Almirall, S.A. (ALM.MC) Q3 2026 Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Almirall 9 months 26 financial results and business. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. If you join using device audio, click the raise hand button on your screen. To withdraw your question, please press *11 again or click the lower hand button. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pablo Divasson, Head of Investor Relations. Please go ahead.

Pablo Divasson del Fraile: Thank you very much, Sandra. Good morning, everyone. Thank you for joining us for today's quarterly earnings update and review of Almirall's 9 months financial results for 2026. As always, the slides we are using today are available in the Investors section of our website at almirall.com. Please move to Slide 2. Let me remind you that the information presented in this call contains forward looking statements, which involve known and unknown risks. Uncertainties and other factors that may cause actual results to materially differ from what we are sharing today. Please move to Slide 3. Presenting today are Carlos Gallardo, Chairman and Chief Executive Officer Jon Garay, Chief Financial Officer and Karl Ziegelbauer, Chief Scientific Officer. Carlos will start with the business highlights for the first 9 months of 2026. Follow by an update on biologics and the key growth drivers of our medical dermatology portfolio. Carlos will then provide an update on the pipeline and R and D programs. John will walk you through the financial review before Carlos concludes the presentation and we open the call for questions. I will now hand over to Carlos Gallardo our Chairman and CEO. Please move to Slide 5.

Carlos Gallardo Piqué: Thank you, Pablo, and good morning, everyone. Almirall's performance has been progressively since the start of 2026. Delivering a steady 9 month result. In line with the trajectory set out at the beginning of the year. Net sales for the 9 months reached €889 million, representing growth of 8.3% year on year. European dermatology continues to act as the primary growth engine. This momentum is expected to continue into the fourth quarter. On the guidance for the year, Jon will provide some color in a short while. Turning to products, Ilumetri is still delivering healthy and continued double digit growth. Ebglyss growth keeps supporting our long term view of the product with continued ramp up across key European markets. Wynzora and Klisyri are delivering growth in the mid to high teens as expected. We remain closely connected to the dermatology community, strengthening our partnership with physicians, through our ongoing participation at scientific platforms. A key highlight of this engagement was the 26 EADV Congress, where results for the ADlong and ADtouch studies were presented as late breaking data. Adding to the growing evidence base supporting Ebglyss. Turning to our pipeline. We are very proud of our medical dermatology pipeline comprising of 3 mid-stage assets across 6 development programs in 5 indications as well as a few earlier stage assets. We think it is 1 of the strongest in our history and a very meaningful for a company of Almirall size. We are particularly pleased with both the range of indications that it covers as well as for the commercial potential these assets collectively represent. Some of these drugs have the potential to become the next credible patient option for indications such as Hidradenitis Suppurativa, and alopecia areata. Coming months, we expect the first readout of the pipeline. The IL-2 for atopic dermatitis. And the rest will continue during 2028 and early 2020. Please move to the next slide for an update on our biologics portfolio. Third quarter sales of Ilumetri our biologic for psoriasis, represents the best quarter since the launch of the product. Over €65 million in sales. Maintaining the product's steady double digit growth trajectory. Net sales reached €191 million in Europe in the first 9 months of 2026. Ilumetri continues to hold a solid position in the psoriasis market with the leading anti IL 23 class. Its profile is supported by real world evidence, including the 2-year positive study data presented at the EADV 2026 October meeting. Highlighting sustainable disease control and meaningful long term patient benefits. We also see further opportunities to strengthen the evidence base. The above study in psoriasis will assess the 200 milligram dose in biologic naive patients diagnosed for less than 2 years. Performance remains consistent with our long-term expectations. And we continue to be firmly on track to deliver more than €300 million in peak net sales. Please move to the next slide for the Everest highlights. Ebglyss continued to scale across Europe and generated more than €102 million in net sales in the first 9 months of 2026. The results reflect continued healthy growth across the European franchise, and our mid- and long term view remains unchanged. We expect the strong clinical profile of lebrikizumab and continued expansion of the atopic dermatitis market to support sustained growth. The clinical side, Almirall together with Lilly continued to strengthen Ebglyss' positioning. The EADV 2026 Congress in October, successful 5-year ADlong results and AD touch data were presented at the late-breakers, are adding further evidence on the drug's clinical profile and long term value. As we mentioned in prior earnings calls, the ADorable-1 pediatric data and the pediatric submission was accepted by the EMA. The every-8-week maintenance regimen has been approved in The United States. While the ADhope to study in Europe can potentially support an extension of the dosing interval, to every 12 weeks. I will now hand over to Carlos to walk you through our pipeline developments in more detail.

