellent management team, very good executors and aggressive. So, we're excited to see what they're able to do with the cash that they have raised, and we're happy for them. So that will allow for a well-funded launch. And then the third is, I think that -- and this is a little bit more intangible, but it is our royalty deal allowed them to conduct that equity deal. And so, to the extent that other companies see that, that's a good thing for our pipeline. Operator: There are no further questions at this time. I'll turn the call back over to Ali Hedayat. Ali Hedayat: Thank you, operator. Thank you all for joining us today, and thank you for -- to the DRI team for an enormous effort in bringing these great results to fruition here. We look forward to discussing our Q4 and full year results with you next March, and thank you for your continued commitment to DRI. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Nomad Foods Third Quarter of 2025 Conference Call. [Operator Instructions] Also, please be aware that today's call is being recorded. I would now like to turn the call over to your host, Jason English, Head of Investor Relations. Please go ahead. Jason English: Hello, and welcome to Nomad Foods Third Quarter 2025 Earnings question-and-answer session. We've posted the associated press release, prepared remarks and investor presentation on Nomad Foods website at noomadfoods.com. I hope you've all had a chance to review them. I'm Jason English, Head of Investor Relations and I'm joined by Stefan Descheemaeker, our CEO; Ruben Baldew, our CFO; and sir Martin E. Franklin, our Co-Founder and Co-Chairman. During this call, we'll make forward-looking statements about performance that are based on our view of the company's prospects, expectations and intentions at this time. Actual results may differ due to risks and uncertainties discussed in our press release, our filings with the SEC and in our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for and should not be read together with IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within the presentation represents adjusted figures. All adjusted figures have been adjusted primarily for, when applicable, share-based payment expenses and related employer payroll taxes, exceptional items, foreign currency translation charges, or gains. Unless otherwise noted, today's comments from here will refer to those adjusted numbers. With that, operator, let's open the line to questions. Operator: [Operator Instructions] Our first question here will come from Andrew Lazar with Barclays. Andrew Lazar: Welcome to Dominic. Maybe to start, one for you, Martin. Nomad discussed quite a bit at our September conference about medium-term goals, productivity and even said the company expected to deliver positive EBITDA growth in '26. Obviously, since then, Nomad has changed CEOs. And investors, I think, are rightfully asking whether those commitments sort of are still relevant, as oftentimes a new CEO appointment can signal the need for some form of a profit reset. So I guess my question is whether Nomad still stands by those recent comments at this stage. Stéfan Descheemaeker: Thank you for your question. I would say a few things. First of all, these commitments and if you like, internal commitments and goals are ones that are approved and studied by our entire Board, not just our CEO. We made a few commitments that I think are important that are consistent and what we've talked about already in our prepared remarks. Our EUR 200 million multiyear efficiency target, obviously, it still stands and is still actively being worked on, I think, quite successfully. The second, our medium-term goals to compound EBITDA in low single digits. Those goals continue to be in place and you have to excuse me. And third, accelerating free cash flow growth by delivering EBITDA and also -- and importantly, while reducing exceptional items. So I think all of these goals are in place. Obviously, when we bring in a new CEO, it's our CEO's prerogative to evaluate everything in fairness to Dominic, he's in the company for 3 days. He doesn't take over as CEO until the year-end, but we brought in Dominic because of his growth orientation and in the business. So I'm excited to have him and only see this as being a positive in terms of our metrics of performance. Andrew Lazar: All right. And then maybe as a follow-up, I know I think private label trends tends to lag branded price increases when Nomad's led with them. And sometimes that's led to some temporary market share weakness in the past. I guess how is Nomad balancing sort of the pricing that you're going to be taking next year with keeping share momentum? And maybe can your higher level of productivity help offset some of the inflation such that maybe more modest pricing can be enacted than otherwise that might have had to have been the case? Ruben Baldew: Yes. Thank you, Andrew. Let me take that question. So first, the kind of price lag and dynamics. If we look at the last 3 months, last 6 months, last 9 months, we've seen our price index versus competition and our competition is mainly private label slightly go down, so 2%, 3%, which is helpful in the context that we have to take pricing. I do have to say that's the average of an average. So of course, you always have to go a bit more in the detail per country and the specific product, but there has been a bit of catching up of private label. So that's one thing. I think more importantly, and you were already given half of the answer, is what are we seeing for next year. And we've been clear that the inflation we're seeing most of the pricing we're going to take in quarter 1, '26. Now a couple of things there. The inflation in total is not the same level of inflation. We said it before like 2 years ago. We're looking around cost price inflation of around single digit. And that's probably at this moment what we're looking at. Second point, also when you compare, and that's also probably the question behind your question on competitiveness and not going too aggressive in terms of pricing and losing share, our RGM capabilities versus 2, 3 years are in a better place, and we said it before, we will do this very surgically. Third point is what you alluded to. We've launched this cost competitiveness program, and Martin also mentioned of EUR 200 million, and we still passionately stand behind it. And by the way, this is not only a forward-looking program. You also heard in our remarks that in quarter 3, but also in quarter 2, we are delivering lower overheads, compensating for inflation even when you correct for the bonus release. So that cost competitiveness program, we will drive forward, and that will help for us to make the right trade-offs in how much should you price versus where actually do we have some offset in savings. We will also look at pricing, how that links with the renovation. So if we're looking at some renovation with different superiority, different product quality, we try to link that to pricing. So there's also new news both for retailers as well as consumers. And the last remark, just to be clear, I think it's just too early days to really see what the effects are. We are sending out the price as we speak. We have already sent to certain customers in certain countries. There's a bit of difference overall. And we can come back more on that when we release our quarter 4 results in the new year. Operator: And our next question will come from Scott Marks with Jefferies. Scott Marks: I just wanted to follow up on a question that Andrew asked about reiterating some of the medium-term targets. I think as we think about '26, with pricing coming in, Dominic taking over and some of the other dynamics that you've laid out. Just wondering how we should be thinking about '26 preliminarily in terms of maybe cadence of the year or when we should be thinking about some of these newer initiatives kind of that are kicking in. Stéfan Descheemaeker: Ruben, do you want me to take that? Ruben Baldew: Well, I can do. I build on -- let me just build on what Martin already said. So I think what Martin just said, and it's also your question, Scott, we launched a program strategy in September, which is not only the program of Stefan or of a CEO, it's something endorsed by the entire Board and our whole internal program. What Martin just said, look, we will passionately drive a EUR 200 million competitiveness program. We will see the benefits of cash flow. But it would also be unfair to make a lot of additional comments concretely on '26 with Dominic just coming into the role. But there is a clear focus on the top line recovery and some of the effects we're seeing this year will help also for next year. And overall, we expect results to be better next year than this year. How much that will be completely is more for when we announce our full year results in early next year. Scott Marks: Okay. Appreciate the answer. And then second question from me would be, you called out, obviously, some challenging dynamics in the U.K. with the expectation for some of those to stabilize. As we think towards the Q4 and low end into the guide, if results were to come in, let's say, below what you're anticipating or above what you're anticipating, maybe what would be the reasons for that? How should we be thinking about kind of like the risks and the potential upside risks as well? Ruben Baldew: Yes. So we've said today, we're confirming, reiterating the guidance, albeit at the low end of the guidance. The low end of the guidance on the top line implies a quarter 4 between minus 1.5% and minus 2%. And let's just take a step back. If we look at our sell-out, our sell-out year-to-date is plus 0.2% -- if you look at our sellout -- and by the way, that's plus 0.2% in a year where we're not happy. It's a year where we've seen the impact of the weather, both as well in our savory business, savory frozen food in Northwestern Europe as well, we're not so happy with the ice cream performance more in quarter 3. Despite that, our sellout is plus 0.2%. We also said part of that is transitory, and we see the market recovering and also our own sell-out numbers. If you look at the last 3 months, value is plus 0.5%. Our last 3 months volume growth is plus 0.7%. So our sellout is not where we want it to be, but it is positive and actually it's slightly improving. And that you have to see then to an implied guidance of minus 1.5%, minus 2%. Now, what gives us confidence that we're able to hit that. If you look at our difficulty plan, and you've also seen that some of it in the prepared remarks, we improved the product quality of our pizza business in the U.K. That's one. We started around September with our new campaign in the U.K. It's a bit too early to tell, but the first positive, the first signals are positive. We see distribution increases in Italy, but also in France. So we're now 1/3 of the quarter is now behind us. To your question, what needs to go well, wrong, what could change it. There's a bit where you could look at pricing. We've increased the prices of our chicken range in the U.K. because we said a lot of the pricing will be taken next year. It's a bit depending what competition will do, so that could go up or down a bit, but I think those are probably the big ones. Operator: And our next question will come from John Baumgartner with Mizuho. John Baumgartner: I'd like to stick with private label, but I'm curious more about the competitive aspects because market share has always been high, but it hasn't really increased in your categories for the better part of the decade prior to the cost of living crisis. And even now it seems to have sustained momentum even as price inflation has moderated. So I'm curious, what are you seeing from retailers? Is private label competing differently aside from price? Is the innovation more refined? Is the quality improving? Are there differences in non-price factors that you're seeing over the past 24, 36 months? Because it does seem that maybe there's an evolution here from store brands. Jason English: Thanks for the question, John. I think it's... When you think about this category, frozen food, it's a very good category. Category is growing nicely year after year. But definitely, private label is a big thing. And I think the learning from my 10 years is basically, you have to be -- I mean, every day, you have to be non-complacent. And you have to make sure that you have the right value equation, which is partly price and partly obviously, renovation, A&P and all the rest of it. And when you think about, let's say, this year in the U.K., for example, we lost it a bit. And I think exactly what Ruben mentioned in terms of renovation of fish fingers, in terms of renovation of pizza, in terms of some renovations of packaging in peas, for example, that's exactly what we're doing right now, which is to come back with the right value equation. That together obviously with to Ruben's point, which is pricing-wise, we are slightly better compared to where we were a few months ago, a few quarters ago. I think that's where we think we can do a better job. But definitely, to your point, it's not only pricing, it's the non-pricing peas. And that peas is when I compare '26 with '25, starting now actually, I mean, our program is much better. And let's face it, I think we can be hard with ourselves. I think '25, I don't think we've been good enough in terms of value equation. And that's why we're doing all these renovation in pizza, for example. And what we can see is in the U.K., well, even we've compare ourselves with premium, we are superior with the takeaways. We intend to do the same with the second part, which is thin. We intend to come with the renovation, a superior fish finger, which is a big thing for us. The fish finger is around 40% of our fish business. which is really big. And it's going to hit the market together with the sizing in Q1. So that's the kind of things we're doing. We're doing things. We're renovating the packaging in peas. Peas we have -- definitely, we have a superior product. But definitely, I don't think it can do better in terms of packaging. So it's -- philosophically, it's very simple. I think our job as branded people, we need to bring additional value compared to private label. And if we don't do that, obviously, we lost our relevance. And that's, I think the program for '25, '26, second half of '25 and definitely '26 is going to be much better than what we have. Operator: Our next question will come from John Tanwanteng with CJS Securities. Jonathan Tanwanteng: I was wondering