AMD achieves record revenue of $9.2 billion in Q3 2025, fueled by 36% growth in data center and AI segments, with strong fourth quarter outlook.

OPERATOR - (00:00:00)

Greetings and welcome to the AMD third quarter 2025 conference call. @ this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press Star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce to you Matt Ramsey, VP Financial Strategy and Investor Relations. Thank you Matt. You may begin. Thank you and welcome to AMD's third quarter 2025 financial results conference Call. By now you should have had the opportunity to review a copy of our earnings press release and the accompanying slides. If you have not had the opportunity to review these materials, they can be found on the Investor relations page of AMD.com we will refer primarily to non GAAP financial measures during today's call. The full non GAAP to GAAP reconciliations are available in today's press release and the slides posted on our website. Participants in today's conference call are Dr. Lisa Su, our chair and CEO, and Jean Hu, our Executive Vice President, CFO and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin the call, I would like to note that Dr. Lisa Su, along with members of AMD's executive team will present our Long Term Financial Strategy at our Financial Analyst Day next Tuesday, November 11th in New York. Dr. Lisa Su will present at the UBS Global Technology and AI Conference on Wednesday, December 3rd. And finally, Jean Hu will present at the 23rd Annual Barclays Global Technology Conference on Wednesday, December 10th. Today's discussion contains forward looking statements based on our current beliefs, assumptions and expectations speak only as of today and as such involve risks and uncertainties that could cause results to differ materially from our current expectations. Please refer to the cautionary statement in our press release for more information on these factors that could cause actual results to differ materially. And with that I will hand the call over to Lisa.

Lisa Su - (00:02:11)

Thank you Matt and good afternoon to all those listening. Today we delivered an outstanding quarter with record revenue and profitability reflecting broad based across our data center, AI server and PC businesses, revenue grew 36% year over year to 9.2 billion, net income rose 31% and free cash flow more than tripled. Led by record EPYC, Ryzen and Instinct Processor sales, our record third quarter performance marks a clear step up in our growth trajectory as the combination of our expanding compute franchise and rapidly scaling data center AI business drive significant revenue and earnings growth. Turning to our segments, Data center Segment revenue increased 22% year over year to a record 4.3 billion, led by the ramp of our Instinct, MI350 series GPUs and server share gains. Server CPU revenue reached an all time high as adoption of 5th gen Epyc turn processors accelerated rapidly, accounting for nearly half of overall EPYC revenue in the quarter. Sales of our prior generation EPYC processors were also very robust in the quarter reflecting their strong competitive positioning across a wide range of workloads. In Cloud we had record sales as Hyperscalers expanded EPYC CPU deployments to power both their own first party services and public Cloud offerings. Hyperscalers launched more than 160 epic powered instances in the quarter, including new turn. offerings from Google, Microsoft Azure, Alibaba and. Others that deliver unmatched performance and price performance across a wide range of workloads. There are now more than 1,350 public Epyc Cloud instances available globally, a nearly 50% increase from a year ago. Adoption of in the cloud by large businesses more than tripled year over year as our on prem share gains are driving increased demand from enterprise customers for AMD cloud instances to support hybrid compute. We expect cloud demand to remain very strong as Hyperscalers are significantly increasing their general purpose compute capacity as they scale their AI workloads. Many customers are now planning substantially larger CPU buildouts over the coming quarters to support increased demand from AI serving as a powerful new catalyst for our server business. Turning to enterprise adoption, EPIC Server sell through increased sharply year over year and sequentially reflecting accelerating enterprise adoption. More than 175th gen EPYC platforms are in market from HPE, Dell, Lenovo, Supermicro and others. Our broadest portfolio to date with solutions optimized for virtually every enterprise workload. We closed large new wins in the quarter with leading Fortune 500 technology, telecom, financial services, retail streaming, social and automotive companies as we expand our footprint across major verticals. The performance and Total Cost of Ownership (TCO) advantages of our EPIC portfolio combined with our increased go to market investments and the expanded breadth of offerings from the leading server and solutions providers position us well to for continued enterprise share gains. Looking ahead, we remain on track to launch our next generation 2 nanometer Venice processors in 2026. Venice Silicon is in the labs and performing very well, delivering substantial gains in performance, efficiency and compute density. Customer pull and engagement for Venice are the strongest we have seen, reflecting our competitive positioning and the growing demand for more data center computer multiple cloud OEM partners have already brought their first Venice platforms online, setting the stage for broad. Solution availability and cloud deployments at launch. Turning to data center AI. Our Instinct GPU business continues to accelerate. Revenue grew year over year driven by the sharp ramp of MI350 series GPU sales and broader MI300 series deployments. Multiple MI350 series deployments are underway with large cloud and AI providers, with additional large scale rollouts on track to ramp. Over the coming quarters. Oracle became the first Hyperscaler to publicly offer MI355X instances, delivering significantly higher performance for real time inference and multimodal training workloads on OCI's Zetascale, SuperCluster, Neo Cloud providers. Crusoe, DigitalOcean, Tensorwave, Vultr and others also began ramping availability of their MI350 series public cloud offerings in the quarter. MI300 series GPU deployments with AI developers also broadened in the quarter. IBM and Zyfra will train multiple generations of future multimodal models on a large scale. Mi 300x Cloud and Cohere is now using Mi 300x at OCI to train its Command family of models for inference. A number of new partners including Character AI and Luma AI are now running production workloads on MI300 series demonstrating the performance and TCO advantages of our architecture for real time AI applications. We also made significant progress on the software front in the quarter. We launched ROCM7, our most advanced and feature rich release to date, delivering up to 4.6x higher inference and 3x higher training performance compared to ROCM6. ROCM7 also introduces seamless distributed inference, enhanced code portability across hardware and new enterprise tools that simplify the deployment and management of Instinct solutions. Importantly, our open software strategy is resonating with developers hugging face. VLM, SG Lang and others contributed directly to Rockham7 as we make Rockham the open platform for AI development at scale. Looking ahead, Our data center AI business is entering its next phase of growth with customer momentum building rapidly ahead of the launch of our next gen Mi 400 series accelerators and Helios Rockscale solutions in 2026. The Mi 400 series combines a new compute engine with industry leading memory capacity and advanced networking capabilities to deliver a major leap in performance for the most demanding AI training and inference workloads. The MI 400 series brings together our silicon software and systems expertise to power Helios, our Rackscale AI platform designed to redefine performance and efficiency at data center scale. Helios integrates our instinct Mi 400 series GPUs, Venice Epyc CPUs and Tensando NICs in a double wide rack solution optimized for the performance, power, cooling and serviceability required for the next generation of AI infrastructure and supports Meta's new open rack wide standard. Development of both our Mi 400 series GPUs and Helios rack is progressing rapidly, supported by deep technical engagements across a growing set of Hyperscalers, AI companies and OEM and ODM partners to enable large scale deployments next year. The ZT systems team we acquired last year is playing a critical role in Helios development, leveraging their decades of experience building infrastructure for the world's largest cloud providers to ensure customers can deploy and scale Helios quickly within their environments. In addition, last week we completed the sale of the ZT manufacturing business to Samnina and entered a strategic partnership that makes them our lead manufacturing partner for Helios. This collaboration will accelerate large customer deployments of our Rackscale AI solutions. On the customer front, we announced a comprehensive multi year agreement with OpenAI to deploy 6 gigawatts of Instinct GPUs with the first gigawatt of Mi 450 series accelerators scheduled to start coming online in the second half of 2026. The partnership establishes AMD as a core compute provider for OpenAI and underscores the strength of our hardware, software and full Stack solutions strategy. Moving forward, AMD and OpenAI will work even more closely on future hardware, software, networking and system level roadmaps and technologies. OpenAI's decision to use AMD instynt platforms for its most sophisticated and complex AI workloads sends a clear signal that our instinct GPUs and Rockham open Software stack deliver the performance and TCO required for the most demanding deployments. We expect this partnership will significantly accelerate our data center AI business, with the potential to generate well over $100 billion. In revenue over the next few years. Oracle announced they will also be a lead launch partner for the Mi 450 series, deploying tens of thousands of Mi 450 GPUs across Oracle Cloud infrastructure beginning in 2026 and expanding through 2027 and beyond. Our Instinct platforms are also gaining traction with sovereign AI and national supercomputing programs. In the UAE, Cisco and G42 will deploy a large scale AI cluster powered by Instinct MI350X GPUs to support the nation's most advanced AI workloads. In the US we are partnering with the Department of Energy and Oak Ridge National Labs to build Lux AI, the first AI factory dedicated to scientific discovery. Together with our industrial partners, OCI and HPE powered by our Instinct MI350 series GPUs, Epyc CPUs and Pensando Networking. Lux AI will provide a secure open platform for large scale training and distributed inference when it comes online in early 2026. The US Department of Energy also selected our upcoming Mi430X GPUs and Epyc Venice CPUs to power discovery, the next flagship supercomputer at Oak Ridge designed to set the standard for AI driven scientific computing and extend US high performance computing leadership. Our Mi 430x GPUs are designed specifically to Power Nation scale AI and supercomputing programs extending our leadership powering the world's most powerful computers to enable the next generation of scientific breakthroughs. In summary, our AI business is entering a new phase of growth and is on a clear trajectory towards tens of billions in annual revenue in 2027 driven by our leadership, Rackscale Solutions, expanding customer adoption and an increasing number of large scale global deployments. I look forward to providing more details on our data center AI growth plans at our Financial analyst day next week. In client and gaming segment, revenue increased 73% year over year to 4 billion. Our PC processor business is performing exceptionally well with record quarterly sales as the strong demand environment and breadth of our leadership Ryzen portfolio accelerates growth. Desktop CPU sales reached an all time high with record channel sell in and sell out led by robust demand for our Ryzen 9000 processors which deliver unmatched performance across gaming productivity and content creation applications. OEM sell through of Ryzen powered notebooks also increased sharply in the quarter reflecting sustained end customer pull for premium gaming and commercial AMD PCs. Commercial momentum accelerated in the quarter with rising PC sell through up more than 30% year over year as enterprise adoption grew sharply driven by large WINS With Fortune 500 companies across healthcare, financial services, manufacturing, automotive and pharmaceuticals looking ahead, we see significant opportunity to continue growing our client business faster than the overall PC market based on the strength of our portfolio, broader platform coverage and expanded go to market investments in gaming revenue increased 181% year over year to $1.3 billion. Semi custom revenue increased as Sony and Microsoft prepare for the upcoming holiday sales period in gaming. Graphics revenue and channel sellout grew significantly driven by the performance per dollar leadership of our Radeon 9000 family. FSR4, our machine learning upscaling technology that boosts frame rates and creates more immersive visuals saw rapid adoption this quarter with the number of supported games doubling since launch to more than 85 turning to our embedded segment, revenue decreased 8% year over year to 857 million. Sequentially revenue and sell through increased as the demand environment strengthened across multiple markets. Led by test and emulation, aerospace and defense and industrial vision in healthcare. We expanded our embedded product portfolio with new solutions that extend our leadership across adaptive and x86 computing. We began shipping industry leading Vercel Prime Series Gen 2 adaptive SoCs to lead customers, delivered our first Versal RF development platforms to support several next generation design wins and introduced the Ryzen embedded 9000 series with industry leading performance per watt and latency for robotics, edge computing and smart factory applications. The design momentum remains very strong across our embedded portfolio. We are on track for a second straight year of record design wins already totaling more than $14 billion year to date, reflecting the growing adoption of our leadership products across a broad range of markets and expanding set of applications. In summary, our record third quarter results and strong fourth quarter outlook reflect the significant momentum building across our business driven by sustained product leadership and disciplined execution. Our data center, AI, server and PC businesses are each entering periods of strong growth led by an expanding tam, accelerating adoption of our Instinct platforms and EPIC and rise in CPU share gains. The demand for COMPUTE has never been greater as every major breakthrough in business, science and society now relies on access to more powerful, efficient and intelligent computing. These trends are driving unprecedented growth opportunities for amd. I look forward to sharing more on our strategy roadmaps and long range financial targets at our financial analyst meeting next week. Now I'll turn the call over to Jean to provide additional color on our third quarter results.

