This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Corporacion Inmobiliaria Vesta, S.A.B de C.V. American Depositary Shares, each representing ten (10) Common Shares
Q3 2023 Earnings Conference Call
10/20/2023
spk00: Greetings, ladies and gentlemen. Welcome to the Vesta third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow today's prepared remarks. And as a reminder, this call is being recorded. Please note that you will need to connect via telephone if you would like to participate in the Q&A. It is now my pleasure to introduce your host, Fernanda Bettinger, Investor Relations Officer. Please go ahead.
spk04: Good morning, everyone, and thank you for joining us today. With me are Lorenzo Dominique Vero, Chief Executive Officer, and Juan Sotil, Chief Financial Officer. The earnings release detailing our third quarter 23 results was released yesterday after market, and it's available on the company's website, along with our supplemental materials. On today's call, management's remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. This assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures included herein were prepared in accordance with IFRS, which differs in certain significant respects to U.S. GAAP. All information should be read in conjunction with and its qualified insincerity by reference to our financial statements, including the notes directo and are stated in U.S. dollars unless otherwise noted. I'll now turn the call over to Lorenzo Vero.
spk09: Thank you, Fernanda, and good morning, everyone. Recent geopolitical events have deeply saddened and affected the global community. We hope for increased stability and a peaceful resolution. While there is understandable concern regarding today's volatile capital markets, expectations of increased interest rates and enduring inflation, it's important to note that Vesta will continue to benefit from strong momentum on development front despite macro unpredictability. Our sector and our business are uniquely resilient. with a well-balanced portfolio of outstanding clients in diversified high demand industries. Vesta's business case remains attractive in an inflationary environment as we benefit from a natural hedge on inflation with annual rent increases that are tied to CPI, an important competitive advantage. Further, Vesta's business is dollarized. So while our third quarter results reflect foreign exchange headwinds, This will not materially impact our long-term performance despite a strengthening of PESO. As always, we are vigilant to changes in market dynamics and plan for a range of outcomes to respond accordingly if we see current trends shift. However, outstanding nearshoring driven demand continues. Driven by different concerns about escalating risks and the rising cost of sourcing and manufacturing in Asia, particularly China. We believe today's turbulence and geopolitical volatility will not only strengthen this trend, as manufacturers seek to future-proof their supply chain more than ever. INEGI reported that Mexico's July industrial production surged by nearly 5% year-over-year, which marks the 21st straight month of industrial growth and at a solid pace. Vesta's third quarter performance reflected strong execution across our organization in line with our level three strategy goals on multiple fronts. Before I get into the results, I'd like to underscore our team's commitment to excellence, which is enabling our success on the execution of our growth plan. Now, let me share more with you on our third quarter 2023 results. We saw vacancy rates at record lows with strong leasing and increasing rental prices driven by tightening supply, particularly in Mexico's most desirable manufacturing hubs. During the third quarter 2023, we began construction on nine new buildings equivalent to 2.6 million square feet in Mexico's most strategically relevant markets including three in Mexico City metropolitan area, three in Juarez, two in San Luis Potosi, and one in Aguascalientes. Note, we have increased our presence and continued traction in the Bajio region during the quarter. CBRE remarked within its market analysis that the Bajio region saw acceleration in new demand and revived construction activity, particularly from the automotive sector. Starting price for space is trending upwards, in line with other key Mexico markets as logistic companies expand their presence, attracted to the Bajio's highly desirable and advantaged location, skilled labor force, and infrastructure. Half of the overall activity under construction within the Bajio market is pre-leased with net demand, therefore expected to continue to further increase for the remainder of 2023 and into 2024, which will drive up asking prices. For Vesta, part of our Aguascalientes building we're starting has already been pre-leased, and the development plans Vesta has in place for our land reserves will continue to capitalize on this trend to further close the gap between Bajio and other regions. Our total development pipeline therefore reached 3.5 million square feet for the third quarter, with a $291 million expected investment and a 10.2% average yield on cost. Third quarter 2023 deliveries of 2.3 million square feet and buildings under construction increased Vesta's total portfolio to more than 40 million square feet, an important milestone for Vesta. Our properties appraised value increased materially during the quarter. to just over $3 billion as we've been incorporating new assets while the total portfolio has also been increasing in overall value. Vesta's land bank decreased during the quarter as land holdings transferred to the current active portfolio. Vesta's third quarter leasing activity reached 1.4 million square feet. of which 736,000 were new shoring-led contracts with multinational clients such as Foxconn, Sage Automotive, Sumitomo, Becker-Disley, Gates, and Continental in markets such as Guadalajara, Juarez, Aguascalientes, San Luis Potosi, among others. And 626,000 square feet in lease renewals during the quarter. I would like to highlight Vesta's strong balance sheet, reflected in our outstanding ratios, such as net to EBITDA of 3.1 times and loan to value of 25.8%, with no significant near-term maturities. We're focused on maintaining our discipline to drive continued four-quarter success on the final stretch of Vesta's level three strategy. we expect a strong end to 2023 driven by continued robust leasing while strategically and selectively executing on construction starts and potential asset sales. We're maintaining high levels of vigilance on our tenant base with a steadfast focus on sustainable growth to secure a solid foundation for 2024 that ensures sustained value creation for Vesta stakeholders. With that, Let me pass our conversation to Juan, and I will return for some brief closing remarks.