if you could talk about the decision to keep the majority of your repricing to next year. You've previously demonstrated the ability to go to your retailers and make adjustments ahead of that annual negotiation. Maybe first, what drove that decision this year not to do so? And second, does that give you any incremental leverage or ability to make up a portion of that inflation that you ate in '25 as you talk to your retail next year and within, obviously, the context of end demand elasticity? Stéfan Descheemaeker: Well, let me contextualize a bit this decision. Put yourself back in 2022, where between March and June, every month, we had another $50 million additional COGS. And so whilst all the negotiations, the prenegotiations with all the retailers in Europe were behind us. Well, it was simple. It was force majeure, and we decided to reopen everything. And by the way, we not only reopened it once, but sometimes twice, even 3 times. And we did it, and it worked overall even in countries that are probably a bit more difficult like France and Germany. This time, it's very different. It's not force majeure. It's just an additional COGS that came in the middle of the year and the negotiations were behind us. And quite frankly, we took the commercial decision not to take it this year. I think it would have been a mistake to reopen the negotiation for something which was not considered as a hyperinflation. So that's why we did it. But definitely now, obviously, we need to take a more holistic approach for next year, how much we need to price, also combine also with the renovation program and the whole 360 approach. That's obviously for next year. Jonathan Tanwanteng: Okay. Great. And then second, could you talk a little bit more about some of the cost saving items over the next quarter and year and how they phase in and possibly net out between your cost restructure, the resumption of bonus accruals and then how that nets out with also the savings realizations as well? Ruben Baldew: Yes. So it links a bit to our overall $200 million program. That $200 million program, vast majority of that sits in supply chain, around $170 million invested in overheads. Overheads, you already see some savings coming through this year, which is really about making the organization simpler. We've done restructuring in some of our functional support areas. We're also looking at non-people costs where we also now started with the indirect procurement team and getting savings out of that one. So that's the first part. Then if you look at supply chain, we actually have already been delivering quite a bit. It's a step-up in supply chain from EUR 145 million to kind of EUR 180 million, EUR 175 million. The big step-up there is procurement. And it's not that in procurement, we're all tomorrow going to have huge consolidation in the fish supply base. But if we look at elements like ingredients, like packaging, some other ingredient base, we think we can further consolidate our supplier base, and that's the big driver of the savings there. The other part is in our factory footprint, we've lost volumes. So there, we're going to do 3 things. 22% of our volume still sits at CoCopac, and we think we can in-source that. So we'll do that. Secondly, we see some of our bigger factories where we have an opportunity to rightsize both cost and asset base. And thirdly, and again, it's not only promising. You've seen in our year-to-date results that we announced a closure in one of our smaller factories, which not only helps from a profit perspective, but also from a cash perspective. So we're doing that, and we will continue to do that. How we allocate that to the P&L is exactly linked to the question of Andrew, we're going to be surgical where we think that saving needs to be used not to price for the last piece of inflation and dampen some of the supply chain impact or we say, look, in areas like, for example, peas, where we know we have good quality, we're going to invest more in communication or like what Stefan mentioned, we see in fish thing is that we have an opportunity to improve quality, and we're going to use those savings to improve product quality. Operator: And our next question will come from Steve Powers with Deutsche Bank. Stephen Robert Powers: So you've spoken a little bit about this indirectly, but the implied fourth quarter guidance does contemplate an acceleration on a 2-year basis. And I guess you've spoken a little bit about where your confidence comes from that. But I guess just a little bit more clarity or a little bit more color as to how you think you're protected against downside just because the comparison is a bit more difficult. Ruben Baldew: I understand the question. Maybe it's also good to understand '24 comparator, and it's how far back do you want to go versus '23 comparator because we had the same discussion, I think, last year when we delivered a 3% growth in quarter 4, which is the background of your question. If you look at the year before, actually H1, the year before was minus 2%, and in H2, we had a minus 8%. So you also have to look at the comparator of the comparator, which sounds a bit as we're going back very many years. But in the end, it's looking at run rates, and we knew that the comparison run rate wasn't the strongest. The second point, which for me is a crucial point, we are not happy with this year. We know we had the destocking. We had not the greatest ice cream season, but our sellout is plus 0.2%. If you look at the last 3 months, it's a plus 0.5% growth in volume plus 0.7%. That is vis-a-vis a guidance implied of minus 1.5%, minus 2%. So there's some call it buffer, but some difference there. And secondly, if you then look at our activity program for the fourth quarter, there is a lot with additional distribution. There's a lot where we're stepping up quality in pizza. There is the mass brand in the U.K., U.K. specifically because we're not happy with the U.K. performance, and that's not something which will be solved in 4 to 12 weeks, but we see stabilization of shares, which also gives confidence. I think, yes, that's probably all the context and color I can give at this moment. Stephen Robert Powers: Perfect. Okay. That makes a ton of sense and it's confirming. I guess the other question I wanted to ask about was just around capital allocation priorities. I think your comments over the course of time, especially recently have been pretty consistent about how you plan to deploy capital, obviously, supporting the dividend and prioritizing share repurchases. It seemed like in the prepared remarks that there was even more emphasis on that capital allocation prioritization. And I do note that in the recent refinancing that you executed, I think there was an extra $150 million or so raised with that. So should we infer that, that will be deployed towards buybacks? Or are there other uses of that extra capital? Martin Ellis Franklin: I'll take this one. It's Martin. I don't know how many companies you're able to buy at 6.5 PE, but I think while we're in that ZIP code, we're going to be buying back our own stock. We see obviously a far higher intrinsic value of the company than the equity markets give us credit for. I think we said that in our prepared remarks. And obviously, the credit markets really do recognize the strength of the company and its cash flow. So we will be continuing to be bought by stock in the past. We're going to continue to buy back stock until we feel that the markets are fairly valuing the company. And obviously, the extra $150 million of cash that we have gives us more liquidity to do so. Operator: And with no remaining questions, I'd like to turn the call back over to Stefan Descheemaeker for... Stéfan Descheemaeker: Well, thank you all for joining us today. This has been my 40th earnings call with the company, and it will be my last. The past 10 years have been dynamic with the good, but also challenging times, but the company has persevered through it all, emerging from each challenge stronger than before. It held true during Brexit, Russia's invasion of Ukraine, the more recent period of hyperinflation, and it will be true again this year. This year was more challenging than we initially expected, but I'm already seeing the companies begin to bounce back. The foundation for improvement has been laid, and I'm excited to see Dominic build upon it as the next CEO. The best is still ahead for Nomad Foods. And with that, thank you, and goodbye.
Operator: Welcome to the Iovance Biotherapeutics Third Quarter and Year-to-Date 2025 Conference Call. My name is Daniel, and I will be your operator for today's call. [Operator Instructions] Please note that this conference call is being recorded. I will now turn the call over to Sara Pellegrino, Senior Vice President, Investor Relations and Corporate Communications at Iovance. Sara, you may begin. Sara Pellegrino: Thank you, operator. Good morning, and welcome to the Iovance webcast to discuss our business achievements, pipeline milestones and third quarter 2025 results. Members of our executive leadership team speaking on today's call include Dr. Fred Vogt, Interim CEO and President; Corleen Roche, Chief Financial Officer; Dan Kirby, Chief Commercial Officer; Dr. Igor Bilinsky, Chief Operating Officer; and Dr. Friedrich Finckenstein, Chief Medical Officer. During the question-and-answer session, we will also welcome Dr. Raj Puri and Mark Theoret from our Regulatory Affairs executive leadership team; and Dr. Brian Gastman, Executive Vice President of Translational Medicine and Research. This morning, we issued a press release that is available on our corporate website at iovance.com. I would like to remind everyone that this conference call will include forward-looking statements regarding Iovance's goals, business focus, business plans and transactions, revenue and revenue guidance, commercial activities, clinical trials and results, regulatory approvals and interactions, plans and strategies, research and preclinical activities, potential future applications of our technologies, manufacturing capabilities, regulatory feedback and guidance, payer interactions, restructuring, licenses and collaborations, cash position and expense guidance and future updates. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected during today's call. We undertake no obligation to publicly update any forward-looking statements. I will now like to turn the call over to Fred. Frederick Vogt: Thank you, Sara. I will start by sharing our continued progress to increase revenue and margins, advance our pipeline, reduce expenses and improve operational execution. Third quarter revenue grew 13% over the prior quarter and notably, gross margin improved and was 43% following the initial results of our strategic restructuring and cost optimization. More improvements are coming, including today's announcement of our centralization of manufacturing at our internal manufacturing facility. Our highest priority is to accelerate revenue growth to increase Amtagvi adoption across our network of academic and community authorized treatment centers or ATCs. We have expanded to include new academic ATCs and multiple community ATCs. Initial patients are being treated in the community and are generally earlier in their melanoma treatment journey. As we educate community oncologists across our ATCs, including the major academic centers, we are seeing earlier and more frequent patient referrals to drive growth. Real-world data showed response rates of 60% in the second-line treatment setting, which has provided a strong foundation to amplify our compelling story to the melanoma community for the power of TIL therapy in melanoma. We are on track to achieve our revenue guidance range of $250 million to $300 million for the full year 2025. With robust current demand, we expect a strong fourth quarter for Amtagvi alongside increasing Proleukin sales as we saw in late 2024. We continue to project Amtagvi peak sales of more than $1 billion in the U.S. and melanoma with larger additional opportunities in international markets and in future indications. For example, our interim clinical data in previously treated non-squamous non-small cell lung cancer showed a best-in-class -- apologies for technical difficulty here for one second. For the -- for example, our interim clinical data in previously treated non-squamous non-small lung cancer showed a best-in-class profile and unprecedented durability compared to standard of care in this population, including an objective response rate of 26% and a median duration of response not reached at more than 25 months of follow-up. There is a significant market opportunity in this lung cancer indication, which is about 7x greater than our current advanced melanoma indication. We expect to quickly complete enrollment in our LUN-202 registrational trial in 2026 with approximately 80 patients. This sample size will support an accelerated approval given the unmet need in non-small cell lung cancer, precedent of the Amtagvi approval in 73 melanoma patients and recent accelerated approvals based on 70 to 80 patients from defined non-small cell lung cancer population. The U.S. FDA previously provided positive feedback on our trial design, which aligns with FDA guidance for single-arm trials to support accelerated approvals for single agents in conditions with unmet medical need. We look forward to advancing toward a supplemental biologics license application in non-squamous non-small cell lung cancer and a potential launch in the second half of 2027. As we increase revenue and advance our pipeline, we are laser-focused on expense management and profitability. Following our third quarter reorganization, we are refining our operating plan to ensure we are appropriately investing in our commercial launch and high-value programs. Again, cost of sales and gross margin will improve significantly as we transition manufacturing to our internal facility in early 2026. During this call and our future quarterly updates, we will highlight our ongoing efforts toward further expense reductions and resource allocation. Corleen will now highlight our third quarter financials in further detail. Corleen Roche: Thanks, Fred. Good morning, everyone. During my first quarter as Chief Financial Officer, I want to emphasize our focus on driving the company towards sustained profitability. Our strategy included prioritizing top line growth, significantly improving margin and controlling costs with a disciplined approach. In the third quarter, our top line revenue remained strong. Total