Karl Ziegelbauer: Thank you, Carlos. and good morning, everyone on the call. Our early and mid stage pipeline offers multiple opportunities for future value creation. 4 proof-of-concept of Phase II studies are ongoing. And 2 additional studies are planned to start towards year end. The Phase II study for our anti IL-1 antibody in Hidradenitis Suppurativa is ongoing. Likewise, the Phase II for Alto mutant Fc in areata. Our partner, Simcere, is also running a Phase II study of IL-2 mutant Fc in atopic dermatitis. In addition, a proof of concept study of our anti IL-21 antibody, Hidradenitis Suppurativa, is running current. Next, we plan to advance our 2 mutant Fc into SLE with cutaneous manifestation. And our anti-IL-1RAP antibody into pyoderma gangrenosum, a rare painful, neutrophilic disease with high unmet need with a potential role for IL-1 pathway dysregulation. Together, these programs provide 6 proof-of-concept of Phase II studies with readout expected to begin this quarter and continue over the next years. While still early, they are grounded in defined biology and offer a diversified set of potential. First, or best in class opportunity. Next slide, please. Alongside clinical execution, we are building the next wave of innovation in medical dermatology. We focus our internal capability on therapeutic hypothesis generation by partnering selectively for differentiated technologies and modality to create products. Our new collaboration with Crystal-O is a good example for this strategy. And shows that we make progress with our activities in China. It combines Crystal-O's ion channel and small molecule discovery expertise with Almirall's development and commercial capability to pursue novel therapies in medical dermatology. This collaboration gives us access to novel technology while enabling Almirall to lead future global development and commercialization outside China. This strengthens our early pipeline and creates additional portfolio opportunity within our core dermatology Next slide, please. We continue to invest selectively behind our marketed products, through label expansion and additional clinical evidence. For tirbanibilium, the European regulatory process for the larger 100 square centimeter treatment is ongoing. With approval expected in the coming weeks. With Eli Lilly, we continue to pursue label expansion and generate additional evidence for Ebglyss. We have filed with EMA to extend the lebrikizumab label to children aged 6 months to 17 years and weigh below 40 kg and have moderate to severe atopic dermatitis. Approval is expected in the second half of 2027. We are also conducting a Phase III study of lebrikizumab in Nummular eczema with a readout expected in 2029. Let me now highlight recent clinical results. Next slide. At the EADV 2026, Almirall presented late breaking data from the Almirall sponsored ADlong study. Evaluating durability of response and long term disease control with continuous lebrikizumab treatment in moderate to severe atopic AD. ADlong is a 2-year extension of parent studies already running for 3 years, allowing to explore long term disease control for up to 5 years. Clinical benefit was sustained through week 108. At that time, 93% of patients achieved EASI-75 and 67% achieved clear or almost clear skin based on IGA 0/1. In addition, 78% achieved a pruritus in a score of 4 or below. The safety profile remained consistent with studies with no new safety signal. These results reinforce potential of lebrikizumab as a long term treatment option for sustained disease control with now patients being well controlled for up to 5 years. Next slide, please. Lebrikizumab not only provides long term control of atopic dermatitis, but also provides effective control in difficult to treat or high impact areas. 1 such area is hand and foot. And our partner, Eli Lilly, presented at EADV 2026 positive results from the AD Touch study. AD TOUCH is a Phase III study of lebrikizumab in moderate to severe hand and foot atopic dermatitis. AD Touch met its primary endpoint, 53% of lebrikizumab treated patients achieved clear or almost clear skin on the hands and feet at week 16. Compared with 17% on placebo. Benefits were observed early. With significant skin clearance improvements from week 4 and itch reduction from week 2. Patients also reported improvements in hand and foot pain. To broaden the clinical evidence base for these difficult to treat areas, Almirall has started dedicated Phase IIIb study to explore the efficiency and safety of lebrikizumab in adult and adolescents participants with moderate to severe face and neck atopic dermatitis. In summary, those recently presented clinical data support the best in disease profile of lebrikizumab. With that, I will hand over to John for the financial review.