spk08: Lorenzo, thank you, and good morning to everyone on the call. Let me begin with a summary of our third quarter results. Starting with our top line, total revenues increased 24% to $56 million, mainly due to rental revenue coming from new leases and inflationary adjustments on rental property during the quarter. As a reminder, most of DESTA leases are indexed to inflation, We therefore continue to benefit from a favorable effect of higher than expected inflation on our top line results. In terms of the current mix, 86.4% of the first quarter revenue was denominated in US dollars, a slight decrease from 87.1% on the third quarter of 2022. Turning to our cost structure, total operating costs reached $5.9 million in this quarter from 2.9 million in the third quarter of 22. This was mainly due to an increase in real estate taxes arising from new buildings delivered in the quarter, insurance, maintenance costs, and other property expenses in connection with energy consumption at our Vesta parks. Adjusted net operating income increased 20.4 to 52 million. driven by higher rental revenue, while margin contracted 273 basis points to 92.1, mainly due to higher costs from rented properties. Administrative expenses were up 27.6%, reflecting the year-on-year best appreciation impact on Vesta employees' benefits. legal and auditing fees, as well as higher non-cash expenses due to an increase in the company's long-term compensation plan. In turn, adjusted EBITDA reached $45 million in the second quarter of the year, a 17.1% increase compared to the prior year's quarter. While the margin decreased 407 basis points to 80.3 due to decreased gross profit resulting from increased cost and expenses. Moving down the P&L, total other income reached $88 million compared to $52 million in the third quarter of 2022. This increase was mainly due to higher property revaluation gains and increase in interest income resulting from a higher cash balance. As a result, We closed the quarter with a pre-tax income of $131 million compared to $89 million in the third quarter of 2022, while Vesta FFO increased 26% to $34 million. Now turning to our CAPEX and portfolio composition, we invested $106 million in the quarter, mainly in construction of new buildings in the Northern, Bajio, and Central region. As of September 30, 2023, the total value of our existing portfolio was $3.1 billion, comprised of 214 high-quality industrial assets with a total GLA of 37 million square feet and with an 86.4 of total income denominated in U.S. dollars. Moreover, as Lauren noted, our total portfolio surpassed 40 million square feet in this quarter, which combines our existing portfolio and the new properties under development in Mexico's most strategic markets. Year over year, Vesta's stabilized occupancy therefore increased to 97.3% from 96.6% while total portfolio occupancy closed at 92.5% and the same store occupancy at 97.6%. Turning to our balance sheet, as Lorenzo mentioned, we are in a solid position with extraordinary ratios and no significant maturities in the near future. Our total debt remained stable, $929 million at the end of this quarter. Net debt to EBITDA was 3.1 times, and our loan-to-value was 25.8%. Cash and equivalent increased to $408 million, reflecting the funds raised from our recent IPO transaction in the New York Stock Exchange. In addition, subsequent to quarter end, on October 16, we paid a cash dividend for the second quarter of this year equivalent to 32 cents in pesos per ordinary shares. Finally, as a result of our strong leasing activity, supported by a continuing strong demand environment, We made the decision to revise our full year 2023 guidance. We now expect to achieve between 19% to 20% year-over-year revenue growth with an increase from our previous guidance from 17% to 18%. While adjusted NEO margin was revised to 92.5% from 93%, an adjusted EBITDA has been revised to 81.5% from 82%. This reflects higher expenses year-to-date. This concludes our third quarter 2023 review. Operator, could you please open the floor for questions?