product revenue increased approximately 13% over the prior quarter to about $68 million. This included Amtagvi sales of approximately $58 million and global Proleukin revenue of nearly $10 million. As expected and consistent with prior quarters, overall gross to net was less than 2% and is expected to remain minimal. As Fred mentioned, we are on track to achieve our revenue guidance in the first full calendar year of Amtagvi sales. Next, I am pleased to highlight initial improvements in expenses and gross margin from the corporate restructuring and continued cost optimization initiatives implemented in the third quarter. We reduced total costs and expenses by approximately 10% over the prior quarter, excluding restructuring charges of approximately $5 million. We lowered cost of sales by approximately 21% over the prior quarter, resulting in improved gross margin of approximately 43%. Importantly, costs associated with patient drop-off and manufacturing results continue to decline as our revenue continues to grow. Gross margin will improve over time as we accrue benefits from our recent restructuring, implement additional cost savings initiatives and centralize manufacturing at our internal facility. Our cash position of approximately $307 million as of September 30 was bolstered by expense reductions and is expected to fund operations into the second quarter of 2027. I will now turn the call to Dan Kirby, our Chief Commercial Officer. Daniel Kirby: Thanks, Corleen. Our ultimate goal is to establish Amtagvi as the preferred option for all eligible patients. Patients deserve a onetime cell therapy with curative intent, and we are steadfast in delivering on that promise. My conversations with patients and caregivers remind us of the commitment to the Iovance mission, pioneering a new treatment paradigm for patients with solid tumor cancers. At the recent Melanoma Research Foundation Gala in Denver, Iovance received the Corporate Leadership Award in recognition of our efforts to advance care for melanoma patients. In my first 8 months at Iovance, we have made notable progress to lay the foundation for revenue growth by driving adoption across our ATCs. I'll highlight 3 key areas of focus. First, new ATCs are driving growth. In the third quarter, we added community ATCs alongside new high-volume academic ATCs. These new ATCs contributed to the highest number of patient starts with better capture in the third quarter. Our first community ATCs are beginning to treat patients with Amtagvi in this setting. New ATCs continue to come online and will drive further growth in the fourth quarter and beyond. Second, penetrating the community market is key to unlocking Amtagvi's tremendous potential as we increase the frequency, speed and efficiency of community referrals to ATCs. Health care professional and patient-focused campaigns are having a positive impact. Under our specialty pharmacy agreement with Biologics by McKesson, patients have broader access to Amtagvi. Hospitals now have flexibility to obtain Amtagvi directly or through a specialty pharmacy, giving their finance teams confidence to place more orders. Our third focus area is to drive earlier treatment with Amtagvi. This will increase penetration in our academic centers. We are educating medical oncologists on the advantages of cell treatment with Amtagvi when it has the greatest benefit. Earlier shifts in referral patterns are supported by our first real-world data that shows 60% of patients respond in the second-line setting. In addition, new initiatives in academic ATCs will address earlier tissue procurement for patient types, such as BRAF mutations, so they can be treated before their health status declines. Proleukin revenue also grew in the third quarter. Our main revenue channel for Proleukin is use with Amtagvi. Two U.S. wholesalers ordered in the third quarter, and all 3 wholesalers are expected to order significant volume in the fourth quarter. Proleukin will continue to grow through this main revenue channel in addition to the 2 other revenue channels for clinical and manufacturing use. Like other companies, we are evaluating our Proleukin pricing strategy outside of the United States based on the current environment, which may help drive future revenue growth. Amtagvi has the potential to reach more than 30,000 patients with advanced melanoma globally. Canada became the first new market to approve Amtagvi and approvals are pending in 3 additional markets. The United Kingdom and Australia in the first half of 2026 and Switzerland in early 2027. In the European Union, we are confident in our planned strategy. We are seeking scientific advice from the European Medicines Agency and intend to resubmit for regulatory approval shortly thereafter. Looking at the broader potential of lung cancer, our interim data demonstrates that onetime treatment with Lifileucel represents a true game changer and potential cure for patients with non-squamous advanced non-small cell lung cancer. With approximately 50,000 addressable patients in the U.S. alone, the market opportunity is about 7x larger than our current melanoma opportunity and represents potential U.S. peak sales of $10 billion. U.S. academic and community practices are enthusiastic about our lung cancer program. All of our current and future ATCs are expected to launch in non-small cell lung cancer. A significant portion of them already treat patients in our LUN-202 trial. The ATC footprint for lung cancer is essentially the same as our melanoma treatment network. ATCs are eager to leverage their current TIL infrastructure to quickly adopt Lifileucel in lung cancer upon approval. I will now pass the call to Igor. Igor Bilinsky: Thank you, Dan. I will provide a brief manufacturing update. We have streamlined our manufacturing organization while reducing costs and improving our manufacturing success rate as reflected in our third quarter gross margin. Importantly, we are finalizing an expansion at our internal facility, the Iovance Cell Therapy Center, or iCTC, that will enable us to support anticipated demand without the need for a contract manufacturer. All Amtagvi and clinical manufacturing will transition to iCTC in early 2026 to maximize capacity utilization, lower cost of sales and drive future gross margin growth. We will complete a key step in this facility expansion during routine annual maintenance around the end of this year. During this time, our contract manufacturer will provide continued access for patients to meet demand before we transition all manufacturing to iCTC. We will also boost capacity immediately prior and following the maintenance period to provide additional manufacturing slots for patients, allowing smooth supply through the next 2 quarters. Bringing all manufacturing internally will be an important milestone for us as a company. In addition to the cost benefits, we will maintain uninterrupted supply during routine maintenance in the future using internal capabilities. We can also scale up within the existing facility to support future markets globally and indications, including lung cancer. I will now pass the call to Friedrich. Friedrich Graf Finckenstein: Earlier this week, we reported interim data from our registrational IOV-LUN-202 clinical trial of Lifileucel. The data demonstrated a potentially best-in-class clinical profile and meaningful improvement over current standard of care in previously treated patients with non-squamous non-small cell lung cancer. Following onetime treatment with Lifileucel monotherapy, the objective response rate was an impressive 26%. An objective response was observed in 10 out of 39 patients, which included 2 complete responses. The disease control rate was 72%, showing a meaningful benefit for many patients with stable disease. Importantly, median duration of response was not reached at more than 25 months of follow-up, which is unprecedented durability for non-small cell lung cancer therapy in the post-chemo and immune checkpoint inhibitor setting. Standard of care docetaxel monotherapy recently showed an objective response rate of only 13% and a median duration of response of only 5.6 months without any complete responses in the same patient population. We are on track to quickly complete enrollment of approximately 80 patients in 2026. We have seen a strong increase in enrollment this year, driven by the positive reception of the efficacy data among trial investigators. In addition to the 39 patients in the data set, a double-digit number of patients are awaiting or have recently received TIL infusions and more patients have entered the trial as of today. We plan to share more data from LUN-202 at a medical meeting next year, including a meaningful number of additional patients and longer follow-up. We also look forward to advancing towards a supplemental biologic license application for Lifileucel in non-squamous non-small cell lung cancer and a potential launch in the second half of 2027. We also continue to make progress across the rest of our pipeline, which I am happy to discuss during the Q&A session. Thank you. Operator: [Operator Instructions] Our first question comes from Andrew Tsai with Jefferies. Lin Tsai: Nice execution this quarter. Great to see various dynamics improving. Good job. So my question this quarter is on the lung cancer data update that you had. It's interesting that the signal did not necessarily degrade compared to the prior data cut. In fact, maybe the efficacy on DOR seemed to get better. So for the remaining batch of patients, would you expect the third data cut to be also similar or even better than what we're seeing in this interim that you just had? Or would you expect some kind of efficacy degradation on a larger sample size? Frederick Vogt: Thanks, Andrew. I can start and then maybe Friedrich can chime in here. I don't -- we don't expect any degradation in the efficacy signal. We're getting very good within the LUN-202 trial at making sure our investigators identify the right patients for the trial. And we are obviously going to be cutting the data with longer and longer follow-ups. And with ongoing responders, as you can see in the swimmers plot from that data cut, we would expect to see that durability improve even beyond what we have today. I'll let Friedrich comment a little bit on the details of how we think that study is going to play out, but that's the big picture view. Friedrich Graf Finckenstein: Yes, I agree with Fred. Not much to add there. I think the study now has reached that phase where folks know what they're doing. They're familiar with the therapy. They know how to identify patients. We are able to communicate best practices. So I think this is all in a very stable place. What is noticeable is that we saw a true uptick in enrollment, which is really driven by the positive data that we were able to share with the investigators lately. That's also fairly typical. It's kind of an inflection point where then things just take off because folks see and believe in the therapy and things are working really well. Operator: Our next question comes from Yanan Zhu with Wells Fargo. Yanan Zhu: Congrats on the quarter. Just a quick one on the lung cancer. Can you talk about when did you touch base with FDA regarding the path and the regulatory path? And you did mention 80 patients. I wanted to hear your confidence that 80 patients is enough for the lung cancer filing. Then on Amtagvi in melanoma, can you talk about infusion growth into fourth quarter and into 2026, your confidence for inflection point in the patient infused? And lastly, sorry, if I may, on the improved gross margin, great to see that result. Can you comment on how much of it is coming from patient dropout and manufacturing success rate improvements versus how much is coming from cost reduction measures? Frederick Vogt: Thanks, Yanan. Why don't I start on the FDA point and then Raj Puri will jump in, and I'll ask Dan and Corleen to help out with the Amtagvi, the inflection point as well as the gross margin questions here. We've engaged heavily with FDA on the LUN-202 trial and gotten guidance from them, feedback on the trial design, patient population, CMC, things like the potency assay. We feel very comfortable that we're on the right track here. Obviously, engagement with FDA is a continuous process during the trial. As I'm sure investors know, we have to engage frequently and we do engage frequently. A lot of it doesn't get talked about. So we'll continue to do that on this trial, but we're very comfortable with where we stand right now in the trial design and what we need to do to get a supplemental BLA submitted on time. On the sample size for the patient -- for the 80 patients, we pointed out during a lot of our calls earlier this week as well as during our prepared remarks here that we think 80 patients will be sufficient based on the precedent of Amtagvi with 73 patients which led to the approvals on label in melanoma as well as a lot of recent FDA meeting the last couple of months, FDA approvals in non-small cell lung. So I'll let Raj and maybe Mark comment on that on what they've seen with the FDA and why they think that's reasonable. Raj Puri: In addition to what Fred said that we in continuous interaction with the FDA, we plan to apply for many different priority designations such as Fast Track designation, RMAT designation, et cetera. And as Fred mentioned that 80 patients also based on the 73 melanoma patients that we got Amtagvi approval on. And recently, Mark will elaborate further that the FDA has approved about 4 non-small cell lung cancer trials based on accelerated approval of patients list to 70 to 80 patients. Unknown Executive: I agree with what you had said, Raj. I think there's recent precedent for this number of patients in patients with non-small cell lung cancer and very high unmet medical needs with the response rate and particularly this unprecedented duration of response, we feel based on the precedent and the data thus far, patient data set would be sufficient and compelling. Frederick Vogt: All right. So on the inflection question and fourth quarter growth, obviously, we feel very confident having a strong fourth quarter, but I'll let Dan talk about some of the details there. Daniel Kirby: Thank you. And thanks, Fred, and thanks, Yanan, for the question. First, the answer is yes, we expect continued growth in the fourth quarter and beyond into 2026. The reasons behind that are -- I'm going to separate this from academic and community. In the academic setting, we've launched field efforts, including a disease awareness campaign in Q3 to educate medical oncologists for earlier referral into those centers. We're seeing some results from that right now that will continue moving forward. We also are launching in the academic setting initiatives to increase penetration, which would have to do with addressing certain patient types that we haven't been able to capture such as BRAF mutations I mentioned, where we have opportunities to get tissue earlier. So we do see growth in the academic setting. Moving to community. I mentioned that we're onboarding now and we've started to treat at the first community sites. We have several large ones that are coming on in this quarter that will drive significant growth in Q4 and beyond in 2026, and that also sets the table for... Corleen Roche: Gross margin, let me just focus you on 2 areas, and I think you mentioned them, one, which is patient drop-off and manufacturing results. So if you think about the dollars that are written off from out specs since the beginning of the year, they have decreased by 40%. They're about $9 million this quarter. And we are now seeing the initial benefit of the restructuring that we announced in Q3. So those are 2 key areas that are driving revenue improvement or margin improvement. Operator: Our next question comes from Salim Syed with Mizuho. Salim Syed: Congrats on the progress. I guess one for me on the guidance here. I know you're reiterating the guidance quarterly. And I guess, is there any scenario here in your mind where you're going to actually hit closer to the top end here? I'm just curious why at this point, 2 months left in the year, why we haven't narrowed it down the top end of the range to a lower number that seems more reasonable. Frederick Vogt: Yes, Salim, we reiterated our guidance range of $250 million to $300 million, which is a pretty narrow range to begin with. It's our first full calendar year on the market, as you know, and we're on track right now towards that guidance. Fourth quarter, as Dan was just mentioning a minute ago, we have a large influx of new ATCs. We've got Proleukin sales to contend with, which we think will be very strong in the quarter, especially based on fourth quarter last year. You can go back and look at those numbers. And we have got this ATC growth both in the community and in the academic setting. So I think at this point, we're just comfortable with the guide that we put out, $250 million to $300 million, and we'll be in that range, and that's what we're comfortable saying right now. Operator: Our next question comes from Tyler Van Buren with TD Cowen. Nicholas Lorusso: This is Nick on for Tyler. Just one for me. Can you let us know how many Amtagvi patients were treated this quarter? And then also, how will the CTC maintenance this quarter impact Amtagvi infusions and sales? Frederick Vogt: Yes. Nick, we're not going to -- we're not talking about infusions anymore. We're just going to use revenue going forward, as you can see from our press release. We think that's the ultimate story here, and we hope investors appreciate that we're focusing on the dollars, and that's what matters at the end of the day. On the iCTC maintenance, I'll pass it to Igor for that question. I think he had covered it in his prepared remarks, maybe you can highlight it again, Igor. Igor Bilinsky: Yes, of course. Thanks for the question, Nick. So as I mentioned, as part of the routine maintenance this year, we'll complete the expansion part of the facility that's important for centralizing manufacturing at iCTC and also kind of continue providing uninterrupted capacity from iCTC during future maintenance periods. And this year, we've learned from our experience in Q1 2025. So we made several improvements. We will boost manufacturing capacity immediately and prior to the iCTC maintenance that will provide additional manufacturing slots for patients, and that will allow essentially smooth supply through the next 2 quarters. Operator: Our next question comes from David Dai with UBS. Xiaochuan Dai: A couple of questions from me. So just on the ATC ramp, you're seeing early community initiatives in there. I'm just curious in terms of what are the timeline for the community activation to actually see patients treated. That's the first question. And the second question is just around the margin improvement. You said you're planning to have more margin improvement over the next few quarters. So I'm just curious what is sort of like the margin we should be expecting over the next quarters, essentially, one should be expecting the plateauing of the margin over time? Igor Bilinsky: So I'll take the ATC one first and look at the ramp for that. So you mentioned specifically community. Our first community centers are starting to treat now. Typically, with centers, they treat a few patients, they make sure the insurance goes through, they get comfortable with it and they start ramping patients after that. That is expected to continue with our community ones that are just starting to treat now. The newer ones coming on with the volume will start slow in -- with a few patients in there for it, but then will start to ramp up. The key with the community is that the referral patterns are already there to get those patients in earlier. So as we discuss with those larger entities opening them, we also have robust discussions regarding referral patterns and patients lining up. So we will see a ramp there a little faster than you'll see with the academics, but it should be coming over in the next quarter and 2, and then we'll get to full peak probably by mid next year. Corleen Roche: David, on the gross margin, yes, we mentioned that it will continue to improve. So that will be further benefit from the restructuring, but also a number of initiatives across operational efficiency in the manufacturing plant as well as cost savings initiatives to run the organization as efficiently as possible. Frederick Vogt: And just to finish off, we did announce one of those things today, David, by transitioning all manufacturing to internal as Igor and Corleen and others have discussed, we expect this to have additional margin improvements on the back of that. That's not something that's reflected in the 43% that we reported today. Operator: Our next question comes from Colleen Kusy with Baird. Colleen Hanley: Congrats on the progress. On the community ATCs that you're seeing come online, can you just speak to the capacity that you see at those centers versus what the capacity is that you're seeing at the academic centers? Frederick Vogt: Sure. So thank you very much, Colleen, for the question. The capacity with community centers, they are hospitals. They do have the bed space comparable to the academics. What we do see with them, though, is less of a clinical trial allocation and other competing priorities for those beds and more of a priority in the solid tumor space than we see in the academics for it because they do split beds in the academics with the hematology space, where the CAR-Ts are, et cetera. So we do see an opportunity to have a larger percent of their capacity in the community setting. Operator: And our final question comes from Reni Benjamin with Citizens. Reni Benjamin: I'm sorry, I jumped on the call a little late. So you may have answered this already, so just indulge me. I'd like to understand a little bit more about the global expansion that you highlighted. How do you envision these programs or the expansion without a partner? Should we really be -- should we be thinking about any sort of a meaningful contribution in terms of revenues going forward or at least in 2026? Or is this something that goes out much further? And just a follow-up question regarding both TILVANCE and the LUN-202 study. It seems like enrollment will slow at least from the 202 study. Can you just give us a better sense as to how enrollment is progressing in each of those studies? That would be great. Frederick Vogt: Yes, Ren. So first, on the global expansion, we're not thinking right now really about partnership. TIL technology and the science of delivering TILs to patients, the medicine behind it is complicated. We're not really sure there's a partner out there that would give us any kind of advantage. And we're always really cautious about asset dilution and giving anybody rights to anything that we do because we think that TILs are going to be extremely powerful in the future, and we would like to own all of that. That said, we may work with distributors in certain markets. We may work with people that can help enter markets for us. We tend to staff very light and lean in those markets while we wait for revenue to appear. In 2026, I don't expect a significant amount of revenue from those markets. However, we'll start to see that business grow. And then over time, I think it will become a major component of our business in the future. And since Dan heads those teams, I'll let him give some color and maybe just highlight the markets that we're going to go back into, include the U.K. and we're going to be entering for the first time in the U.K. and Australia and other places where there's a significant number of melanoma patients in need. Daniel Kirby: Sure. And so Reni, one of the things we've always said about our global expansion, if you look at the history of cell therapies globally, this has been more of a long-term strategy to produce revenue in 2027 and beyond, but you needed to get the filing and approvals in place because reimbursement does take a while in those regions, you want to make sure you do it in the proper sequence. So where we are right now with it, we are ramping up in Canada with our first ATC. We have pending approvals in the U.K. as well as Australia. We're in discussion right now in the U.K. about getting an NHS support on which ATCs will go up and running there. So we're getting the process in place as well as within Switzerland and then refiling in the EU. So this has been a long-term strategy with it and something that we will see, if you look at Kite, who did a great job with Yescarta globally, it took them several years from the approvals to get revenue in there. So we follow that model, knowing it would take 2027 would be our first year to have any appreciable revenues. Not saying we won't get any next year, but really appreciable revenues in 2027 from ex U.S. Frederick Vogt: And then on the enrollment question, I'll focus on LUN-202, Reni, because TILVANCE, we really haven't said anything publicly about the enrollment there beyond that it's going well, and we think that's on track right now. But on LUN-202, enrollment has really picked up lately. And if you heard on the calls earlier this week, we have double-digit patients right now waiting for infusions, and we have a lot of activity there. I'll let Friedrich comment in a second here, but we think we can easily hit the time line that we gave for the launch of Lifileucel in non-small cell lung in the second half of 2027 based on our current enrollment timings in the LUN-202 trial. Friedrich, do you want to add to that? Friedrich Graf Finckenstein: Yes. Just really quick, Reni. Since I don't know when you joined, I described that before earlier in the call. I think in the lung study, we've now reached this point where, number one, we have stability and familiarity of the investigators and the sites with the therapy. They know how to pick patients. And important, we have a data set that has the size and the quality and the data that are driving investigator engagement. They see the potential for this therapy, they see the benefit in the patients, and they now are enrolling at the speed of what is typical for a trial that has shown data like this. So I share Fred's confidence in us being on track here with our goals. Reni Benjamin: Got it. And just as a quick follow-up, maybe, Fred, to your comments about TILVANCE that enrollment is going well and things are on schedule. Can you just remind me when do you think ultimately enrollment would be complete or when you might be filing the BLA? Have you provided any of that guidance before? Frederick Vogt: Not yet. We're still pretty early in this trial here. This is a longer-term study. We do have the ability to read at an interim time point for ORR and seek an accelerated approval in first-line melanoma in the study. And that's not too far off. We have not guided anything publicly, and there's obviously a first 670-patient trial, at least 600 patients on the main population. That's tough to predict accurately right now. But we should be in touch pretty soon with some more updates on that as that starts to crystallize for us. Operator: This concludes the question-and-answer session. I would now like to turn it back to Fred Vogt for closing remarks. Frederick Vogt: Thank you again for joining the Iovance Biotherapeutics Third Quarter 2025 Conference Call. We look forward to providing future updates on our commercial launch and pipeline as well as our cost optimization initiatives to drive towards profitability. We are motivated by the stories we continue to hear about the patients who benefit from Iovance TIL cell therapies. I'm confident that Iovance will remain the global leader in innovating, developing and delivering current and future generations of TIL cell therapies for patients with cancer. As always, we are thankful to our patients, the health care and advocacy communities, our partners and our exceptional Iovance team. I would also like to thank our dedicated shareholders and covering analysts for their support. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the Shift4 Q3 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. On today's call, we have Taylor Lauber, CEO; and Christopher N. Cruz, CFO. It is now my pleasure to introduce your host, Tom McCrohan, Head of Investor Relations. Thank you, Tom. You may begin. Thomas McCrohan: Thank you, operator, and good morning, everyone, and welcome to Shift4's Third Quarter 2025 Earnings Conference Call. With me on the call today are Taylor Lauber, our CEO; and Chris Cruz, our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website, which can be found at investors.shift4.com. Today's call is also being simulcast on X Spaces, which can be accessed through our corporate X account at Shift4. Our quarterly shareholder letter, quarterly financial results and other materials related to our quarterly results have all been posted to our IR website. Our call and earnings materials today include forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as a result of certain risks, uncertainties and many important factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our corporate website. For any non-GAAP financial information discussed on this call, the related GAAP measures and reconciliations are available in today's quarterly shareholder letter. With that, let me turn the call over to Taylor. Taylor? David Lauber: Good morning, everyone. Thanks for joining the call. Starting with our quarterly performance, we delivered results in line with our Q3 guidance. Gross revenue less network fees were $589 million, and adjusted EBITDA was $292 million. Each of these was up 61% and 56%, respectively. When excluding the impact of Global Blue, gross revenue less network fees grew 19% year-over-year. You will find in our shareholder letter that we also highlight the organic growth of the business, that is to say excluding the impact of recent M&A. Chris will go into more detail here, but that growth was 18% year-over-year. Volumes were in line with our expectations at roughly $55 billion. Each of these growth scenarios can be compared with the medium-term guidance we set forth in our Investor Day in February, and we've also done so in our shareholder letter. You will note that the high teens sit on our hands case compares favorably with 19% delivered in this quarter, while the inclusion of Global Blue obviously brings things notably higher. Furthermore, we continue to find attractive capital allocation opportunities, which supports our most likely case of 30%-plus gross revenue less network fee growth over the medium term. Chris will walk you through our adjusted free cash flow, but while early, we're also feeling ahead of pace for our $1 billion target. Some notable puts and takes in the quarter. Our blended spreads on payment volume were stable at 62 basis points, and we expect them to remain so through the end of the year. Tax-free shopping had some tough comparables, particularly in Asia as a result of a particularly weak Japanese yen last summer. Sales in Store were negative 11% in Asia during Q3, but recovered throughout the quarter and were positive in October. Separately, in the U.S., the last 2 weeks of September and the subsequent weeks of October presented more same-store sales volatility than we've seen in prior periods. While not consistent across verticals, same-store sales have generally skewed negative to our expectations. To put a finer point on it, we saw same-store sales, whether that be restaurants or hospitality, range from positive 1% to negative 4% with meaningful volatility week to week. While not immune from the broader economy, our deliberate and balanced transformation over the past several years does mean we are more diversified and scale, both geographically and by industry than at any point in our history. We also continue to add lots of high-quality customers, as I mentioned above. And we continue to complement our growth with massive payments cross-sell funnel, which becomes increasingly attractive during times of economic uncertainty. The competitive landscape has been a topic of serious debate among investors throughout the last few months. While I can imagine it's tricky to aggregate all of the various data, we would like to reiterate that the competitive landscape from our perspective has been unchanged for quite some time. We are the #1 in hotels in the U.S., we are the #1 in stadiums, and we are the #2 in restaurants but with a large TAM and a clear differentiation in both our strategy and product focus. We are only just beginning to bring these products all over the world where there isn't a clear market leader for any of these verticals. Global Blue also puts us as an undisputed category leader in luxury retail global. And with regard to Global Blue, this is our first quarter since closing the transaction in early July. This business brings both an industry-leading product for luxury retail and also an extensive two-sided network consisting of the best luxury brands around the globe and the high net worth shoppers that frequent them. They are also deeply embedded in the commerce experience at the store, presenting natural synergies for payments. Sales in Store at Global Blue were 5% above the prior year, with Europe growing 13% and Asia being negative 11% for the reasons that I mentioned earlier. We're reasonably happy with these results considering the negative impact currency has played throughout the year. These results are also before any synergies from business combination. You will find the detailed summary of Global Blue's performance in our shareholder letter. And from an integration perspective, we are on track with previously discussed plants. Our 3-in-1 payment terminal for payments, currency conversion and VAT refund eligibility detection is in beta. We also highlighted several Australian hotel payment wins in our shareholder letter distributed this morning. Of note, all the hotels mentioned are owned by Accor, the largest hotel operator in Australia and New Zealand, and also a very large hotel operator globally. The Australian hotel wins represent an early proof point to our strategy to take our industry-leading products into new geographies and markets around the world is working. In Restaurants, we're proud to welcome Nobu, but also signed thousands of other restaurants this quarter across Canada, the U.K., Ireland and Germany, with our international production improving to over 1,300 merchants signed each month. In Hospitality, we won Hyatt Vacation Club and will power payments for their over 20 resort properties around the globe. In Sports and Entertainment, we signed the Cincinnati Bengals, Clemson University, North Carolina State, Rutgers University, and Syracuse University, that one was for you, Jordan. Lastly, we'd like to point out the opportunities that can seem unique, but are a function of the platform effect of constantly adding integrations relevant for our other customers. To that end, we signed Hertz and will power payments across 60 of Hertz' rental car locations. Our presence in nonprofits continues to grow as well, evidenced by the dozens of nonprofits attracted to our platform each quarter as well as the on and off-ramp services for many crypto and Stablecoin platforms such as Stellar and Plasma. As has been the case each quarter, these are just a few of what we've highlighted in our material, even a smaller fraction of what we've actually onboarded. We are delivering these impressive wins while relentlessly streamlining our operations. And in that regard, as many of you know, we take the leading part very seriously in our M&A and integration approach. We made multiple small divestitures, most notably acardo, which is a couponing business owned by Vectron, for $34 million. These sales remove noncore business lines and help keep our laser focus on revenue synergy opportunities. We also closed SmartPay this week. As previously mentioned, this provides us with an existing and proven distribution channel to sign restaurants, hotels and stadiums in Australia and New Zealand. By equipping a proven team with industry-leading products like we have, we can be highly confident in the success of their go-to-market. The combination of these 2 events are roughly neutral, meaning the divestitures and the acquisition of SmartPay and their contribution to the remainder of the year, but both were important operational milestones. Lastly, we agreed to acquire Bambora, otherwise known as Worldline North America. While I'm sure many of you would like to see us slow down, the opportunity presented by a $90 billion payment gateway was something we would not ignore. A core competency of our business and team is to constantly seek out interesting technologies, great customers and excellent talent. Those of you who know our track record of executing on gateway conversions and other synergies can appreciate why this makes so much sense. We expect that transaction to close in Q1 of '26 and are encouraged by our pipeline of opportunities. I wouldn't be able to discuss capital allocation without the notable dislocation in our own valuation despite the continued performance and numerous opportunities we see ahead. In short, our own equity is one of the more attractive opportunities we see. And with expanding cash flows and accelerated deleveraging, we simply can't ignore it. To that end, our Board has authorized the new $1 billion stock repurchase program, which is the largest in our history. We will be implementing a plan to purchase at what we view as highly attractive levels right away. And with that, I'll turn it over to Chris for his first earnings call. Welcome aboard. Christopher Cruz: Thank you, Taylor. We delivered another quarter of consistent results that set new third quarter records across all of our key performance indicators. Volume grew 26% year-over-year to $55 billion. Gross revenue less network fees grew 61% to $589 million. Adjusted EBITDA grew 56% to $292 million, and our adjusted free cash flow conversion was 48%, resulting in $141 million of adjusted free cash flow. Our Q3 adjusted EBITDA margins continued to deliver in line with our expectations of approximately 50% in spite of the continued expansion investments we are making to become the most diversified and scaled that the business has ever been in its history. Double-clicking on our revenue categories. Our Q3 blended net spreads remained stable at 62 basis points, and we continue to expect full year spreads to be stronger than the 60 basis points previously communicated. This stability extends across our verticals of Restaurants, Hospitality and Unified Commerce. Subscription and other revenue was $119 million in Q3, up 16% compared to the same period last year. The growth continues to come from our market-leading vertical software solutions. However, as solid as this growth continues to be, we remain focused on deleting the parts and deprecating legacy revenue streams from acquired companies in favor of what we believe to be higher quality of revenue. This dedication to strategy will continue to influence year-over-year growth rates. As Taylor mentioned in his remarks about the medium-term guidance update, Q3 organic growth for gross revenue less network fees was 18%. Organic year-over-year growth of 18% compares the performance of the base business by removing newly acquired revenue from both the Q3 2024 period and the Q3 2025 period. It's also worth noting that these disclosures related to updates about our medium-term guidance would have been done next quarter at year-end. But based on recent industry events, we wanted to be proactive about pulling forward these disclosures, including that of organic growth for you all. Since the third quarter of 2022, we have grown gross revenue less network fees by 3x, expanded adjusted EBITDA margins by 600 basis points and achieved the balanced transformation of becoming a more diversified and globally scaled provider of software integrated payments. Through continued execution on cross-sell value creation and our delete the parts approach, we expect to maintain disciplined focus on margins and benefit from the operating leverage in our business. An example of the Shift4 playbook at work is the deleting of legacy parts through divestitures. Additionally, and although early, we are encouraged by the potential of AI applications to enhance our operating leverage across operations and product development while enhancing our own ability to drive decisions informed by our large data assets. As it relates to Global Blue, we wanted to provide a more clear breakout this quarter given its new inclusion in results. Global Blue contributed $156 million to gross revenue less network fees and $68 million to EBITDA, which were in line with our overall expectations despite headwinds faced by the business in the Asia Pacific market. Additionally, the subcomponents of Global Blue, consisting of: one, tax-free shopping, acquiring and dynamic currency conversion will be reported within payments-based revenue, while the post-purchase solutions subcomponent will be reported in subscription and other. As you can appreciate, we expect these breakouts to be less relevant over time as we cross-sell products to customers and bring on customers using multiple products. Our adjusted free cash flow in the quarter was a record $141 million, which modestly exceeded our expectations given our third quarter, along with our first quarter, are the higher cash interest expense periods in the year. As you get to know me more, it should come as no surprise that I believe that the ultimate measure of business durability is compounding growth in free cash flow per share. So I'm particularly enthused by the progress of this metric, especially as a jumping off point towards our medium-term guidance goal of exiting 2027 with $1 billion of run rate adjusted free cash flow. GAAP net income for the third quarter was approximately $33 million, resulting in diluted EPS of $0.17 per share. Non-GAAP net income for the quarter was approximately $148 million, resulting in a non-GAAP EPS of $1.47 per share. Note that the latter EPS metric uses our non-GAAP share count of 100.7 million shares, which increases share count by 10 million shares to treat the mandatory convertible preferred on an as-converted basis. On debt capital structure, we are in the enviable position of being efficiently tranched with all debt trading above par, resulting in access to attractive cost of capital in multiple deep markets. As of Q3, our net leverage pro forma for the full year effect of Global Blue was 3.2x, with notable deleveraging achieved quarter-over-quarter that resulted in our newly issued term loan already stepping down by 25 basis points of cost. I will take this opportunity to make clear that our leverage guidance remains unchanged with a view that the business should not exceed 3.75x net leverage on a sustained basis. With the company's current share repurchase authorization coming up for expiration at year-end, the Board has authorized a new share repurchase program of $1 billion through year-end 2026. This authorization level is the largest in the company's history and comes at a time when we have ample liquidity and access to capital to execute upon it. As a reminder, our capital allocation framework judiciously assesses relative value across 4 areas: one, customer acquisition; two, product investment; three, acquisitions and investments; and four, share repurchases. As we evaluate how the current market backdrop compares to historical periods of share repurchase execution, we think it notable that