Jean Hu - Executive Vice President, CFO and Treasurer - (00:17:56)

Jean thank you Lisa and good afternoon everyone. I'll start with a review of our financial results and then provide our outlook for the fourth quarter of fiscal 2025. We are pleased with our strong third quarter financial results. We delivered a record revenue of 9.2 billion, up 36% year over year, exceeding the high end of our guidance, reflecting strong momentum across our business. Our third quarter results do not include any revenue from shipments of the MI308 GPU products to China. Revenue increased 20% sequentially driven by strong growth in the data center and the client and gaming segment and modest growth in the embedded segment. Gross margin was 54%, up 40 basis points year over year primarily driven by product mix. Operating expenses were approximately 2.8 billion, an increase of 42% year over year as we continue to invest aggressively in R and D to capitalize on significant AI opportunities and go to market activities for revenue growth. Operating income was 2.2 billion representing 24% operating margin. Taxes, interest, expense and other totaled 273 million. For the third quarter of 2025. Diluted earnings per share were $1.20 compared to $0.92 a year ago, an increase of 30% year over year. Now turning to our reportable segments starting with the data center, Data center segment revenue was a record of 4.3 billion up 22% year over year primarily driven by the strong demand for 5th generation EPYC processors and Instinct MI350 series GPUs. On a sequential basis, data center revenue increased 34% primarily driven by strong ramp of our AMD Instinct MI350 series GPU. The data center segment operating income was 1.1 billion or 25% of revenue compared to 1 billion a year ago or 29% of revenue driven by higher revenue partially offset by higher R and D investment to capitalize on significant AI opportunities. Client on the gaming segment revenue was a record of 4 billion up 73% year over year and 12% sequentially driven by strong demand for the latest generation of client and graphic processors and stronger sales of console gaming products. In the client business revenue was a record 2.8 billion up 46% year over year and 10% sequentially driven by record sales of our Ryzen processors and the richer product mix. Gaming revenue rose to 1.3 billion up 181% year over year and 16% sequentially reflecting higher semi customer revenue and strong demand for our Radeon GPUs. Client on the gaming segment operating income was 867 million or 21% of revenue compared to 288 million or 12% a year ago driven by higher revenue partially offset by increase in go to market investment to support our revenue growth. Embedded Segment revenue was $857 million down 8% year over year. Embedded was up 4% sequentially as we saw certain end market demand strengthen. Embedded Segment operating income was 283 million or 33% of revenue compared to 372 million or 40% a year ago. The decline in operating income was primarily due to lower revenue and end market mix. Before I review the balance sheet and the cash flow. As a reminder, we closed the sale of ZT System manufacturing business to Sanmina last week. The third quarter financial results of the ZT manufacturing business are reported separately in our financial statements as discontinued operations and are excluded from our non GAAP financials. Turning to the balance sheet and cash flow during the quarter we generated $1.8 billion in cash from operating activities of continuing operations and the free cash flow was a record of 1.5 billion. We returned 89 million to shareholders through share repurchases resulting in 1.3 billion in share repurchases for the first three quarters of 2025. Exiting the quarter, we have 9.4 billion authorization remaining under our share repurchase program at the end of the quarter, cash, cash equivalent and short term investment was 7.2 billion. Our total debt was 3.2 billion. Now turning to our fourth quarter 2025 outlook, please note that our fourth quarter outlook does not include any revenue from AMD Instant MI3.08 shipment to China. For the fourth quarter of 2025 we expect revenue to be approximately 9.6 billion plus or minus 300 million. The midpoint of our guidance represents approximately 25% year over year revenue growth driven by strong double digit growth in our data center and client and gaming segment and the return to growth in our embedded segment. Sequentially we expect revenue to grow by approximately 4% driven by double digit growth in the data center segment with strong growth in server and continued ramp of our MI350 series GPUs, a decline in our client gaming segment with client revenue increasing and gaming revenue down strong double digits and the double digit growth in our embedded segment. In addition, we expect fourth quarter non GAAP gross margin to be approximately 54.5% and we expect non GAAP operating expenses to be approximately 2.8 billion. We expect net interest and other expenses to be again of approximately 37 million. We expect our non GAAP effective tax rate to be 13% and diluted share count is expected to be approximately 1.65 billion shares. In closing, we executed very well delivering record revenue for the first three quarters of the year. The strategic investment we are making position us well to capitalize on expanding AI opportunities across all our end markets driving sustainable long term revenue growth and earnings expansion for compelling shareholder value creation. With that, I'll turn it back to Matt for the Q and A session.