spk00: We will now open the floor for questions. As a reminder, if you would like to participate, you do need to connect by dialing on your phone. To ask a question, please press star then the number 1 on your telephone keypad. To withdraw your question, press star 1 again. We'll pause for just a moment to compile the Q&A roster. Our first question will come from the line of Juan Ponce with Bradesco BBI. Please go ahead.
spk02: Hi. Good morning, everyone, and thanks for taking my question. Congrats on the strong results. So how are you managing the infrastructure bottlenecks with the new development projects? We continue to see this as a significant headwind on overall supply. Have new projects finished the construction phase without securing sufficient energy sources? Maybe with, you know, the expectation of securing them in a reasonable period of time. And lastly, are you seeing a similar pace of investments beyond what you have programmed through 2024? Thank you very much. Thank you, Juan.
spk09: for your attendance and your remarks and for your question. I'm sorry. No, that's Juan Ponce from Bradesco, right? Yes. Yeah, correct. Thank you, Juan. Well, definitely the development has its own challenges. uh therefore i like to highlight uh besta's expertise in this particular venue we have been this year was our 25th anniversary we've been developing for more than 25 years now and there's always bottlenecks there's always challenges but this is where our local expertise and our experience is a greater advantage a Energy, as you mentioned, has been one of the main challenges. However, for the land that we have acquired, let's say in the last years, we started and anticipated to the restrictions in terms of energy so that we have been able to secure for our clients enough energy for them to start and run operations. And I would like to invite you to visit any of our parks in Tijuana, for example, Guadalajara, Querétaro, and other markets. And you can see the infrastructure we have invested in order to secure and anticipate those energy demands for light manufacturing clients, as well as logistic clients. And we have been pretty successful in order to have the right energy infrastructure in place when the client starts operations. This is not an easy task, but I think that by anticipating to this issue and understanding the requirements from the legal authorities, things can get resolved. This is definitely a challenge for new developers that are coming into Mexico that do not have that expertise, that do not have that knowledge and clearly it's important not only to acquire the right land, but acquire the right land which has the feasibilities to have the clients connected and have them start their operations as soon as possible. Regarding your development base, yes, I think this quarter we were able to invest about $100 million, $108 million. This is quite an interesting number. If you remember back in the days when after the IPO of Vesta, this was an amount that we would be investing over a year. Now this is what we're investing in just one quarter. So this is clearly increasing our pace of investment. And 2024, we have not given any guidance. However, we know that the market dynamics are strong. Fundamentals are stronger than ever. There's strong demand. And we will continue to develop in markets where we see that there's a great demand, limited supply, an increase in rents, and where we can secure long-term Class A tenants for our buildings and in line to our discipline approach towards high-quality tenants and high-quality income.
spk02: Thank you, Lauren. So just to confirm, all of the development portfolio and land bank that you currently have has the sufficient energy sources secured, correct?
spk09: Yes, these are all buildings that we have started construction. Many of these buildings are already inside of industrial parks that we have developed also buildings in the past. And for the majority, we have secured the energy, or we are sourcing the energy enough for our clients. So we feel comfortable about being able to deliver. If you can see the completion dates, which is in 23 or 24, for those dates when operations will kick in for our clients, we're going to have the right energy. And remember that many of our clients are in the light manufacturing sector. So we do not cater to heavy industries, for example, that require a lot of energy. Normally, our clients have some certain requirements, and those are the ones that we like to address. And that's one of Vesta's main advantages.
spk02: Very clear. Thank you, Loren.
spk00: Your next question comes from the line of Pablo Ricaldi with Santander. Please go ahead.
spk07: Hi, everybody. I have two questions. The first one is regarding the vacancy hike we saw in the quarter. I understand a lot of the GLA came, like, at the end of the quarter, but I don't know if you can explain a little further how you see dynamics in the recent activity of that vacant space. And the second question is regarding quarters. I don't know if you can explain dynamics in the quarters as of today.