valuation multiples at present would be comparable to the lowest we have executed repurchases in the past. Further, as stated before, the company is the most diversified and scaled it has ever been in history and is generating record results across all key performance metrics. At the same time, the business is delivering growing levels of adjusted free cash flow that continue to require reinvestment. Although we believe that any 1 of our 4 categories of capital allocation opportunities would generate accretive returns, it is hard for us to ignore the relative attractiveness of the trading level of our common shares on an absolute basis, but particularly on a growth-adjusted basis. As someone that has invested in this business multiple times over the past decade, I am eager to make immediate progress against this new $1 billion authorization to enhance long-term shareholder value. Now for guidance. For full year 2025, we are reaffirming guidance within a narrowed range. We now expect volume to range from $207 billion to $210 billion, representing 26% to 27% year-over-year growth. For gross revenue less network fees, we now expect the range to be $1.98 billion to $2.02 billion, representing 46% to 49% year-over-year growth. And for adjusted EBITDA, we now expect the range to be $970 million to $985 million, representing 43% to 45% year-over-year growth. We are affirming our adjusted free cash flow conversion expectation of plus 50%. Within this guidance, our view on Global Blue's contribution remains unchanged as the business does have a seasonally higher calendar third quarter versus its fourth quarter. Also, we wanted to point out that even though these are now narrower ranges to our prior guidance, there is an intentional shape to the relative ranges. The implied fourth quarter range in volume is approximately 5% from low to high, while the same range in gross revenue less network fees is slightly less, and in adjusted EBITDA, this range is 4%. The intent here is that we believe a wider range of outcomes is prudent based on the uncertainty we are observing in macro and industry conditions. While at the same time, for a metric like adjusted EBITDA, there is more in our control and demonstrates our commitment to execution. In summary, after taking into consideration an essentially neutral impact from the acquisition of SmartPay and the offsetting reduction from noncore divestitures, our full year 2025 guidance is reaffirmed within a narrowed range. One last item. In response to inquiries about gross revenue, recall that we do not formally guide this metric. However, we expect a gross revenue range of $4.09 billion to $4.15 billion for the full year. Before passing back to Taylor, I did want to take a moment to express my sincere gratitude to my CFO predecessor and now Board member, Nancy Disman, for the transition support, mentorship and fantastic finance foundation she has established. You will be missed by the team, but I'm certainly thankful to continue to have you on speed dial. With that, let me now turn the call back to Taylor. David Lauber: Thanks, Chris. Before we go to Q&A, some of you may have seen the exciting news that our Founder and Chairman, Jared, has been nominated to run NASA. Again, we're going to be updating you as things progress. But just to be clear, we don't expect really anything is going to change from our previously disclosed plans. He intends to remain the largest shareholder of the business. And so we wish him well, and we're really excited for the road ahead. With that, we're going to turn it over to Q&A. But Tom, I think you had a question we were going to address from X. Thomas McCrohan: Yes. So the question from X this quarter comes from [ Dor Barda ]. And his question is, where is the company's primary focus right now? Are you edged down on integrating and cross-selling into the $1 trillion acquisition funnel? Or are you simultaneously investing heavily in net new product development? David Lauber: Yes, it's a great question. And the answer to both of those is yes. So hopefully, you can sense the theme for this quarter is a reminder of what we always do, which is that we take our category-leading products and we find as many customers as possible to get those in the hands of in as capital efficient of a way as possible. And so whether that is leveraging capabilities like the sales force that SmartPay brings us into Australia, or the distribution network and existing customer base that Vectron gives us in Germany, taking our products into these new geographies with an embedded right to win like an established sales force or an existing customer base is always a significant priority for the business. And with that, operator, if you wouldn't mind opening the line up to Q&A. Operator: [Operator Instructions] Our first question comes from the line of Dan Dolev with Mizuho. Dan Dolev: Great results, Taylor, and congrats on the new CFO role. My question is for you, Taylor. What are the implications of Jared getting nominated to NASA? I think a lot of people are interested in that. And great results, again. David Lauber: Yes, sure. Thanks for the question. Good to hear from you. Well, first of all, it's great for the country. The ambition that we've seen inside our walls for 26 years really has always deserved a bigger stage. So I think it's a phenomenal thing for the country. Now with regard to the company specifically, it's likely to simplify our structure quite meaningfully. So if you recall from the ethics agreement that he executed back earlier in the year, he is not required to divest the stock, but he will be relinquishing the super votes associated with his shares. So it likely means to collapse down to a single share class, which I know a lot of investors will appreciate and simplifying our TRA structure. So I want to reiterate, he intends to remain the largest shareholder of the business. This is something he feels passionately about, but I think it will simplify our share structure when it's completed. Operator: Our next question comes from the line of Timothy Chiodo with UBS. Timothy Chiodo: Again, Chris, good to be working with you here. I want to hit 2 things. First one on Bambora, and then if you don't mind, a brief follow-up around Q4 end-to-end volumes. So on Bambora, let's hit that one first. So $90 billion of gateway opportunity. And I just think back to the time of the IPO and the gateway opportunity back then was $200 billion, and it seems so large. And here we go adding another $90 billion. So I was just hoping you could add a little bit more context around that $90 billion and what's in there in terms of verticals and how other parts of Shift4 and some of the learnings from prior gateway conversions might help to make this gateway conversion a very successful one. And then I'll follow up on the numbers after. David Lauber: Sounds great. I'll hit this one. And you hit the nail on the head, Tim, which is this is textbook Shift4. It is a good technology product with a really captive base of customers and $90-odd billion of volume. Now as also is the case, the volume varies from some of the other verticals we serve. There's some business services in there. There's a few different flavors. So it's probably inappropriate to take one gateway and apply it to the next and apply it to the next. But we feel really strongly that this asset, the sticky customers, many of which have been on it for 20-plus years, will benefit from a consolidated payment solution. This has not been a huge priority for that business for a period of time. On top of that, there's a lot of transparency in this one, which I think behooves us all given the skepticism around M&A in our industry. It is widely understood what Ingenico had paid for that business years ago and what we're paying for it now, which is significant fractions of that. It is clearly telegraphed by Worldline what the contribution of the business is, and then we get to take that and enact a bunch of revenue synergies. Now there are also some capabilities. It's like one of the larger ACH providers in the country. So there's some capabilities we're going to get from it as well and more talent, which we always need more of. So very textbook Shift4 and something we literally train ourselves to be on the lookout for opportunities like this all the time. Christopher Cruz: Yes. And one, thanks, Tim, for the congrats. But on Bambora, the other thing that I think is a really interesting way to frame the attractiveness of it is to look at how many of the capital allocation framework boxes it checks on its own. I mean in and of itself, you can think about the gateway volume potential as a large expansion in customer acquisition potential. You can look at the ACH EFT component as product and capabilities enhancement. And then, of course, in and of itself, I think it's a continued reflection of a disciplined approach to making acquisitions and investments. So that's just one other thing that I think is worth noting and is something I'm enthusiastic about with that transaction. Timothy Chiodo: Excellent. And the minor -- the numbers follow-up. So implied for Q4 in terms of the end-to-end volume, you mentioned a range there. But on an absolute dollar basis, it's roughly $57 billion to $60 billion. And just clarifying, there's roughly -- I think it's slightly less than $1 billion or so a quarter in there from Global Blue acquiring business, and then there's another -- something in that range, maybe slightly less than $1 billion as well from the couple of months of SmartPay. But when we add up those numbers on an absolute basis, is it reasonable for investors to think about taking that $57 billion to $60 billion, annualizing it or multiplying by 4, adding on some conversion, some new production, thinking about same-store sales and churn, but reasonable jumping off point to model out 2026 end-to-end volume expectations? Christopher Cruz: Yes. I think from the perspective of is it reflective of a jumping off point, putting aside kind of like minor nuances and seasonality that's changing a little bit in the business, I think it actually is a reasonable jumping off point reflective of kind of the run rate shape of the business. So I think you articulated it well. Operator: Our next question comes from the line of Jason Kupferberg with Wells Fargo. Jason Kupferberg: Thanks for all the new disclosures. And I wanted to just start on organic growth. I know you were 18% there in Q3, obviously, very consistent with the medium-term Investor Day target. But I think we were trending a bit above that in the first half of the year. Maybe you can clarify that. And then just give us a view on Q4 organic top line growth, just trying to piece together how the current year is coming together, because I know we've been targeting 20% plus from a full year perspective. Christopher Cruz: Thanks. So one thing I just wanted to clarify off the top, and hopefully, it didn't get lost in sort of the prepared remarks was that some of the disclosures really are as a result of an update to the medium-term guidance, which we would have realistically planned for the year-end. But we, given industry events, decided it was prudent to be proactive and pull some of these things forward. And so I just wanted to make sure I reiterated that point. Look, I think on the organic growth, the idea that we have a growth that's on a gross revenue less network fee basis in line with our -- I think the way we've articulated it in the past is the sit on our hands case would signal the consistency of the business. From that perspective, I think we're sort of in line with what we had guided to as far as that case and that medium-term guidance. David Lauber: Yes. And just with regard to the full year, I think, and Chris characterized this well in his remarks, there is caution. Our ranges give us an outcome of greater than 20% down to below that. And I think that's just prudent. The same-store sales environment has been quite volatile. And I don't mean that as persistently negative or anything else. Tried to characterize that in my prepared remarks as well. So yes, it's still within our guidance range, but we want to be prudent. We want to give, obviously, the in-quarter disclosure as well. Jason Kupferberg: Okay. No, that's helpful. And then just a follow-up on Global Blue. Those slides were really helpful also. I think you had the volumes up 5% in Q3. Just curious how that's been trending quarter-to-date, what you've assumed for Q4 there? And then anything you can tell us just in terms of what the year-over-year Global Blue growth was in GRLNF as well as adjusted EBITDA. I know you gave us, obviously, the Q3 '25 actuals. David Lauber: Yes, sure. So I'll start with the performance of the business has been strong despite volatility. So that's really encouraging. And Chris can keep you honest here, but the year-over-year growth of their revenue was about 19%. So a phenomenal business. I think we tried to point this out at the time of the acquisition. In terms of the Sales in Store, which is the tax-free shopping segment of their business, what you saw was a combination of reasonable strength in Europe. Now keep in mind, Europe generates more revenue per Sale in Store than Asia, but also a pretty significant headwind in Asia. So there were a confluence of factors back in the summer of '24 that made Chinese shopping in Japan particularly strong. And so comping that was going to be quite difficult, and that's why you have that negative. So the blend of 5 is something we're reasonably content with. Also keep in mind, and we tried to just kind of illustrate this. When the dollar depreciates and the Chinese currency depreciates, that is really hard on the business, because the shoppers spend less. And so while there's a little bit of translation benefit, it is not a positive for the business when the dollar depreciates. I wanted to clarify that point as well. So awesome business dealing with volatility in their end markets and dealing with it quite nicely and growing strong on a year-over-year basis before we enact any synergies, which is phenomenal. Operator: Our next question comes from the line of Darrin Peller with Wolfe Research. Darrin Peller: I know there were some headwinds in the quarter, whether it be the discussion you had around the currency dynamics in Global Blue or same-store sales you called out, or even some faster conversions of software, yet you came in roughly in line with your guide. And so maybe just help us understand what you saw that made up for that shortfall, and if those trends are sustainable going forward or outperformance trends? And then, Chris, first of all, congrats again. But when I think about guidance, there's been a few quarters of volatility around your guide. So just help us understand your philosophy to build up from a guide standpoint going forward, what we should think about from a conservatism, how you think about it that way versus being more in line, or anything else you can provide? David Lauber: Yes. So I'll start with that, and then Chris can hit the guidance philosophy. With regard to things that we were pleased with during the quarter, customer adds is something we're particularly pleased with. The pace of international adds is something we're particularly pleased with. So the shopping trends that I mentioned in reaction to Jason's call was something we were particularly leery of. Quite frankly, predicting where that would land was almost a fool's errand given how strong the success was of Chinese shopping in Japan back in the '24 period. But maybe just to balance it out, and I made this comment in my prepared remarks, growth in SiS in Asia has grown to positive again on a year-over-year basis in the most recent month of October. So things are going well on that front. It remains somewhat tricky to predict where travelers are going to shop, and there are significant countries and weightings to that. So we're going to continue to get better at that. But Chris, do you want to hit the... Christopher Cruz: Yes. Well, actually, I'll just add on to one point around that is, in some of the variables that we saw through the quarter that were changing, I think Taylor in his prepared remarks highlighted the note that if you were to look at some of the week-to-week trends that we were seeing within same-store sales in some of our verticals, you could end up seeing like a plus 1% to a minus 4%. And that kind of volatility was something that we were trying to react to throughout the quarter. You add to that the topic that we've now talked about a couple of times already around balancing out European strength for Global Blue Sales in Store in the tax-free segment, offset by what looked like a pretty tough headwind in Asia Pacific. And you just had a few moving parts that I think warranted caution going into that period. At the same time, the backdrop was one where certainly from a macro data, certainly from an industry data, from data points we were seeing throughout, it was enough to want to make sure that we were expressing caution. So a lot of data points to take in. At the same time, I think we have the most data we've ever had as far as being able to try to inform our decisions around it. So I think that's a positive. Maybe to the second part of your question, Darrin, one, thanks for the congrats. And two, so look, on guidance philosophy, it's a nuanced topic, I'm sure, and especially one that I think will need some evolution over time as I get more comfortable in the seat. The first thing I would say, though, is that from a philosophy standpoint, there really isn't an intent to change the underlying philosophies. I think the frameworks that we use, the way we inform it with data, the underlying approach to the most important drivers within the business, I mean those are things that I think are pretty foundational, not looking to make dramatic changes. I think as we look at this set of macro backdrop, it is just something that, from my perspective, we want to make sure that we're taking in all of the right data sets and that we're making the most informed decisions possible based on the recency of the information. But certainly something that I think will be an evolving topic. And so feel free to keep asking. Operator: Our next question comes from the line of Andrew Jeffrey with Truist Securities (sic) [ William Blair ]. Andrew Jeffrey: Well, so we'll update that. It's been William Blair for about 1.5 years. But Chris, welcome. Look forward to working with you. I want to say that my wife and I happily contributed to Global Blue's third quarter revenue growth. A question on the pace of processing conversion in that business. It's a big opportunity. I think you said somewhere around $550 billion. Can you just update us on your right to win, how you see payment processing cutover or conversion sort of playing out? And what you -- I guess, competitively, there's one sort of callout processor, I think, today for a lot of those Global Blue merchants. How do you sort of manage those relationships, recognizing that the VAT refund business is such a high-value product for merchants? David Lauber: Yes, sure. I'm going to actually cover this one. It's a great question. But I think it's really important to distinguish between the headline customers that everyone knows and the breadth of the Global Blue business. So certainly, in Downtown Paris, everyone knows the Louis Vuittons of the world. But the reality is you can just as easily go to a village on Lake Como in Italy and nearly every merchant is using Global Blue. And these are SMBs. So we see a breadth of conversion opportunity from SMB all the way up to the largest of the enterprises. And if history is a guide, the earliest success comes from all those assets. It is incredibly low friction to switch from an existing bank terminal into what from a product perspective is going to be pretty revolutionary, which is the terminal that they're used to, but it also does currency conversion and it automatically detects that the shopper is eligible. So to the extent you were traveling in Europe and you encountered a store where they didn't present you with the tax-free option, that's likely because the cashier just didn't know or didn't think to ask. And yet our technology is going to sort of prompt that just like it does in the largest enterprise environments that Global Blue has built so successfully. So from a competitive landscape, we see an opportunity to win business from a ton of local banks in that SMB spread. We can win it reasonably quickly. And then, again, history being a guide, enterprises take longer and take more time. Quite frankly, I think you're probably referencing Adyen. They're a phenomenal company. We admire them a lot, and they serve these enterprises quite well. We're an important piece to the commerce puzzle in that environment. So we want to make sure the technology works incredibly well for those customers. But the conversion opportunity goes far beyond the logos that you see. And if you think, what we're really good at is we're really good at getting that mom-and-pop store a much better technology solution that, quite frankly, is much stickier and harder to leave. And owning all these pieces, we can do that in a way that traditionally has only existed for the largest enterprises. Andrew Jeffrey: Okay. That's helpful. And just as a follow-up on SkyTab and sort of the growth in your software revenue, recognizing the divestiture of some legacy software. Can that accelerate? Do you expect that to accelerate? Sort of does it grow in concert with Global Blue volume conversion? Or how do we sort of dimensionalize the software contribution going forward? Christopher Cruz: Yes. This is Chris here. I think we've articulated this in the past as acknowledging that the idea that we have a North Star model that really emphasizes what we view as highest quality of revenue will come from payment processing. From that perspective, I think we are not shy about the statement that we will look to deprecate the legacy revenue streams, deprecate software revenue streams in favor of the higher quality of revenue. And so I think from that perspective, even though our Subscription and Other was an attractive growth, it grew nicely in the quarter for sure, it's an area that I think will be an area that will continue to be an impact on like adverse growth in the future. David Lauber: Yes. Just to pull it back to philosophy here, we prioritize payment volume as the primary source of monetization. We deliver a heck of a lot of technology to these merchants. Carefully weighing the fixed and variable costs that a merchant pays for our product is, I think, something we spend a lot of time on. Most of our competitors have significantly higher fixed costs, which really manifests themselves in that subscription and other revenue stream. So we tend to lean more towards payments even if the technology solution being delivered has a lot of software embedded into it. And to Chris' point, as a byproduct of this acquisition history, there is always some legacy revenue that we're deprecating. So I completely acknowledge this is probably one of the harder lines to model inside the business. But generally, anything we're doing is in pursuit of that payments revenue growth. Operator: Our next question comes from the line of Sanjay Sakhrani with KBW. Sanjay Sakhrani: Congrats, Chris. I guess the share buyback announcement and authorization was a pretty strong statement. Maybe Taylor and Chris, you guys can talk about sort of the cadence of how you expect to take advantage of it. I know you talked, Chris, a little bit about the leverage constraints and stuff. So maybe you could just speak to those as well. And I think it's the right thing to do given where the valuation is. So I would love some color on that. David Lauber: Yes. I'll start with this one. There's been times in our history where we weigh an attractive M&A pipeline against evaluation in our equity and it's a tough decision. In this case, and Chris will comment on our leverage profile, and that comes into this a little bit, but this one isn't a tough decision. So we are trading at levels that we were trading at in December of 2020, and yet there's 12x the EBITDA in the business and accelerating free cash flow and deleveraging at an accelerating pace as well. So the obvious thing to do here is to buy as much of our equity as we're going to be permitted to buy within reasonable price ranges. But to Chris' point, executing at current levels is consistent with the lowest price we've paid for our equity. And we've been pretty aggressive with buybacks. I think M&A kind of gets the headlines, but we've repurchased, I don't know, 12% to 15% of the company in the 5 years that we've been public. This presents an opportunity to do even more than that at the lowest multiples we've seen in the company's history. So incredibly excited to be able to deploy capital into such an obvious opportunity. Chris, do you want to hit the leverage? Christopher Cruz: Yes, sure. So I think I made reference to the fact that on sort of a pro forma LTM basis, we're at 3.2x net leverage. I think the perspective that we have around having ample cash on hand, we have ample liquidity. We are approaching $0.5 billion in adjusted free cash flow generation. So there's probably not been a period in history where the company has had sort of the, we'll call it, availability to capital, but also access to capital across the multiple deep markets. So you take that into consideration, you take into consideration that the free cash flow generated needs to get reinvested. And it's not to say -- and I hope this was clear, it's not to say that we don't think that there are attractive areas within all areas of our 4-part capital allocation framework, but right now, it is really hard to ignore the relative attractiveness of where we're trading today. David Lauber: Yes, that's a good point. These dollars are not coming at the expense of a missed product development opportunity or integration priority or, quite frankly, M&A opportunity, but there's more of them than I think many expected at this point, and the equity is certainly lower. So we have to act on it. Sanjay Sakhrani: Great. And just to follow up on some of the choppiness that you've seen in the Restaurant and Hotel verticals in the third quarter. Could you maybe just explain what you've seen thus far into the fourth quarter and if that's persisted. And I know, Chris, you kind of talked about weighing that as you provided your refreshed outlook. But just how we should think about that? Because like when we look at like cross-border volumes and such, I know it's sort of an overarching number, so it's not specific to your verticals or such, but like how should we think about that as we move through the rest of the year? Christopher Cruz: Yes. Look, I would love to be able to know with precision exactly what the rest of the year is ultimately going to look like. But from a recency data, again, we benefit from being able to see data in a near real-time manner. But from a recency data, here's a for example. I think coming towards the end of the quarter, we were actually starting to see what looked like stabilizing trends in Restaurants, and it created some encouraging signs off of a quarter that had seen some downward skewed negative volatility. But of late, we're starting to see a little bit of a softening again in some of those trends. That would be for example. Now happily, I just want to underscore, because it's an interesting contrast to what you had brought up this idea of cross-border, I think prior to us being as diversified as we are right now, that comment, the impact that cross-border is looking more positive, restaurant might have some softness, that would have been an irrelevant comment a couple of quarters ago. But now actually, from the diversification standpoint, I really think it's important not to lose sight of the fact that because of the positioning of the business, because of the balanced transformation that we've been able to achieve, we actually do have these puts and takes, these offsets. So I think in the grand scheme of things, we do have acknowledged uncertainty in certain areas, but actually some enthusiasm in some other areas. David Lauber: Yes. I would call you back to the revenue diversification that we highlighted in our shareholder letter. And I don't know if this is going to be helpful or further confusing you, but we see all the data points you do about United Airlines having their strongest weeks in their history and Chipotle, no one is buying the burritos. Like we see both of those. And we see them manifest in many ways inside of the cohorts inside of our business, which is Global Blue has got strong shopping and same-store sales in your average restaurant are bouncing week-to-week, but skewed towards that negative volatility. It's confusing, but quite frankly, the scale and diversification of our business is awesome at this point relative to our history. So for us, there are data points that help inform future investment and all these other things and help us, quite frankly, put chips where we think verticals are going to be the most successful over a period of time. But yes, that industry to industry volatility absolutely exists. We're getting both benefit and detriment from that. And this bifurcated consumer, I think, is a real thing. Operator: Our next question comes from the line of Adam Frisch with Evercore ISI. Adam Frisch: It's Adam Frisch. Chris, congrats on the role and great job getting out of the gate pretty hot here this morning. The organic number is really interesting, very welcomed as well. I think you said the number excluded the deals done in both of the third quarters. But is that to say that this quarter included contributions from deals completed in the quarters in between? So maybe just a little color here on the calculation would be great. And then I have a quick follow-up as well. Christopher Cruz: Thanks for the clarifier. Absolutely not. Yes. No, it's meant to be clean of acquisitions for the periods. Adam Frisch: So the 18% does not include any acquisition impact at all from the prior quarters or, I guess, from the prior 4 quarters? David Lauber: Yes. It's the best way to look at the base business, right, which is if you did not have M&A in either of the measurement periods, what would have happened in that base business is great. Adam Frisch: Okay. Okay. Cool. Welcome that very much. And then second, as a follow-up, assuming Jared gets confirmed, I'm getting a bunch of inbounds this morning from investors about whether his shares would create a liquidity event and how that would be handled. So I wanted to give you a chance to address that on this call before it takes on a life of its own potentially. David Lauber: Yes, yes. No, I completely appreciate that, and I addressed this right before the Q&A started. His ethics letter from the first go round is publicly available, not required to divest his shares, and doesn't intend to. He intends to remain the largest shareholder of the business. So we don't anticipate anything there. And in fact, I just want to say he does anticipate converting his shares from the super voting shares down to common. So I think the share class will likely collapse into a single share class and be much easier to understand from the investor standpoint, and quite frankly, open us up to pools of capital that don't invest in multi-share class companies today. So from the company standpoint, it's frustrating not to see them in the halls on a daily basis, but the corporate structure gets a lot cleaner. Christopher Cruz: Yes. And then just -- since we're on the topic, to reiterate a point that also Taylor brought up earlier was the idea that beyond the share class structure potentially changing and collapsing to simplified, you also have what in the last go around, we had talked about the concept that the tax structuring would also attempt to simplify to the ups. Adam Frisch: Great. Okay. Cool. And then just maybe one last one. The merchant conversion progress from prior acquisitions, any color there that you can provide? There were some disclosures in prior quarters, didn't say anything this quarter. So maybe just a little bit there on how you're progressing there from the acquired merchants? David Lauber: Yes, absolutely. Happy to provide color. And this isn't an intentful omission. It's the simple fact that our earnings shareholder letter was, I think, 190 megabytes when I tried to download the public version this morning. So the cross-sell is going quite well. I think that's probably best evidenced by simply the customer adds that I mentioned earlier in response to what I think was probably Darrin's question. So customer adds across the board, whether that be in Germany, whether it be in the U.K., whether it be in Canada, all of those are fueled in some way. buy an M&A asset, whether that's a small sales team or an embedded base of restaurant customers in Germany or Gateway Hotel customers in Canada. So the customer adds are really, really encouraging across the business. It's quite frankly, what helps ballast that same-store sales anxiety that we see in the core base of the business. So it's going well across all of them. This is muscle memory for our business. So if you recall, what happens when we acquire a company is all of the customers inside of that become part of a sales funnel that our team is chipping away at on a daily basis. So the fact that an acquisition occurred doesn't really mean much to the average business development professional inside of Shift4. It just means they've got a lot more customers in their call queue to execute against or in their campaign. So it's going well across the board, quite frankly. Operator: Our next question comes from the line of Will Nance with Goldman Sachs. William Nance: I wanted to follow up, I think, on Tim's earlier question on the volume and approach it a slightly different way. Just look at the kind of low 20s exit rate on volume with a little bit of inorganic contribution, it's kind of roughly in line with where the Street is expecting volume growth in 2026. So I was wondering if you could just talk about the puts and takes off of that run rate and just kind of what would lead you to kind of accelerate or decelerate into next year and just things that we should be keeping in mind as it relates to modeling out to 2026. Christopher Cruz: Yes, sure. Thanks, Will. I would say probably in line with a similar kind of commentary here, and maybe Taylor will have a slightly different nuance to it, but from my perspective, again, it's hard for me to ignore, sort of from a recency standpoint, data that we're seeing. And so I'd say there's a degree of balanced caution within some of the verticals, offset by, obviously, what we're seeing is the diversification effect where we are also seeing some recent strength in other areas like in cross-border, like in luxury. So I would say that the exit rate, which is kind of where Tim's question was at, that annualizes kind of the fourth quarter. I think that's a fine starting point, but we gave the ranges on volume really from a '25 standpoint for a region. And I think that, that range, again, the intentionality of the shape of that range, where the volume range is the widest relative to something more in our control like an adjusted EBITDA, that range is widest because of wanting to acknowledge that there's a complex macro backdrop. David Lauber: Yes. If I had to barbell the 2 items, probably most front and center is we say this volatility of same-store sales is quite real, like it looks bad 1 week and it looks okay the next. It's very confusing, and you want to be cautious about what that could look like over a sustained period of time. Maybe on the other end of the barbell, you've got Global Blue, which is really contributing nothing of substance to that payments growth rate and a massive customer base, lots of geographies, et cetera. So those are kind of -- that's a cylinder that's not firing of any consequence yet and yet will be significantly in 2026. William Nance: Got it. Appreciate that. And that was going to be my second question. Just on some of these logo wins, you had the earlier question, I get it's early and some of the ones on the page are kind of more enterprise in nature, but wondering if you could just speak to the sales process that led to some of these wins. And Taylor, I know you've been doing a lot of traveling over the past couple of months. As you spend time with the Global Blue team, how are you thinking about evolving the go-to-market so that when we see some of the wins on these pages, I'm thinking back to when you put the Hospitality wins and we'd see something indicating it was a gateway conversion. Like how do we think -- how are you thinking about potentially starting to work payments into the selling process of some of these new wins, maybe not some of the logos that we're seeing on the page, but into some of the more SMB sales? David Lauber: Yes. It's an awesome question, and I'll sort of contrast the 2 businesses for you, because this is exactly what we're spending a ton of time on right now. Global Blue is a phenomenal business focused on the highest end of the enterprise, solving the most complex problems and never losing a single customer in that process. They serve the enterprise customer exceptionally well, and they're kind of built to do that. Where if I were to criticize and say there's areas that we can bring strength to the table, it's the service of the really long tail of SMB customers that don't have the best coverage model. They adopt Global Blue because it's a product that the consumer demands and has a lot of traction, and they want to be able to provide that to the shoppers. So it's the village of Bellagio, where it's in Lake Como, right, where there's tons of little mom-and-pop merchants that offer the service, too. So the skill set we're trying to bring to the organization is how do you efficiently serve thousands of SMBs across Europe and the rest of the world. And I think we've got unique skills to bring to that. The skills they are bringing to us are how do you serve the largest and most demanding enterprises within luxury retail. So we're both learning a lot from each other in that regard. And then the only thing I would say is -- and by the way, we're having conversations with every flavor of customer, right? So we're having conversations with SMBs. Those are quick. It's, "Yes, this sounds great. I'll do it." And then we're having conversations with their largest enterprise customers, and they're saying, "Hey, can you help us with this unique problem we have today?" So I'm really encouraged across the board. But the laws of physics are simply those big customers take longer to get those conversations done than the small customers. So I think that's going to be the bulk of the focus. Christopher Cruz: Yes. And I'll add that when you start to look at that customer stratification, it's at a unit economic level, very logical that if you are providing a TFS product to the longer tail of SMBs, the gross profit and revenue density isn't necessarily there to provide the technology and quality of service that you would want if you add to the equation the cross-sell of services that now turn the gross profits and the unit economic model into one that looks a lot more like the SMB that we serve. It makes a ton of sense to be providing all of the service levels, all the support, really starting to elevate the significance of that SMB customer within that segment or within that business is exactly like the benefits of the cross-sell. David Lauber: Yes. And sorry to belabor the answer. I think it's really important, though, where we're going to have to spend a lot of time with you all and the Street is what's the volume pull-through of this. Because to be clear, I think the enterprise customers offer the highest volume opportunity at the lowest spread, but these SMB customers are the inverse of that. And we are quite content with the volume growth that looks lower and a spread that's stable to growing, because that's a fast win cycle. To be clear, all of it is an opportunity, but I think volume growth relative to net revenue growth is something that has undulated inside the business as we skew from time to time more towards enterprise, more towards SMB, et cetera. So that's where we're going to owe you the updates, but my prediction is early success in SMB, and what's going to feed the funnel 2, 3, 5 years from now, it's going to be that enterprise base. Operator: [Operator Instructions] Our last question comes from the line of Dominic Ball with Rothschild. Dominic Ball: Great to hear about Global Blue. On competition, we've seen some turbulence with one of your legacy acquirer peers. Does this present an opportunity to accelerate share gains in the U.S.? And on the enterprise side, we've seen Oracle Payments extend their offering powered by Adyen, but it doesn't seem like it's going to be exclusive going forward. So how do you view that development? And could this open up further partnership opportunities with MICROS? David Lauber: Yes. Awesome question, and congrats on the call, by the way. I think you were the long one. In terms of competition in the United States, I really do want to foot stop this point from my prepared remarks. It's relatively unchanged for our lines of business, which is in Restaurants, we tend to focus on table service. This is not where you see the Clovers and the Squares of the world. We do see Toast. And I know Toast has got wider ambitions to do far more than just table service. But in our kind of slice of the world that is Restaurants in the United States, competition is relatively unchanged. Toast is a great company. We're winning and growing quite nicely in that regard. And we don't see significant pressure from others. Quite frankly, any, let's say, industry chaos tends to be helpful to the extent that big companies are struggling. It will help us, by the way, just as much on the enterprise sale as it will on the SMB sale to have a company that's sort of struggling to redefine its image. Now to go to your point with regard to Oracle, I think they've always had this ambition to try to deliver a simplistic product to their customer base that embeds software payments, et cetera. That's very, very hard to do with the products they serve. And so much -- take yourself out of a point-of-sale system that they sell and put yourself into any other software, it's very enterprise grade and requires a lot of pieces. And this is where Shift4 has found unique success. It's taking what is an otherwise very complicated solution to implement that merchants are dependent on and stitch together all the parts to get it done and do it in a way that feels like an SMB experience, where our team comes in, connects all the dots regardless of the complexity. Again, Yankee Stadium is probably a good example of trying to make an SMB experience delivered in some of the most complex environments. So we don't see really any issue. We partner with Oracle constantly in the Hotel vertical as we have to, to support them. We also activate a lot of restaurants. And we'll be there to the extent any customer needs the help. Thomas McCrohan: Operator? Operator: Thank you. At this time, I'd like to pass the call back to management for any closing remarks. David Lauber: Yes. Thanks to everyone for dialing in this morning and also for the great questions. I look forward to catching up with you all individually as the weeks and quarter progresses. Christopher Cruz: Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.