Matt Ramsey - VP Financial Strategy and Investor Relations - (00:25:34)

Thank you very much Dean John. We can go ahead and poll the audience for questions now. Thank you. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press Star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. We ask that you please limit yourself to one question and one follow up thank you. One moment while we poll for questions. And the first question comes from the line of Vivek Arya with Bank of America Security. Please proceed with your question. Thank you for the question. I had a near term and a medium term question for the near term. Lisa, I was hoping if you could give us some sense of the CPU GPU mix in Q3 and Q4. And just tactically, how are you managing this Transition from your Mi355 towards Mi400 in the second half of next year? Can you continue to grow in the first half of next year from these Q4 levels? Or should we expect some kind of pause or digestion before customers get on board the Mi 400 series?

Vivek Arya - Equity Analyst - (00:26:50)

Sure Vivek, thanks for the question. So a couple comments. We had a very strong Q3 for the data center business. I think we saw strong outperformance in both the server as well as the data center AI business. And a reminder that that was without. Any MI308 sales.

Lisa Su - (00:27:08)

The MI355 has ramped really nicely. We expected a sharp ramp into the third quarter and that proceeded well. And as I mentioned, we've also seen some strengthening of the server CPU sales and not just let's call it near term, but we're seeing our customers are giving us some visibility in the next few quarters that they see elevated demand which is positive going into the fourth quarter. Again, strong data center performance up double digits sequentially and up in both server and data center AI again on the strength of those businesses. And to your question, I mean we're not guiding into 2026 yet obviously, but given what we see today, we see a very good demand environment into 2026. So we would expect that MI355 continue to ramp in 1H26. And then we mentioned MI450 series comes online in the second half of 2026. And we would expect a sharper ramp as we go into the second half of 2026 of our data center AI business.

Vivek Arya - Equity Analyst - (00:28:26)

And for my follow up, there is some industry debate, Lisa, about OpenAI's ability to kind of simultaneous engage with all three merchant and the ASIC suppliers, just given the constraints around power and capex and their existing Cloud Service Provider (CSP) partners and so forth. So how are you thinking about that? What is your level of visibility in the initial engagement and then more importantly how it kind of broadens out into 2027? Is there a way that one can model what the allocation would be or just how should we think about the level of visibility in this Very important customer. Thank you.

Lisa Su - (00:29:04)

Yeah, absolutely, Vivek. Look, we're very obviously very excited about our relationship with OpenAI. It's a very significant relationship. Think about it as it's a pretty unique time for AI right now. There's just so much compute demand across all of the workloads. I think in our work with OpenAI we are planning multiple quarters out, ensuring that the power is available, that the supply chain is available. The key point is the first gigawatt. We will start deploying in 2H26 and that work is well underway and we continue just given where lead times are and things like that. We are planning very closely with OpenAI as well as the Cloud Service Provider (CSP) provide partners to ensure that we're all prepared with Helios so that we can deploy the technology as we stated. So I think overall we're working very closely together. I think we have good visibility into the MI450 ramp and things are progressing very well.

OPERATOR - (00:30:14)

And the next question comes from the line of Thomas o' Malley with Barclays. Please proceed with your question. Good morning.

Thomas o' Malley - (00:30:22)

Thanks for taking my question and congrats on the good results. I had a first question on obviously with the announcement at ocp, customer interaction has to be growing. Could you talk about into next year what your view is on discrete sales versus system sales? When do you see that crossover kind of happening and just what initial responses have been from customers after getting a better look at it at the show?

Lisa Su - (00:30:44)

Yeah, sure Tom, thanks for the question. There's a lot of excitement around MI450 and Healios. I think the OCP reception was phenomenal. We had numerous customers and frankly bringing their engineering teams to understand more about the system, more about how it's built. There's always been some discussion about just how complex these rack scale systems systems are and they certainly are. And we are very proud of the HELIOS design. I think it has all the features, functions, reliability, performance, power performance that you would expect. I think the interest in MI450 and HELIOS has just expanded over the last number of weeks, certainly with some of the announcements that we've made with OpenAI and OCI as well as the OCP show with Meta. I think overall from our perspective, I think things are going really well in both the developments as well as the customer engagement there. So in terms of racscale solutions, we would expect that the early customers for MI450 will really be around the rackscale solutions. We will have other form factors as well for the Mi 450 series, but there's a lot of interest in the full rack scale solution.

Thomas o' Malley - (00:32:08)

Super helpful. And then as my follow up, it's a broader question as well and similar to kind of what Vivek asked. But if you look at the power requirements that are out there for some of the early announcements into next year, they're pretty substantial. And then you also have component issues that you're seeing across interconnected memory. Just from your perspective as an industry leader, where do you think that the constraint will be? Will it come first with components not being available or do you think that both data center footprint in terms of infrastructure and or power is the gating factor to some of these deployments into next year just as we really see some larger numbers start to get deployed.

OPERATOR - (00:32:40)

Thank you.

Lisa Su - (00:32:41)

Yeah, sure. Tom, I think what you're pointing out is what we as an industry have to do together, the entire ecosystem has. To plan together and that is exactly what we're doing. So we're working with our customers on their power plans over the next actually I would say two years from a silicon and a memory and a packaging and a component supply chain. We're working with our supply chain partners to make sure all of that capacity is available. I can tell you from our visibility, we feel very good that we have a strong supply chain that is prepared to deliver sort of these very significant growth rates and large amount of compute that is out there. And I think all of this is going to be tight. I think there is a, you can see from some of the CapEx spending that there's a desire to put on more compute and we're working closely together. I will say that the ecosystem is very, I would say works very hard when there are these types of, let's call it, tightness out there. And so we also see things open up as we're working, getting more power, getting more supply, all of those things. So the net net is, I think we are well positioned to grow significantly as we transition into 2H26 into 27 with the Mi 450 and Heal.

OPERATOR - (00:34:13)

And the next question comes from the line of Joshua Buchwalter with DD Cowan, please proceed with your question.

Joshua Buchwalter - (00:34:20)

Hey guys, thank you for taking my question. Actually wanted to start on the CPU side. So you know, you and your largest competitor in that space have talked about near term strength, supporting AI workloads on general purpose servers from agentic. Maybe you could speak to the sustainability of these trends and, and they called out supply constraints. Are you seeing any of those in your supply chain? And are we in a period where we should think about the CPU business on the data center side as being a seasonal or should we expect normal seasonality in the first half of next year?

OPERATOR - (00:34:55)

Thank you.