spk09: Absolutely. Pablo, thank you for being on the call. The stabilized portfolio actually had an increase in occupancy, which means a decrease in vacancy. And total portfolio clearly considers new buildings that have been recently developed. For many of these buildings, we're in the marketing stage. And that's why you might see an increase in vacancy there. However, we feel very comfortable with many of these buildings because all of them are in very strong markets, such as Tijuana, Monterrey, Juarez, and Guanajuato. And those markets have been very dynamic. So even that we have recently finished those buildings, we feel very comfortable that in a short period of time, we're going to have some great results in many of these projects, just because of how strong the dynamics are. I can even tell you we're already in negotiations with some of them. However, we will only let you know once we have finalized the lease agreements. But we're very comfortable. These are very tight markets with rent increases. So these are going to be very successful projects. And regarding the Juarez Dynamics, as you could see, we started three new buildings. One of them a built-to-suit and two spec buildings. The reason being that we have a strong pipeline for Ciudad Juarez. We recently delivered two buildings. One of them was leased to D.B. Schenker, D.B. Schenker Logistics Company, which is working for Microsoft and other electronic sector companies. but there are strong dynamics in the region and that's why we think that we have a great location very close to the Zaragoza border crossing. I would say the best location in Ciudad Juarez, very unique urban infill and strong and very close proximity to logistic corridors. and labor pool, and that's why we believe that anticipating to strong demand is going to be a key benefit, and that's why we started three new buildings, which actually we're already in touch with some potential clients to that. So we're going to see a stronger dynamics in the border region coming from auto sector with electric vehicles, coming from electric sector, electronic sector, which is increasing rapidly, and some other logistics and light manufacturing operations in the region. Sage Automotive is one of the clients in the auto sector that recently leased one of our buildings. And so this is a good example of Asian companies taking space for the supply chain and integration of supply chain in North America. And we're going to see more of that in the region.
spk03: Perfect. That was very clear. Thanks very much. Thanks a lot. Gracias.
spk00: Your next question comes from the line of Hugo Grassi with Citi. Please go ahead.
spk03: Hello, everyone. Thank you for the opportunity to ask a question. Congratulations on the results, first of all. It should be a brief question. So can you actually explain a little bit more of the $13.57 million in current tax expense on the third quarter, the current tax expense? Is it a stronger PISO on a year-on-year or QMQ basis that typically causes that tax expense? And just to check on my intuition, the impact is that the U.S. denominated debt becoming smaller in PISO terms, right? That should be on my side.
spk08: That is correct. A strong reason for the current tax expense is the fact that Exchange rate, when compared to the close of the year, the peso has a strong appreciation, and that means that I have to market to market my debt in peso terms, dollar times the dollar exchange rate of the end of the year, and the same operation as of the end of the quarter. And that implies that I have to reserve a bigger amount on taxes. The second reason, however, is just the strength of the company. We're generating a lot of profits just out of the normal rental revenue that we have. So those two things are explaining the current tax increase pretty much.
spk03: All right. I appreciate it. Thank you. Thank you, sir.
spk00: Your next question comes from the line of with Goldman Sachs. Please go ahead.
spk01: Good morning. Thank you for taking my questions. I wanted to speak about your current development pipeline. So just looking at it, only 10% of it is DTS and the rest of it is inventory. The majority of the inventory is not pre-leased. I mean, some of it is just because you recently launched it. But I was thinking, are you looking to perhaps start pre-leasing that development portfolio that's inventory or as you go forward, or do you rather continue with a focus on delivering the properties and then trying to attain the highest rent possible at the very end? And then if you can provide some more color, if you would, on how you're looking at the the undefined capex that you spoke about in the past in terms of land bank, land acquisition, if there's any further developments on that front that perhaps you can provide some color on. Thank you.