Jon U. Garay Alonso: Thank you, Karl, for the pipeline update, and good morning, everyone. Net sales for the first 9 months of 2026 reached €889 million representing an 8.3% year on year growth. Third quarter net sales were €286.5 million an increase of 10.1% compared to the same period the prior year. European dermatology keeps delivering solid double digit growth of 17.6% year to date, reinforcing Almirall's path towards leadership in medical dermatology. EBITDA for the first 9 months reached €222 million corresponding to a margin of around 25% of net sales 2 years ahead of our 2028 ambition. It reflects continued operating leverage and keeps us on track to deliver within our full year 2026 EBITDA guidance range. Gross margin was around 65% for the 9 month period. This includes the benefit from activity of divestment and some positive sales mix effects partially offset by minor effect of higher royalty tiers. R and D investment was €107 million for the first 9 months representing 12% of net sales. Disciplined SG and A approach allowed net sales continue growing faster than our expense base. We closed the third quarter with a net cash to EBITDA ratio of around 0.2x with a strong cash generation in Q3, leaving us with significant financial flexibility. At this point, we reiterate our full-year 2026 guidance with net sales growth in the range of 9% to 12% and EBITDA range of €270 million to €290 million. Based on our performance year to date, and regarding the net sales line, we expect to finalize the full year towards the mid to low end of the range of our guidance. On the other hand, EBITDA points toward the upper range of the guidance as we are benefiting from both the operating leverage and a disciplined management of our SG and A. Next slide, please. The third quarter continued the positive sales trend in medical dermatology. European dermatology remained the primary growth engine supported by Ilumetri and Ebglyss. The non-derma legacy portfolio declined slightly as some markets experienced certain competition in a mature environment. The lower sales in certain products as Eclida or Crestor were partially compensated by positive contributions from products such as Tesavel or Almax. In The United States, performance declined year on year, reflecting continued pressure on the legacy portfolio. In the rest of the world, overall sales grew strongly driven by solid dermatology demand. Let me take you through now dermatology performance in more detail on the next slide. Our European dermatology business continued to deliver strong growth through the first 9 months. Ilumetri reached €191 million delivering a robust 11.5% year on year growth. In fact, Ilumetri delivered its best ever quarter with €65 million sales and growth of c. 14% versus prior year quarter. Ebglyss reached €132 million growing 75% versus prior year. Together, these 2 biologics remained the principal drivers of the portfolio. Wynzora continued to build market share across core European countries with €29 million sales in the 9 month period, growing by 15%. Klisyri reached €18 million with growth of around 22%. In The United States, overall performance declined including a more competitive environment for Seysara, with Klisyri accelerating its performance as access expansion agreement with Cigna earlier this year. Dollar euro FX evolution represented negative impact of 6 percentage points in our performance year to date. In the rest of the world, dermatology sales were primarily supported by purchase patterns of our partners and solid demand for Finjuve in Asia. Overall, our dermatology franchise continues to show solid underlying performance. Next slide, please. Let's briefly review the remaining elements of the P and L. For the first 9 months, gross profit was €576 million representing a 65% of our net sales. The margin reflects a positive contribution from the Aczone and Tazorac divestment favorable sales mix, and good management of our manufacturing cost partially offset by Ilumetri royalties. R&D was €107 million at 12% of net sales. The quarterly evolution reflects the progress in our early development and lifecycle management programs. While still below our 12.5% ambition for the year, we expect a higher level of spending next quarter. SG and A, excluding depreciation and amortization, was €366 million for the first 9 months. The disciplined approach to our expenses supported continued operating leverage, with net sales growing faster than SG and A, as guided in February. EBITDA reached €222 million representing a margin of 25% over net sales 2 years ahead of our 2028 ambition. Financial expenses include the valuation impact of the equity swap linked to the share price and the usual financing cost of the business. Please move to next slide. Our balance sheet remained stable through the first 9 months of the year. Intangible assets reflect capitalized R and D development milestone to Simcere for advancing the ILQO mutant fusion protein into phase 2, WuXi collaboration access fee, recent Crystal-O agreement, as well as other minor collaborations, which were all outweighed by higher amortization. Our net cash to EBITDA ratio stood at around 0.2x continuing to provide us with a strong financial flexibility to pursue new licensing opportunities and selective bolt on acquisitions. Finally, as a testimony to our prudent leverage and cash management, Moody's upgraded our credit rating to Ba1 from Ba2 in June. Let's now turn to the cash flow statement. We generated €61 million in cash in the first 9 months of 2026 compared to a reduction of -€1 million in the same period last year driven by operational leverage in our P and L disciplined working capital management, and higher share. Free cash flow bridged €83 million compared to €42 million in the prior period. Cash flow from operating activities reached €203 million representing a 39% improvement versus same period last year driven by working capital management and higher profitability. Cash flow from investing activities primarily reflects the 2025 Ilumetri sales milestone paid in the first quarter of 2026 largest milestone payment expected this year. Remaining investment related payments have been limited year to date and are expected to remain modest keeping total cash outflows within normal limits excluding any potential new acquisition. Cash used in financing activities was lower year on year, mainly due to lower cash dividend payments with more shareholders opting to receive shares. Overall, these results demonstrate the increasing financial strength of Almirall. We are delivering solid top line growth while translating that growth into significantly stronger profitability and cash generation. Our operating leverage is becoming increasingly visible with EBITDA growing well ahead of our sales and our margin already reaching 25%. While maintaining disciplined investment behind our future growth. At the same time, our strong balance sheet give us flexibility to continue investing in our pipeline, and pursue value creating opportunities. With that, I would like to hand it over to Carlos for his closing remarks.