Lisa Su - (00:34:56)

Sure. Josh, a couple of comments. On the CPU server side, I think. We'Ve been watching this trend for the. Last couple of quarters and we started seeing, let's call it some positive signs in CPU demand actually a couple quarters ago. And what's happened as we've gone through 2025 is now we see sort of a broadening of that CPU demand. So we have a number of our large hyperscale clients are now forecasting significant CPU build into 2026. And so from that standpoint I think it's a positive demand environment. And it is because know AI is requiring quite a bit of general purpose compute and that's great. It catches our cycle as we're ramping Turin. So the Turin ramp has gone extremely fast and we see good pull for that product as well as consistent, strong demand for our Genoa product line as well. So back to seasonality. As we go into 2026, I think we expect expect that the CPU demand environment into 2026 is going to be, let's call it positive and so we'll guide more as we get into the. End of the year. But I would expect a positive demand environment for CPUs. As we see this demand, I do feel like it's durable. It is not a short term thing. I think it is a multi quarter phenomenon as we're seeing just much more demand as these AI workloads really turn into. You have to do real work. So Josh, on the supply side, we have supplies to support our growth and especially in 2026, we're prepared for the ramp.

Joshua Buchwalter - (00:36:41)

Got it. Thank you both. And for my follow up, at least. In your prepared remarks you highlighted progress you guys have made on rock M7. I know this has been an area.

Lisa Su - (00:36:50)

Folks, and can you maybe spend a minute or two talking about where you feel you're at competitively with Rockham? How wide is the breadth of support you're able to offer to the developer community and what areas do you still have work to do to close any potential competitive gap? Thank you. Yeah, Josh, thanks for the question. Look, we've made great progress with Rockham. Rockham 7 is a significant step forward in terms of progress, performance and sort of all the frameworks that we support. It's been really, really important for us to get sort of day zero support of all the newest models and native support for all the newest frameworks, I would say most customers who are starting with AMD now have a very smooth experience as they're bringing on their workloads to amd. There's obviously always more work work to do. We're continuing to augment the libraries and the overall environment that we have, especially as we go to some of the newer workloads where you see training and inference really coming together with reinforcement learning. But overall I think very strong progress with Rackham. And by the way, we're going to. Continue to invest in this area because it's so important to really make our customers customer development experience as smooth as we can.

OPERATOR - (00:38:19)

And the next question comes from the line of CJ Muse with Tanner Fitzgerald. Please proceed with your question.

CJ Muse - Equity Analyst - (00:38:25)

Yeah, good afternoon. Thank you for taking the question. I guess first question, as you think about the 355 to 400 transition and moving to full Rack scale, is there a framework that we should be thinking about for gross margins throughout calendar 2016?

Jean Hu - Executive Vice President, CFO and Treasurer - (00:38:41)

Yes, EJ, thanks for the question. I think in general, as we said in the past for our data center GPU business, the gross margins continue to improve when we ramp a new generation of product. Typically at the beginning of the ramp you go through a transition period, then you will normalize the gross margin. We're not guiding 2026, but our priority in data center GPU business is to really expand the top line revenue growth and the gross margin dollars. And of course at the same time we'll continue to drive gross margin percentage up too.

CJ Muse - Equity Analyst - (00:39:20)

Very helpful. And I guess maybe Lisa, to kind of probe kind of your growth expectations through 26 and beyond. And you talked about tens of billions of dollars in 27. Can you kind of speak at a high level how you're thinking about OpenAI and other large customers and how we should be thinking about the breadth of your customer kind of penetration throughout calendar 2627. Any help on that would be super. Thank you.

Lisa Su - (00:39:50)

Sure, cj. And we'll certainly address this topic in more detail at our analyst day next week. But let me give you some maybe higher level look. I think we're really excited about our roadmap. I think we have seen great traction amongst the largest customers. The OpenAI relationship is extremely important to us and it's great to be able to talk at the multi gigawatt scale because I think that really is what we believe we can deliver to the marketplace. But there are numerous opportunities, other customers that we are in deep engagements with. We talked about oci. We also announced a couple of systems with the Department of Energy that are significant systems and we have many engagements. So the way you should think about it is there are multiple customers that we would expect to have, let's call it very significant scale in the Mi 450 generation. And that's sort of the, the breadth of the customer engagements that we built. And it's also how we're dimensioning the supply chain to ensure that we can supply certainly our OpenAI partnership as well as the numerous other partnerships that are well underway.

OPERATOR - (00:41:13)

And the next question comes from the line of Stacey Razian with Bernstein Research. Please proceed with your question.

Stacey Razian - Equity Analyst - (00:41:21)

Hi guys. Thanks for taking my questions. My first one for data center in the quarter, what grew more year over year on a dollar and a percentage basis, the servers or the GPUs?

Jean Hu - Executive Vice President, CFO and Treasurer - (00:41:37)

Yeah, Stacy, I think our commentary was. Data center grew nicely year over year in both of the areas, both for servers as well as data center AI.

Stacey Razian - Equity Analyst - (00:41:53)

Yeah, but could you, I mean, just directionally did one, which one grew more than the other? I'm not even asking for numbers, just directionally.

Jean Hu - Executive Vice President, CFO and Treasurer - (00:42:02)

Directionally they are similar, but survey is a little bit better.

Stacey Razian - Equity Analyst - (00:42:08)

Server's a little bit better. Okay. And then on the guidance you said that servers, I mean data center overall up double digits. You said servers up strong double digits. What does that mean? Is that like more than 20% or.

OPERATOR - (00:42:25)

Like.

Stacey Razian - Equity Analyst - (00:42:28)

How do I think about what you mean by strong double digits again? I'm trying to, I mean for the GPUs for the year, do you think you're, you were saying roughly like 6.5 billion or something last quarter for the year, do you think it's still in that range? It kind of feels like you're still there.

Jean Hu - Executive Vice President, CFO and Treasurer - (00:42:42)

Stacey, here's what we guided. We guided sequentially. Data center will be up double digits and we said server will go up strongly. And at the same time we also said that Mi350 also going to ramp. So we did not. I think, I don't think what you just mentioned was what we guided.

Stacey Razian - Equity Analyst - (00:43:07)

Okay, so I mean, if you say servers are up strongly, does that mean they're up more than the instinct? Because you didn't really make that commentary on instinct.

Jean Hu - Executive Vice President, CFO and Treasurer - (00:43:16)

No, look, Stacey, let me say it. So data center sequentially, double digit percentage. Both server and data center AI are going to be up as well. And from the standpoint of where they are, I think we're pleased with how. Both of them are performing. The strong double digit percentage comment perhaps was applying to the year over year commentary.

OPERATOR - (00:43:47)

Thank you. And the next question comes from the line of Timothy R. Corey with ubs. Please proceed with your question.

Timothy R. Corey - Equity Analyst - (00:43:53)

Thanks a lot, Lisa. I know it's only been a month since you announced this idea with, but can you give us maybe some anecdotes of how this has influenced your position in the market with other customers? Like, are you engaged with customers that you wouldn't have been engaged with if you hadn't done this deal? That's the first part of the question. And then the second part relates to a prior question, which is that it looks like they could be something like half of your data center GPU revenue in the 2027, 2028 timeframe. So how much risk in your money is there around that single customer for you?

OPERATOR - (00:44:26)

Sure.

Lisa Su - (00:44:27)

Tim, let me say a couple things. First of all, the OpenAI deal has. Been in the works for quite some time. We're happy to be able to talk about it broadly and also talk about the scale of the deployment and the scale of the engagement being multi year, multi gigawatt. I think all those things were very positive. We've had a number of other engagements as well. I think over the last, you know, if you were asked to ask specifically over the last month, I would say that it's been a number of factors. I think the OpenAI deal was one of them. I think having, you know, being able to show the Helios rack in full force at Open Compute was also a very important milestone because people could see the engineering and sort of the capabilities of the Helios racing. And if you're asking whether we've seen an increase of interest or an acceleration of interest, I think the answer is yes. I think customers are broadly engaged and perhaps broadly engaged at higher scale, which is a good thing. And then from the standpoint of customer concentration, I think a very key foundation for us in this business is to have a broad set of customers. We've always been engaged with a number of customers. I think we're dimensioning the supply chain in such a way that we would have ample supply to have multiple customers at similar scale as we go into the 2728 timeframe. And that's certainly the goal.

OPERATOR - (00:46:01)

Thank you. And the next question comes from the line of Aaron Rakers with Wells Fargo. Please proceed with the.

Aaron Rakers - Equity Analyst - (00:46:07)

Yeah, thanks for taking the questions. I'm curious on the server strength that you're seeing, if there's a way to unpack how we think about unit growth. Versus ASP expansion as we move through the turn product cycle. And how do you guys just kind of think about that going Forward.

Lisa Su - (00:46:25)

Yeah. So Erin, on the server CPU side. Turn certainly is more content. So we see and ASPS grow as Turin ramps. But I also mentioned in the prepared remarks that we're actually seeing a very good mix of Genoa still there. So turn is ramping very quickly, but we are also seeing Genoa demand continue well, as the hyperscalers are not able to move everything to the latest generation immediately. So. So from our standpoint, I think it's. Broad based CPU demand across a number of different workloads. A little bit of this is, let's call it server refresh, but it seems like from our customer conversations, the workloads are broadly due to the fact that AI workloads are spawning more traditional compute. So more build out is necessary. I think going forward. Forward. One of the things that we see is there is more of a desire for the latest generation. And so as much as we're happy with how Turin is ramping, we're seeing actually a strong pull on Venice and a lot of early engagement in Venice, which kind of says a lot about the importance of general purpose compute at. This point in time.

Aaron Rakers - Equity Analyst - (00:47:47)

Yeah, thanks. As a quick follow up, I'm curious. And not to think maybe the discussion from next week, but Lisa, you've been very consistent, like 500 billion of total AI silicon TAM opportunity and obviously progressing above that. I'm curious, as we think about these large megawatt kind of deployments, how you think about the updated views on that AI Silicon TAM as we look forward.

Lisa Su - (00:48:12)

Well, Aaron, as you said, not to take too much away from what we're going to talk about next week. Look, we're going to give you a full picture of how we see the market next week. But suffice it to say, from everything that we see, we see the AI compute TAM just going up, so we'll have some updated numbers for you. But the view is, whereas 500 billion sounded like a lot when we first talked about it, we think there is a larger opportunity for us over the next few years and that's pretty exciting.

OPERATOR - (00:48:48)

Thank you. The next question comes from Antwan Chakabon with New Street Research. Please proceed with your question. Hi.

Antwan Chakabon - Equity Analyst - (00:48:55)

Thank you so much for taking my question. So I'd like to ask about whether. The developing relationship with OpenAI could be a tailwind to the development of your software stack. Can you maybe tell us about how. The collaboration works in practice and whether. The partnership contributed in making RACM more robust?

Lisa Su - (00:49:14)

Yeah, Antoine, thanks for the question. I think the answer is yes. I think all of our large customers contribute to let's call it a broadening and deepening of our software stack Overall. I think the relationship with OpenAI is certainly one where our plans are to work deeply together on hardware as well as software, as well as systems and future roadmap. And from that standpoint the work that we're doing together with them on Triton is certainly very valuable. But I will say beyond OpenAI, the work that we do with all of our largest customers are super helpful to strengthening the software stack. And we have put significant new resources into not just the largest customers, but we are working with a broad set of AI native companies who are actively developing on the Rockham stack. We get lots of feedback. I think we've made significant progress in the training and inference stack and we're going to continue to double down and triple down in this area. So more customers that use amd. I think all of that goes to enhancing the RACM stack and we're actually we'll talk a little bit more about this next week, but we're also using AI to help us accelerate the rate and pace of some of the Rockham kernel development and just the overall ecosystem.

Antwan Chakabon - Equity Analyst - (00:50:48)

Thanks Lisa. And maybe as a quick follow up, could you tell us about the useful lives of GPUs? I know that most CSPs depreciate them over 5, 6 years, but in your conversations with them, I'm just wondering if you see or hear any early indication that in practice they may be planning to sweat those GPUs for longer than that.

Lisa Su - (00:51:10)

I think we have seen some early. Indications of that, Antoine. I think the key point being clearly there's a desire to get on the Latest and greatest GPUs. When you're building new data center infrastructure and certainly when we're looking at Mi355s, they're often going into new liquid cooled facilities, Mi450 series as well. But then we're also seeing the other. Trend which is there's just a need. For more AI compute. And from that standpoint some of the older generations Mi 300X is still doing quite well in terms of just where we see people deploying and using, especially for inference. And from that standpoint I think you see a little bit of both.

OPERATOR - (00:52:00)

And the next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question. Great, thank you. You mentioned MI308, I guess.

Joe Moore - Equity Analyst - (00:52:10)

What's your posture there to the extent. That if there is some relief that. You'Re able to ship, do you have. Readiness to do that? Can you give us a sense for how much of a swing factor that could be?

Lisa Su - (00:52:23)

Sure, Joe. So, look, it's still a pretty dynamic situation with MI308. So that's the reason that we did not include any Mi 308 revenue in the Q4 guide. We have received some licenses for Mi 308, so we're appreciative of the administration supporting some licenses for Mi308. We're still working with our customers on the demand environment and sort of what the overall opportunity is, and so we'll be able to update that more in the next couple of months.

Joe Moore - Equity Analyst - (00:52:58)

Okay, but you do have product to. Support that market if it does open up, or are you going to have to start to kind of rebuild inventory for that?

Lisa Su - (00:53:06)

We've had some work in process. I think we continue to have that work in process, but we'll have to see sort of how the demand environment shapes up.

Joe Moore - Equity Analyst - (00:53:18)

Okay, thank you very much.

OPERATOR - (00:53:20)

Thanks, Operator. I think we might have time for just one more caller, please. Thank you very much. No problem. And the final question comes from the line of Ross Seymour with Deutsche Bank. Please proceed with your question.

Ross Seymour - Equity Analyst - (00:53:35)

Thanks for squeezing me in, Lisa. This might take longer than the amount of time we have left before the. Top of the hour, but there's been. So many of these multi gigawatt announcements from OpenAI. How does AMD truly differentiate in there? When you see that big customer signing deals with other GPU vendors and ASIC vendors, et cetera, how do you attack that market differently than those competitors to. Not only get the 6 gigawatt initially. But hopefully more after that?

Lisa Su - (00:54:03)

Sure, Ross? Well, look, what I see is actually this environment where the world needs more AI compute. And from that standpoint, I think OpenAI has kind of led in the quest for more AI compute, but they're not alone. I think when you look across the large customers, there is really a demand for more AI compute as you go forward over the next couple of years. I think we each have our advantages in terms of how we are positioning our products. I think Mi450 series in particular, I think is an extremely strong product rack scale solution. Overall, when we look at compute performance, when we look at memory performance, we think it's extremely well positioned for both inference as well as training. I think the key here is time to market, its total cost of ownership, its deep partnership and thinking about not just Mi 450 series, but what happens after that. So we're deep in conversations on MI 500 and beyond, and we certainly think we're well Positioned to not only participate, but participate in a very meaningful way across the sort of the demand environment here. And I think we have certainly learned a ton over the last couple of years with our AI roadmap. We've made significant inroads in terms of just what the largest customer needs from a workload standpoint. So I'm pretty optimistic about our ability to capture a significant piece of this market going forward.

Ross Seymour - Equity Analyst - (00:55:44)

Great. And I guess as my follow up. It'Ll be a direct follow on to that. You did a unique structure by granting some warrants with this deal. And I know there they vest according to a price that would be very accretive and make everybody happy. Do you think that was a relatively unique agreement? Or given that the world needs more processing power, that AMD is open to somewhat similar, conceptually similar, creative ways to address that demand over time with other equity vehicles, et cetera? Sure, Ross.

Lisa Su - (00:56:14)

So I would say it was a unique agreement from the standpoint that unique time in AI. What we wanted, what we prioritized was really deep partnership and multi year, multi generation, significant scale. And I think we got that. We got a structure that has extremely aligned incentives. Everybody wins, right? We win. OpenAI wins, and our shareholder sort of benefits from this. And all of that accrues to the overall roadmap. I think as we look forward, I think we have a lot of very interesting partnerships that are developing, whether they're with the largest AI users or you think about sovereign AI opportunities. And we look at each one of these as a unique opportunity where we're bringing the whole of amd, both technically as well as all the rest of our capabilities, to the party. So I would say OpenAI was pretty unique, but I would imagine that there are lots of other opportunities for us to bring our capabilities into the ecosystem and participate in a significant way.

OPERATOR - (00:57:29)

Ladies and gentlemen, that does conclude the question and answer session and that also concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

OPERATOR - (00:01:34)

Welcome to Palmer Square Capital BDC's third quarter 2025 earnings call. Quarter 2025 earnings call. At this time, all participants are in listen only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is. Being recorded at this time. I'd like to turn the call over. To Jeremy Goff, Managing Director. Jeremy, you may begin.

Jeremy Goff - Managing Director - (00:01:57)

Welcome to Palmer Square Capital BDC's third quarter 2025 earnings call. Joining me this afternoon are Chris Long, Chairman and Chief Executive Officer, Angie Long, Chief Investment Officer, Matt Bloomfield, President and Jeff Fox, Chief Financial Officer and Director. Palmer Square Capital BDC's third quarter 2025 financial results were released earlier today and can also be accessed on Palmer Square's investor relations website at palmersquarebdc.com we have also arranged for a replay of today's event that can be accessed on our website. During this call, I want to remind you that the forward looking statements we make are based on current expectations. The statements on this call that are not purely historical are forward looking statements. These forward looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward looking statements, including and without limitation market conditions caused by uncertainty surrounding interest rates, changing economic conditions and other factors we identified in our filings with the SEC. Although we believe the assumptions on which these forward looking statements are based are reasonable, any of those assumptions can prove to be inaccurate and as a result the forward looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward looking statements. The forward looking statements made during this call are made as of the date hereof and Palmer Square Capital BDC assumes no obligation to update the forward looking statements unless required by law. To obtain copies of SEC related filings, please visit our website at palmersquarebdc.com with that, I will now turn the call over to Chris Long.

Chris Long - Chairman and Chief Executive Officer - (00:03:37)

Good afternoon everyone. Thank you for joining us today for Palmer Square Capital BDC's third quarter 2025 conference call. On today's call, I will provide an overview of our third quarter highlights, background on our broader credit platform and touch on the benefits of our differentiated investment strategy. Then turn the call to the team to discuss our market outlook and financial performance. During the third quarter, our team deployed $138.7 million of capital and generated total and net investment income of $31.7 million and $13.6 million respectively. We delivered net investment income of 43 cents per share, well covering our 36 cents per share third quarter base dividend and covering our 42 cent per share total dividend which includes a 6 cent supplemental distribution, given interest rate expectations, we appreciate the recent market focus on dividend coverage by the BDC investor community. Unlike many peers, we decided from the outset to create a distribution strategy that maximizes cash returns to our investors sooner rather than later. In that spirit, we continue to pay out nearly all of our excess earnings in the form of a supplemental dividend, which we believe is the right thing to do for our investors. Additionally, we recently announced our September Net Asset Value (NAV) per share of $15.39 as the only publicly traded BDC to disclose Net Asset Value (NAV) on a monthly basis. We believe we provide a unique level of transparency and accountability, giving shareholders regular insight into our performance. Angie will provide additional commentary on our market outlook, but I want to spend a moment addressing recent industry events. There has been much debate around whether there are cracks in the pavement of private credit and leveraged lending at large. We believe it is important for investors to understand that these idiosyncratic situations arise in credit markets year in and year out, and that does not indicate that there is any new systemic risk in private credit or liquid credit portfolios. Default rates in private and public credit have been running at consistent levels for the past couple of years, non accrual rates in BDCs remain below historical levels on average, and underlying portfolio company performance continues to show strength. As a concrete example, through EBITDA growth and lower base rates, TSBD's interest coverage ratio increased sequentially to two and a half times from 2.1 times last quarter, a meaningful improvement that demonstrates companies can better service their debt. When you couple these patterns with PSBD's current yields and the discount to Net Asset Value (NAV), we continue to believe that the opportunity set is compelling for investors and PSBD common stock is undervalued. To that end, our board recently approved an additional $5 million of open market share repurchases, which Matt and Jeff will discuss in further detail. We have confidence in our strategy and believe that our emphasis on senior secured liquid credit and the optionality to deploy into private credit position us to remain agile and adjust to various market environments. This agility is further enhanced by our specialized and seasoned investment team in strong alignment with our shareholders. To put a finer point on this, our investment team is incentivized in a way that promotes a clear focus on investor outcomes and experience, which by definition creates strong alignment through the investment process to make decisions that maximize risk adjusted performance. At the heart of our investment philosophy is the conviction that active management and credit, when executed properly, can generate attractive total returns in excess yield. We believe our focus on higher quality assets, minimizing interest rate duration and maintaining liquidity where possible, combined with our core competency of locating relative value, has helped drive strong outcomes for our portfolio. Looking ahead, we continue to lean into our strengths and prioritize synergies across our platform strategies which we believe will ultimately benefit the bdc. For instance, our CLO issuance volume informs our BDC by enabling us to see nearly all the deal flow in the bank loan space and act on it when appropriate. We believe this quality is often underappreciated by equity investors, particularly given that our presence and recognition in the global CLO space exceeds many other well known alternative asset managers. Since our last earnings call, we've had the opportunity to connect with both existing and new investors, reiterating our position as a deeply experienced corporate and structured credit manager. We believe our differentiated story is resonating, but it is still in the early innings for the public life of psbd, with our listing taking place less than two years ago. We look forward to continuing these conversations in 2026 as we remain steadfast in our commitment to shareholder alignment and transparency. With that, I will hand the call over to Angie.

Angie Long - Chief Investment Officer - (00:09:34)

Thank you, Chris. We are pleased with Palmer Square Capital BDC's third quarter results. Despite shifting rate expectations, uneven economic data and a more recent rebound in tariff concerns. Our portfolio is constructed to perform consistently through periods of uncertainty and we are proud of the efforts we've made to deliver both attractive risk adjusted returns and transparency to Palmer Square Capital BDC shareholders. Taking a Step Back While capital market conditions this quarter felt similar to recent quarters in some respects, we are beginning to see signs of gradual improvement in deal activity. Although overall M and A volumes remain relatively subdued, there has been encouraging progress over the past few months, which has continued through October. We've seen a healthier mix of opportunities filtering through both the broadly syndicated and private credit markets, and deal flow appears to be building momentum each month. Overall sponsor engagement is rising. The recently announced $55 billion take private of Electronic Arts, which represents the largest Leveraged Buyout (LBO) on record, will require approximately $20 billion in debt financing. Even more recently, the approximately $18 billion take private of whole logic will include over $12 billion of financing. These announcements underscore the market's appetite for high quality transactions, and we believe there could be more announcements to come. We also continued to see elevated refinancing activity during the third quarter, helping to provide incremental income generation. This is in line with the syndicated loan market, which saw record levels of activity driven largely by refinancings and repricings. While we can't forecast the pace of refinancing activity going forward, we expect at least some continuation of that trend. Turning to private credit, competition remains elevated and spreads have compressed meaningfully over the past year. Even so, we continue to find relative value in certain instances where versus new broadly syndicated loans, and we expect private transactions to remain an important source of incremental spread and diversification for psbd. Notably in our private credit book tuck in activity is accelerating we view private credit as a complementary lever to our BSL strategy, particularly in today's environment where deals are moving between the two markets. Spread compression has been a recurring theme over the past several quarters and has remained near all time tights across credit markets. Despite this, we're committed to our disciplined approach in deploying capital and playing the long game. As we've stated on previous earnings calls, we will not chase growth when risk adjusted returns do not meet our standards. We think this is very important for investors to understand, especially later in credit cycles. As expected, the Fed cut base rates by 25 basis points in September and another 25 basis points in October, and the market is anticipating additional easing in 2026. And given the softening labor market. While declining base rates will be beneficial to borrowers cash flows and should spur M and A activity, we believe pressure from inflation and tariffs may continue to test the Fed as they balance their dual mandate. That said, we are not macro forecasters and our forecast remains squarely on the credit side of the equation, where we believe our expertise and disciplined approach to underwriting continue to differentiate both Palmer Square Capital BDC and our platform at large. Looking ahead, we're cautiously optimistic about the environment. Early signs of improving deal flow, both in our pipeline and the market more broadly, suggest that a more active M and A environment could take hold in coming quarters. However, Palmer Square Capital BDC's flexibility across both liquid and private markets means we are not dependent on the pace of that recovery, and it allows us to adapt quickly and position the portfolio for attractive opportunities as they arise. As of October 31, Palmer Square Capital BDC was yielding 13.6%, an attractive yield in any market, but particularly compelling given today's tight spreads and the conservative positioning of our portfolio. We believe we've been able to achieve this in large part due to the power of our platform. With that, I'd like to hand the call over to Matt who will discuss our portfolio and investment activity.

Matt Bloomfield - President - (00:13:54)

Thank you, Angie. Turning to our portfolio and investment activity for the third quarter. Our total investment portfolio as of September 30, 2025 had a fair value of approximately $1.26 billion across 42 industries that demonstrate strong credit quality, industry and company specific tailwinds and a diverse mix of end markets. This compares to a fair value of $1.28 billion at the end of the second quarter of 2025, reflecting a decrease of approximately 1.6%. In the third quarter we invested $138.7 million of capital which included 28 new investment commitments at an average value of approximately $4.8 million. During the same period we realized approximately $156.0 million through repayments and sales. As you will notice, we continue to think about diversification as we allocate new capital in the portfolio. As Angie mentioned, third quarter activity demonstrates early signs of improvement with M and A gradually picking up after a subdued period. That said, we maintain a cautious approach for the balance of the year as the BDC sector at large absorbs the impact of rate cuts and a potentially cooling economy. To recap, key portfolio highlights at the end of the third quarter, our weighted average total yield to maturity of debt and income producing securities at Fair value was 10.07% and our weighted average total yield to maturity of debt and income producing securities at amortized cost was 8.00%. We believe our focus on first lien loans and diversification by industry and size contribute to a strong credit profile with 42 different industries represented in our investment mix. Further, our 10 largest investments account for just 10.6% of the overall portfolio and our portfolio is 95% senior secured with an average hold size of approximately $5.0 million. Again, we believe this position sizing is an important risk management tool for PSBD. On a fair value weighted basis, our first lien borrowers have a weighted average EBITDA of $421 million, senior secured leverage of 5.5 times and interest coverage of 2.5 times. Additionally, new private credit loans comprised 20.9% of overall new investments and were funded at a weighted average spread of 536 basis points over the reference rate. While credit quality is a top concern across the sector, non accruals continue to be low at PSPD. On a fair value basis it is only 40 basis points and on an at cost basis only 101 basis points. Our PIC income as a percentage of total investment income remains well below our largest peers and below the industry at approximately 1.1, 4%. We take pride in knowing our shareholders do not have to wonder about the quality of our disclosed investment income. We've maintained an average internal rating of 3.6 on a fair value weighted basis for all loan investments. Our rating is derived from a unique relative value based scoring system. Generally speaking, we believe that the credit performance within the portfolio remains strong, our non accruals remain very low by industry standards and the underlying credit metrics of our borrowers are encouraging. We continue to see stability in both leverage levels and loan to value ratios across our portfolio companies. While we did add Kloeckner, Pentaplast and First brands to non accrual to echo Chris, we view these as isolated events rather than indicative of broader stress in the portfolio. LifeScan, a previous non accrual loan for the past several quarters was removed from non accrual status and is currently trading back into the high 90s and we believe will likely result in a full PAR recovery. This is a testament to our ability to work through individual credit issues and maximize recoveries for the portfolio subsequent to quarter end. We took further strides in optimizing the right side of our balance sheet by refinancing the Wells Fargo Credit Facility, tightening the spread by 55 basis points. Additionally, we extended the maturity of the facility to November 2030 and increased the facility amount to 200 million from 175 million. We believe this exemplifies our focus on driving earnings power to the BDC even even in a falling rate environment through active balance sheet management in addition to active portfolio management. To add to Chris's point earlier on shareholder alignment, I'd like to reiterate that we charge a management fee based on net asset value instead of gross assets. The reason being we don't want to get paid simply for taking on leverage. Further, our incentive fee of 12.5% is below the 15 to 20% of other peers in the sector and we incorporate a net realized loss look back on a one to three year basis. So if we underperform on the credit side we should earn lower fees. Additionally, for further alignment with our shareholders, the Board has approved an additional $5 million of open market share repurchases at PSBD. This is in addition to the ongoing 10b51 share buyback plan that PSBD currently has in place. Given the market level discounts to Net Asset Value (NAV) in the BDC space, we believe this could be an accretive tool to further shareholder return. As we navigate current market dynamics, we are in lockstep with the priorities of our shareholders and will continue to provide transparent visibility into our performance which includes monthly Net Asset Value (NAV) disclosure. Now I'd like to turn the call over to Jeff who will review our third quarter 2025 financial results.

Jeff Fox - Chief Financial Officer and Director - (00:19:52)

Thank you, Matt Switching to the financial results, total Investment income was $31.7 million for the third quarter of 2025, down 15.1% from $37.3 million for the comparable prior year period. Total net expenses for the third quarter were $18 million compared to $21.6 million in the prior year period. Net investment income for the third quarter of 2025 was 13.6 million million or 43 cents per share compared to $15.7 million or $0.48 per share for the comparable period last year. During the third quarter of 2025, company had total net realized and unrealized losses of $10.3 million compared to total net realized and unrealized losses Of $8.2 million in the third quarter of 2024. This consisted of net unrealized depreciation of $7.9 million related to existing portfolio investments and net unrealized depreciation of $1.1 million related to exited portfolio investments. At the end of the third quarter, NAV per share was $15.39 compared to $15.68 at the end of the second quarter of 2025. Moving to our balance sheet, total assets were $1.3 billion and total net assets were $490.4 million as of September 30, 2025. At the end of the third quarter, our debt to equity ratio was 1.53 times, slightly up from the 1.51 times at the end of the second quarter Of 2025. Available liquidity consisting of cash and undrawn capacity on our credit facilities was approximately $252.8 million. This compares to approximately $253.5 million at the end of the second quarter of 2025. As part of our existing stock repurchase plan which commenced on January 22nd of 2025 and expires on January 22nd of 2026. During the third quarter we purchased 343,064 shares and at an average price of $13.75 for a total purchase cost of $4.72 million. As Matt previously mentioned, the board also approved an additional 5 million of open market share repurchases, which is in addition to the existing stock repurchase plan mentioned. On November 5, the board of directors declared a fourth quarter 2025 base dividend of $0.36 per share in line with our formalized dividend policy. Given the liquid nature of the portfolio, we plan to announce the supplemental dividend in December, which allows for repayments to settle. The supplemental distribution will be paid out of the excess of PSBD's quarterly undistributed net investment income above the base quarterly distribution. With that, I'd now like to open the call up for questions. Thank you.

OPERATOR - (00:23:01)

And at this time, I would like to remind everyone, in order to ask a question, please press star. then the number one on your telephone keypad. Once again, star one. And we will pause just a moment. To compile the Q and A roster. All right, looks like our first question. Today comes from the line of Kenneth. Lee with RBC Capital Markets. Kenneth, please go ahead.

Kenneth Lee - Equity Analyst at RBC Capital Markets - (00:23:25)

Hey, good afternoon and thanks for taking my question. Just the investments associated with First Brands. Wonder if you just talk a little bit more about what's the current outlook for the path to recovery there and perhaps you could just talk about why was there a decision made to hold on versus sell the investments in the quarter?

Matt Bloomfield - President - (00:23:48)

Thanks. Hey Ken, it's Matt. Thanks for the question. Yeah, so I'd say it's obviously an incredibly complex situation which I think, you know, quite frankly is going to take quite some time to work through the bankruptcy courts. So from, from our perspective, you know, we're essentially taking it on a day by day basis as we work with, you know, legal counsel and advisors on really trying to, to understand the ins and outs of what's taking place. You know, our view on, on, you know, staying involved. We were obviously part of, you know, the group that put together a pretty sizable debtor and possession financing for the company, which, you know, came with a lot of, you know, benefits to our existing position, including, you know, kind of the three to one roll up to kind of put us at the top of the capital structure. Obviously some pretty outsized economics as part of that, you know, and our view is that there's still, you know, pretty good tangible brand value across that portfolio. So that is, you know, kind of the rationale for staying involved to date, you know, on a go forward basis. We'll continue to evaluate, you know, what we think makes the most sense to ultimately, you know, improving recoveries. And I think, you know, as we alluded to with the life scan situation coming off, you know, that was, you know, a tough situation for many, many quarters and you're kind of working through that process is ultimately going to result in most likely a par recovery, you know, for us. So I think we want to be patient, we want to kind of see the process through. But it's obviously an incredibly complex situation that is going to take, you know, quite a long time to work through.

Kenneth Lee - Equity Analyst at RBC Capital Markets - (00:25:27)

Gotcha. And just one follow up, if I may. One of the advantages of the private credit side is that potentially there's more documentation, more ability to due diligence for. The liquid credit side. Do you anticipate any changes in the investment process in terms of evaluating the adequateness of collateral go forward just based on the experiences you had with First Brands there?

Matt Bloomfield - President - (00:25:57)

Thanks. You know, I think we continue to do everything we can from a documentation standpoint, whether it's, you know, on the liquid side or on the private credit side. You know, obviously in the first brand situation, everything that's kind of being reported that was done kind of on an off balance sheet basis, kind of hidden from most lenders vantage point. So I'd say that is a much different situation than a typical restructuring where, whether it's LifeScan or Kloeckner that we've talked about, given kind of what transpired, you know, kind of behind the scenes and if you will, on first brands. But yeah, I think documentation, you know, certainly is a very, very important thing that we always look at and try to push as hard as we can to, you know, make sure it's as tight as can be. And there's lots of situations where we ultimately will not invest in a transaction if there's certain provisions within the credit agreement that we aren't able to get.

Kenneth Lee - Equity Analyst at RBC Capital Markets - (00:27:00)

Gotcha. Very helpful there. Thanks again.

OPERATOR - (00:27:03)

All right, thanks, Kenneth. And our next question comes from the line of Melissa Liddell with JP Morgan. Melissa, please go ahead.

Melissa Liddell - Equity Analyst at JP Morgan - (00:27:13)

Good afternoon. Appreciate you taking my questions. First thing, I wanted to clarify the total repurchase capacity in light of the 5 million that was just approved. It seems like you're running at a little bit below that on a quarterly basis right now. And so I'm wondering how many, assuming a sort of steady repurchase level, what is that capacity right now on a total basis?

Matt Bloomfield - President - (00:27:42)

Yeah, so we've still got several million of existing capacity from the existing 10B51 that was kind of reinstituted earlier this year. So there's no changes to that. This is just an additional four in the form of an open market purchase plan. So kind of just gives us additional firepower. I think if, you know, there's certain days when the markets are more volatile for us to be able to continue to be active at what we think are pretty attractive levels for buybacks. So it's just an additional plan and then we'll continue. The board will continue to reevaluate on a go forward basis, you know, the existing 10B51 and that's also in addition to, you know, the plan that's still in place at the management company level. And all that's in the, in the 10Q in more detail.

Melissa Liddell - Equity Analyst at JP Morgan - (00:28:32)

Okay, thank you. Following up on one of the slides in your slide deck, it looks like interest coverage picked up a little bit more than normal quarter over quarter, jumping to two and a half times from 2.2 times last quarter. I'm curious if that's just a function of lower borrowing costs or if that's also reflective of general top line or EBITDA growth within the portfolio.

Matt Bloomfield - President - (00:28:58)

Yeah, we agree it was a nice move. Quarter over quarter. I think it was a mix of continued EBITDA growth within the portfolio which again we think shows a lot of strength in the underlying borrowers across the portfolio. And then also to your point, as spreads have compressed some of these borrowers, borrowers have had the ability to kind of refinance and reprice their facilities. So their all in cash interest costs have come down as well. So the combination of both of those, the EBITDA growth and the lower interest burden has caused that to increase, which again we're very pleased with. But it certainly seems to be accelerating, which is good.

Melissa Liddell - Equity Analyst at JP Morgan - (00:29:38)

Thank you.

OPERATOR - (00:29:40)

Thanks, Melissa. And our next question comes from the. Line of Doug Harter with ubs. Doug, please go ahead.

Corey Johnson - (00:29:48)

Hi, this is Corey Johnson on for Doug. I just have a question. Can you maybe help me to understand the internal rating system and I guess, you know, just the decision of why first brands would not be considered really a one, because there were no one ratings during this quarter. Yeah.

Matt Bloomfield - President - (00:30:09)

So you know, our rating system is more relative value focused versus you know, kind of pure, you know, credit metrics that a lot of private credit lenders use. So for us it's really about when we look across a name, whether we think it's kind of fair value at A level A2 would be one that we would obviously be worried about and looking to reduce. So first brands kind of falls in that category. But a four for us is more of we think it's attractive whether it's on a dollar price on a spread basis where on the liquid side of the portfolio we would be looking to buy that loan in the secondary market, if you will. So it's more relative value based versus just pure underlying credit metrics on how we score it. And so those ratings move around inter quarter based on company performance, industry dynamics and kind of secondary trading levels.

Corey Johnson - (00:31:06)

Got it. Thank you.

OPERATOR - (00:31:11)

All right. Thanks to Corey. And that appears to be all the questions we have. So I will now turn the call. Back to Jeremy Goff for closing remarks. Jeremy?

Jeremy Goff - Managing Director - (00:31:22)

Thank you, operator. We wish everyone a happy and healthy holiday season. And we look forward to updating you on our fourth quarter 2025 financial results in the new year. Thank you everybody for joining.

UNKNOWN - (00:31:34)

Thanks, Jeremy.

OPERATOR - (00:31:35)

And this concludes today's conference call. You may now disconnect. Have a great day, everyone.