spk09: Great. Thank you. Thank you, Darrell, for being on the call and for your question. Clearly, we're very happy that we were able to start several buildings throughout the quarter. We currently have a construction pipeline or construction starts of 3.5 million square feet. This is roughly $300 million of investment. And as you could see, many of them are what we consider inventory buildings or spec buildings. And the reason for spec buildings is it's pretty much a result of the strong demand that we're seeing in many of the markets. and our ability to anticipate. We see strong demand and incredibly low vacancies. In many of these markets, between 0% and 1% of vacancies, and in other markets, also incredibly low in the 3% to 5%. So we think that we have an advantage of having been able to have great land with good infrastructure where we can just start a building, and we can We market the buildings throughout the development phase, understanding that we also may have to wait a little bit longer just in order to be able to secure the best rent possible, as you mentioned, but also the best client with good long-term leases. That's the strategy of the company when it comes to spec buildings. And for that reason, we were very comfortable with the inventory strategy. In many cases, we end up leasing them throughout the construction phase. And actually, many of them we end up converting to what we call spec-to-suit. And the reason being that we think that spec-to-suit, you really have a 9 to 12-month Advantage to what the final client will require and it has payoff very well So we're very happy with the pipeline. This is in several markets We are very excited that we were able to also start construction in the Mexico City metro area. We're going to have probably the two most appealing buildings in whole Mexico City area one of them next to la Villa and clearly for same-day logistics and last mile. Another one in Punto Norte, a larger fulfillment center next to Periferico. So these are going to be iconic projects, and hopefully we will be able to make a property tour so that you can visit the sites too. And regarding the land bank, yes, we will continue to analyze for good land in several markets. And when we find those or when we are ready to finalize those acquisitions, we will do them and kind of continue doing what we have done in the past, acquire land, get the infrastructure in place, start a building, and lease it up. It's kind of what we have done in the past has been very successful. And that's exactly what we will continue to do. Currently, we have about $140 million of value in land and infrastructure. These will be reduced as long as we use some of this land. But I'm sure that we will contribute more land probably soon to our land back. That is also part of our advantage.
spk01: Thank you very much.
spk09: Gracias.
spk00: Your next question comes from the line of Gordon Lee with BTG. Please go ahead.
spk11: Hi, good morning. Thanks very much for the call. A couple of quick questions. The first one, I wanted to follow up on the comments you made on the reserves of the provisioning you do for income tax and the degree to which the FX affects that. because I guess you have to market at the quarter end. So because the peso has depreciated since the quarter end, would it be safe to assume that there'll be a reversal, a partial reversal of that provision in the fourth quarter, assuming that the peso would have closed more or less here, sort of 1830 or so? Yeah, absolutely.
spk08: Absolutely. I mean, if the peso goes back to the level of last year's December 31st closing, or even further, 20 pesos, I will have significant, I wouldn't call it negative taxes, reversal of all these things, of course.
spk11: I just wanted to confirm that you had marked the peso at the end of the quarter and not at the date of the report, right?
spk08: Exactly. We marked the market at the end of the period. and not at the day of the report. And the mark-to-market is done carefully, and there's some accounting adjustments that we do make.
spk11: Perfect, perfect. And then the second question, Loren, you mentioned in your remarks that you're considering the sale of assets, right? And I was wondering whether that was A comment in the context of this is something that Vesta always does, is always done. You look at your assets and you decide from time to time to recycle, to sculpt the portfolio and to sort of plow back into development. Or is that more a strategic comment in the sense that maybe you're looking at rebalancing the portfolio away from a certain region into another one? I was wondering just the context of that comment.
spk09: Great. Thank you. Thank you for the question. And thank you for being on the call, Gordon. Part of the Level 3 strategy incorporated asset sales, as we have done in the past. Throughout the whole year, I think we have not sold anything, any assets. However, we are analyzing some asset sales, and we might have some asset sales coming up. It's part of the strategy. The company will continue to be strategic in capital allocation, in value creation. Our main driver is net asset value per share and FFO per share. So whenever there's an opportunity to sell an asset at a premium, We think that there could be a good way to continue to recycle capital and invest it smartly through other means like development. And for that reason, this is an activity that we will continue to pursue. So we might have some more asset sales coming up soon. In line to the Level 3 strategy, I'm sorry, just to remind everyone, when we presented the Level 3 strategy, we said that we were going to be selling about $300 million. I think until now we have sold approximately $200 million. So the idea is is to keep on selling. And clearly, let's say $300 million out of above $3 billion portfolio, this is not material. However, it's more the discipline of being able to sell whenever there's an attractive price and that it drives net asset value per share up.
spk11: Makes sense. Thank you very much.
spk03: Thank you.
spk00: And once again, to ask a question, simply press star one. Your next question will come from the line of Juan Macedo with GBM. Please go ahead.
spk05: Hi, thanks for the call and congrats on the results. We saw you have $16 million spending payment for third party acquisitions of land reserves or new buildings. We were wondering if you could give us some color on what is that related to and whether do you expect to pay that out in the fourth quarter?
spk08: Look, we are negotiating some purchases of land reserve, and we just show good state money on the potential purchases. If the purchase materialized, the seller will feel confident that we have the resources to execute the sales, to finalize the sales. Nothing more than that. This transaction has been going on for some time, and the seller wanted to have some, Assurance that we have the capital resources to do that. And then obviously right now it's obvious, but at some point in time. There were there were that they just wanted to to to feel the confidence.