Carlos Gallardo Piqué: Thank you, Jon. To summarize, the first 9 months of 2026 remains firmly on track. The progressive performance is in line with our expectations. And we remain confident in the 2026 outlook and in our ability to deliver our targets. Turning to the key right growth drivers. Our biologics portfolio continues to provide strong momentum and expanding dermatology market. Ebglyss continues to scale across Europe and remains a central driver of our growth. While Ilumetri continues to deliver steady double digit growth as it moves through a more mature phase of its growth cycle. Both assets have loss of exclusivity dates beyond 2033. Moreover, we continue to generate life cycle management and real world data that further strengthen the clinical profile and long term value of both products. In parallel, our growing pipeline now spans immune mediated skin diseases, rare dermatology, and non melanoma skin cancer. With 6 proof-of-concept of phase 2 programs moving forward. Most of these assets are first in class or potentially best in class profiles, and some target large markets. In the coming months, we expect the first readout of the pipeline, the IL-2 for atopic dermatitis, and the rest will continue during 2028 and early 2020. Assuming successful progress, this could provide us with a diversified base of opportunities for sustainable growth well into the next decade. Finally, we remain disciplined but active on capital deployment. Our strong financial position supports selective bolt on M and A and early stage licensing opportunities that fit our medical dermatology strategy. Together, our well positioned portfolio the depth of our targeted pipeline, our financial discipline, and our continued execution give us confidence as we advance Almirall's leadership in medical dermatology. Back to you, Pablo.

Pablo Divasson del Fraile: Thank you, Carlos. Sandra, back to you for the Q&A, please.

Operator: Thank you. To ask a question, you will need to press *11 on your telephone Or if you have joined via device audio, click the raise hand button and wait for your name to be announced. To withdraw your question, please press *11 again or click the lower hand button. We will now take our first question. From the line of Kirsty Ross-Stewart from BNP Paribas. Please go ahead.

Kirsty Ross: I have a few questions, just a couple on Ebglyss if that is alright. So just on full year expectations, can you let us know your level of comfort with the current expectations for around €190 million, €195 million? And it is comfortable and kind of where you see the source of further acceleration in Q4. Coming from? And then just looking forward into 2027, I was wondering if you could provide any more details on the potential of the German rebate reform coming in January. Have you been able to get any clarity on your eligibility for exemptions? And if not, are you able to give us a kind of approximate range of the potential impact on top line growth in 2027? Thanks very much.

Carlos Gallardo Piqué: Thanks, Kirsty. We remain very optimistic about the mid and long term opportunity for Ebglyss. The robustness of the profile that keeps being enriched with the new data that we are generating, and we showed recently at EADV, the ADlong data, the AD touch, we are also generating additional data. And this is translating into dynamic market share growth, within a market that continues to grow very healthily. So we are very confident about the mid and long term outlook of Ebglyss. We are happy to reiterate our pixels estimate of more than €450 million. In terms of your second question about 2027 details, it is too early to provide guidance for 2027. And we will provide more guidance on the February call. In terms of your comments about the health care reform that was passed in Germany in July as you mentioned, there are a number of ongoing discussions to negotiate deductions and exclusions from this rebate there is still a lot of uncertainty about how this will land. We are monitoring the reform closely, as you can imagine. We think that we qualify for a number of these deductions. But as of today, it is very, very difficult to see, which is going to be the impact of this on Almirall. Some of the market estimates estimate an impact reform in the range of between 1-2.5% of our revenue in 2027 and going forward. And as of today, probably this is the best estimate range.

Kirsty Ross: Sorry. Can I just clarify on my first question? Just, on the 2026 expectations for Ebglyss. I think you mentioned €190 million at Q2. Just wondering if you can comment on that.

Carlos Gallardo Piqué: Q2. We are very confident on the long-term peak sales estimate that you provided, and that is what we are reiterating today.

Kirsty Ross: Okay. Understood. Thank you.

Carlos Gallardo Piqué: Thank you. Thank you.

Operator: We will now take the next question from the line of Shan Hama from Jefferies.

Shan Hama: Hi there, thank you for taking my questions. Just 2 for me. Given that you have consistently been around a 25% EBITDA margin now, which is in line with your 2028 goal. How should we think about this going forward? I mean, assuming there will be some quarter on quarter volatility, but what can we expect for 2027 and 2028 with the balance of sales growth and then also OpEx increase potentially? And then my second question is, I mean, it would be great to hear about the rationale for IL-1RAP in PG. What drives conviction in this indication, and then how does that compare with the potential opportunity in HS? Thank you.

Carlos Gallardo Piqué: Thank you, Shan, for the question. So we are elated that we have reached this 25% EBITDA range ahead of what we initially thought a number of years ago, thanks to the operational leverage that we have been able to demonstrate. Going forward, again, very cautious about saying anything about 2027, and we will provide more color in the future. As you can imagine, this will largely depend on the POC results. And the investment decisions that we decide to make on these assets going forward. Always focusing on long term value maximization. On your comment on the IL-1RAP in PG, that is 1 more POC that we have started. We are very excited, and I will let Karl comment on the rationale.

Karl Ziegelbauer: Yes. Thank you, Shan, for the question. So, PG is a neutrophilic skin disease characterized by painful necrotic ulceration, where there is still a very high unmet medical need as there are no approved targeted therapies. it is more a kind of a rare disease, with a prevalence of 1 in 7000 adults, and there is evidence that the IL-1 but also the IL-36 is involved in the pathophysiology and with our proof-of-concept study, we want to further explore this hypothesis of inhibition of the IL-1, the IL-36, but also the IL-33, this combination that we target with our anti IL-1RAP antibody, whether this provides benefit in this high unmet medical need indication. With respect to your question about the opportunity versus HS suppurativa, this is too early to comment as we are just starting to generate some initial data and we will update you as we go along.

Carlos Gallardo Piqué: Thank you.

Operator: Thank you. We will now take the next question from the line of Guilherme Sampaio from Caixabank. Bank. Please go ahead.

Guilherme Sampaio: Hello. Thank you for taking my question. So I am sorry to insist on Ebglyss. Your mid-term comments were as reassuring as before. But over the short term, you used to be a bit more reassuring than you were today. So is there anything that we should bear in mind regarding shorter term average performance that should lead us to think that it could deviate from the performance this quarter, specifically on Q4. And second, regarding M and A, you have been actively talking about this topic. Is there anything on the radar at the moment? Thank you.

Carlos Gallardo Piqué: Thanks, Guilherme, for the question. I like your insistence on the topic. But I said what I said before, Maybe at that. At the beginning of the year, we were expecting progressive performance. On the growth portfolio. that is what we are seeing. We are confident on the outlook that we have provided. M and A and licensing, so business development in general remains a fundamental part of our strategy. And when we have something to announce, we will share it with the market.

Karl Ziegelbauer: Maybe I can add. You have seen, that we are very active in the early stage yeah, with collaborations for example, in Crystal-O, Ichnos, or also WuXi. Yeah. And this is based on our strategy that we focus our in house activity of channel novel therapeutic hypothesis for skin diseases where there is still a high unmet medical need and where we take clear mechanistic rationale how to address this. Yeah. And then once we have established it, we look for the best partner and who has then the modality and the technology to address this therapeutic hypothesis in the best possible way. And those are then different companies, both in Europe, but also as we have seen, we are making quite a lot of progress with our activities in China, which is, for us, a good opportunity to explore those novel scientific hypotheses in a cost-effective, quick way. With some of these collaborations are not only covering the research days, but the partner will bring the molecules up to proof of concept, for us then having the optionality based on those results to develop this globally.

Carlos Gallardo Piqué: Okay. Thank you.

Operator: Thank you. We will now take the next question. From the line of Jaime Escribano from Banco Santander. Please go ahead.

Jaime Escribano: Hi. Good morning. So a few questions from my side. So in terms of top line review. Ilumetri, you said best quarter in history. If you can elaborate a little bit more, what is behind this very good performance. Also in rest of the world, which was very high, how sustainable is this, How should we think about this line? Going forward? On the other hand, I mean, the legacy, so all what is non-derma, was down -4.6% in 9 months. So if you can provide us some color, Seysara was still a little bit weak. But how-- again, how-- A little bit of outlook for going forward. So this in terms of sales, then I was positively surprised on the gross margin. John, you provided some hints But, again, what would be the outlook going forward? And then on free cash flow, which you almost doubled, the free cash flow versus last year, So, maybe you can elaborate on some of dynamics in terms of CapEx working capital and if this is going to keep being so strong. Thank you very much.

Carlos Gallardo Piqué: Thank you, Jaime, for the question. So I will provide some color on the first 2, and then John can add more comments maybe on the rest of the world as well. And on the legacy gross margin free cash flow. Right? But let me start with Ilumetri. Yes, I am very pleased with the growth of Ilumetri. And why is that? Well, we keep generating real world data. That supports the great efficacy of this product. And the dosing schedule that is extremely welcomed by patients and physicians, And slowly but surely, we keep establishing this product as the ideal product for first line maintenance and first line treatment. Of moderate to severe patients. I remember also we launched the 200 milligram presentation a couple of years ago that this has contributed to add to the robustness of the profile of Ilumetri providing those flexibility, which is again, highly welcomed by physicians. So I would say it is not 1 single factor. it is a combination of factors. that together with the fact that. That the market continues to grow nicely. This is what is helping to propel the growth of Ilumetri, and we expect that this will continue in the coming months. Yes. The rest of the world also, is growing nicely. We established last year a number of new partnerships with some of the products. And these are starting to kick in. Into the performance of rest of the world. And perhaps, John, you can add more color here on the other questions.

Jon U. Garay Alonso: Yeah. Thanks a lot, Carlos. Yes. Following Carlos' comment on the rest of the world basically, geographical expansion is part of our objective Jaime in the next months. And in this case, what we see is the positive impact by the launch of Finjuve recently in 1 of the jurisdictions in Asia. We are tracking it, closely. It is too early still for us to tell you how this can grow in the upcoming quarters, so we are monitoring it closely. But you can see that the rest of the world is already 5% of our company sales, and they are growing. At the very healthy, more than double digit rate. Okay. Now if we go to U.S., it was the legacy portfolio performance. Yes. We are observing this year has been a bit more competitive environment and a bit more challenged than the 1 we were expecting at the beginning of the year. Not totally unexpected because we bear in mind most of these products have been in the market for many years. So it is not bad to see some ups and downs as the 1 we are seeing this year. We are monitoring it closely and perhaps we will see more stabilization next year. Also, there is a component of phasing in the purchase patterns of our partners. We expect to see some moderation in the upcoming months. Jaime. Regarding your question on gross margin, yes. We have delivered a solid gross margin in Q3 in the range of 65%. The same discipline approach we are implementing to our SG&A. We are also implementing it to our manufacturing cost, and we were a bit surprised about this positive income. It cannot be considered as a good proxy for the upcoming quarters. I think in the coming quarters, perhaps something close to 64%. In terms of product margin, can it be a better proxy than 65%? But overall, we remain confident on the disciplined approach to what P&L lines we are implementing. I am very happy with the performance the teams are delivering. I think your last question was about the cash flow. Indeed, our free cash flow has multiplied by 2. In the first 9 months of this year when we have been delivering €83 million compared to €42 million last year. Basically, there are I would say, 3 main components, driving this 2 are purely operational. 1 is the increase profitability level you see in our P&L. That is a direct consequence of the operational leverage we promised to deliver and that it is taking place and is becoming increasingly visible in our P and L. The second point is working capital management. In the financial statements, we have made visible this morning you can see a swing of -€16 million to +€22 million. In terms of capital management, mainly driven by disciplined inventory management without impacting the business, but we are putting a big focus on the inventory levels we have. And also management of our accounts payables and accounts receivables. So very happy for the performance the company is doing, on that area. Of course, if you expect this to continue being repetitive in the upcoming years, We need to be modest working capital. You come to a certain level, and then you try to maintain it. it is it is not equally repetitive year-on-year. But, so far, very happy and, great recognition for the job the team is doing. Have we replied your questions, Jaime?

Carlos Gallardo Piqué: There were many of them. Thank you.

Jaime Escribano: Thank you very much.

Carlos Gallardo Piqué: Yep.

Operator: We will now take the next question. From the line of Pablo de Renteria from Kepler Cheuvreux. Please go ahead.

Pablo de Renteria: Yes. Good morning, and thanks for taking my questions. Most of them have been already answered. But just 1 quick follow-up on Germany, please. So you mentioned a potential 1-2.5% impact on group sales in your base case. Given that this is essentially a price driven impact, should we assume that most of it will flow through to EBITDA, or are there any mitigating factors we consider when assessing the margin impact? Thank you.

Carlos Gallardo Piqué: Pablo, thank you for the question. John will take the answer, but as I mentioned before, also take into account that there is still a lot of uncertainty. About the impact of these reforms. Of course, we are monitoring it very closely, and we will provide an update once the negotiations conclude. Hopefully, in the in the next few weeks. But Jon, do you want to comment on Pablo's question?

Jon U. Garay Alonso: Yes. Thank you very much, Carlos, and thanks, Pablo, for your question. At the moment, it is a bit too early to discuss the potential impact or to discuss the potential alternative measures we would be able to implement because the negotiations from the discussions, they have just started. In any case, Paul, what I would like to remark is that, hopefully, everybody is able to see that we are being quite proactive with a discipline, management of our expenses across all the P&L lines, and you can already see the acceleration of the operational leverage And, hence, the guidance we have provided this morning that EBITDA would be finalizing in the upper range. Of around €290 million that we have provided. So we will monitor it more broadly. And when we have a clear view, we will be able to provide you more transparency.

Carlos Gallardo Piqué: Thank you.

Operator: Thank you. There are no more questions at this time. I would like to hand back over to Pablo Divasson for his closing remarks. Apologies, there is 1 more question. We will now take the next question. From the line of My bad. There are no more questions. I would like to hand back over to Pablo Divasson for his closing remarks.

Pablo Divasson del Fraile: Thank you very much, Sandra. And if there are no further ladies and gentlemen, this concludes our today's conference call. Thank you for your participation. You may now disconnect.