spk05: All right, that's very clear. Thank you.
spk00: Your next question comes from the line of Francesco Chavez with BBVA. Please go ahead.
spk06: Hi. Thanks for the call and congrats on the results. My question is regarding the Bajio region. Can you give us more color on which sub-market in the Bajio are recovering faster? And also, when do you expect Bajio to close the gap against the northern market? Thank you.
spk09: Great. Thank you, Francisco, for your question. As mentioned in the remarks, we have seen an interesting dynamics in the region of the Bajio. As you can see in our results, all of our buildings in San Luis Potosi have been leased at very attractive rents with great companies. And therefore, we started a couple new buildings. We are seeing the auto sector increasing, particularly for electric vehicles, and that's why San Luis Potosi is really reflecting similar dynamics to the north part of Mexico. The same with Aguascalientes. We started another building just because we were able to lease for a couple leases. And actually, in Querétaro and Guanajuato, what we are starting to see is an important increase to an increase of rents. Just throughout this year, in the nine months of this year, we have seen an increase of 15%, which is quite attractive and appealing in line with what we have probably seen in the last years in the north part of Mexico, for example. So we feel very confident that the Bajio region is recovering with great companies. We have a good pipeline for some of the buildings that we are currently in marketing stage. And we think that the nearshoring opportunity is not regional. We think it's national in the most dynamic markets. Remember that the Bajio region has great infrastructure. It has great labor pool. It has good logistics. And actually, it has proven to be a very good location for global companies in different sectors. So for that reason, we believe in the competitiveness of the region as well as the competitiveness of Mexico to be a strong integrator of the North America region. So we will continue to see good dynamics in the area.
spk06: Thank you.
spk00: Your next question comes from the line of Enrique Soho with Fundamental Capital. Please go ahead.
spk10: Sorry, I'm sorry. We cannot answer the question. We have some back noise. Enrique? Eric, can you hear me?
spk08: Yes.
spk10: I wanted to get your insight into the situation currently as prices increase and rents increase. What is the situation with current leaders whose contracts completely end? How are you guys dealing with them? Are they going completely up to what is the market rate? What kind of big spreads are you guys managing? And then additionally, I wanted to get a little bit of insight into... In the revenue section, you have other property revenue for about $4.2 million. I want to see what that represents, as it is quite a bit.
spk09: Thanks. I apologize, Enrique, but it's really hard to listen to your questions, but probably what we were able to understand is about rent increases and other revenue. Is that correct?
spk05: Yeah.
spk09: Okay. Great. Well, definitely we have seen some important rent increases. Remember that our lease agreements have annual escalations according to CPI, and we have seen important increases way above CPI, which is a combination of the annual adjustments on our leases as well as some rollover increases. of some of our clients and some of the different regions, we think that the total spread is probably in the double digits, probably in the 10% to 15%. And additionally, we think that our constant ability to increase rents to get to market, I think that is going to be shown over the next periods, over the next quarters, and will definitely be a main driver of value creation for our portfolio. Regarding other revenue, $4.2 million. Would you like to comment, Juan?
spk08: Sure. Look, other revenue grew from $2.7 million third quarter last year to $4.2 million at this quarter this year, and sequentially, it also had an important one million increase. Most of the other revenue has to do with remboursable services that we provide to the clients. More prominent is energy remboursable services. There's other things, but that's the more prominent thing. Energy remboursables grew significantly from rough numbers, $600,000 to $2 million. And they had a corresponding expenses that grew from $700,000 to $2.2 million. So reimbursables are that. We actually get the money back from the clients. And in the case of energy, that has been growing rapidly. So that's kind of the, broadly speaking, what you can see in my financials.
spk10: Great. Thanks, guys.
spk08: Thank you, sir.
spk00: There are no further questions at this time. I'd like to turn the call back over to Mr. Barahil for his concluding remarks. Please go ahead, sir.
spk09: Thank you, operator, and thank you everyone for joining us today. We're executing our strong pipeline with an aggressive CAPEX deployment program as planned. We're also well positioned to take advantage of new opportunities with a strong capital base and no upcoming debt maturities. Once again, a very special thanks to our outstanding VESTA team for your continued pursuit of elevating standards and for your focus on the innovation and value creation that will drive our continued success for a solid end to the year.
spk00: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer