SATS Ltd.

Good evening, everyone. Welcome to the SETS Third Quarter Results Briefing for Financial Year 2026. I'm David, Group Head of Strategic Communications. Before we begin, I turn your attention to the forward-looking statement now on screen. Now for our safety reminder. Whether you're joining us from the office, at home, or on the road, please be aware of your surroundings at all times. Do make your safety a priority before joining this call, a recording of which will be available on our website. With me today are Kerry Mock, Sats President and CEO, and Timothy Tang, our CFO. I will hand over to Kerry to take you through the business update. Kerry, please.

Thank you, David, and good evening, everybody. I appreciate you guys taking time out on Friday evening to join our earnings call. Let me just quickly go into the third quarter performance. I'm pleased to say that The third quarter performance is really solid. We have record cargo volume driven obviously by seasonal peak. You would recall that last quarter we did see some forward loading as well. We benefited from that. But despite that, the number for this quarter was record. In fact, in our history, this is probably the highest quarter we've ever got in our history. And year-on-year growth is across all lines of business. We also continue to outperform ITER's number for a nice straight quarter. And that's driven a lot by APEC and EMEA growth, which more than offset some of the de minimis impact in America and tariff impact as well. We continue to show good commercial progress. We won a new cargo and ramp contract with China Cargo in Paris and with Saudia Cargo also in America. And I'll share a bit more new wins in my updates later. From a revenue standpoint, 8% growth against last year. Very pleasing to see the margin expansion to almost $300 million EBITDA into 18.1% margin. And PEPMI has grown 20% to $84.7 million. And really what is pleasing for us is the resilient network continues to capture trade flows and it shifts. So all the uncertainty in the geopolitical environment, in a tariff situation, so far we have been benefiting from all the different shifts, primarily because of the network that we have. Just on the food side, aviation meals have grown 4.5% year-on-year, and non-aviation meals have also shown a 7% growth to 10.5 million meals this quarter. Next slide. As I mentioned, we also want two new wins. One is Allegiant Air in Sanford Airport, which is the hub airport in the US, and Azul in Viracapos Airport, which is actually in Sao Paulo. Azul is actually the largest low-cost carrier in Brazil, and we are actually the hub provider for ground handling in Brazil. So that's a fantastic win for our team in Brazil as well, and we continue to grow Our presence in Brazil with some of these winds that we have locked in. On the food side, very pleasing to say we've won a multi-year in-flight catering contract with Turkish Airline. Turkish Airline is leveraging on a halal-produced meal out of Narita and Haneda, and it's been a contract that we've been aiming for for quite some time, and very happy that our team in Japan managed to secure the contract with Turkish Airline. We continue to invest in our infrastructure. We recently signed a 20-year lease for a new warehouse in London Heathrow. This is really to grow our business in Heathrow. As you know, if you look at Heathrow Airport at the Horseshoe area, many of the facilities are actually aged as well. So this will be a first new facility in Heathrow, and we believe that's going to help us gain more business in London, but at the same time allowing us to put a more modern warehouse in Heathrow to support the growth of air cargo over there. We've also expanded our e-commerce and freight forwarder handling business in Frankfurt Airport. We took an old facility previously from DHL, and we converted for usage and we're now starting to roll out those services for freight forwarders in Frankfurt. As you know Frankfurt is the biggest cargo hub in Europe so our ability to provide additional services for our targeted customers in freight forwarding is actually a very important part of our specialized services focus. In Singapore, closer to home, we just broke ground on an extension of our maintenance centre. Again, this is in preparation to put more capacity so that we can actually service more of our ground units here, GSE equipment here in Singapore. As you know, we have also announced the refreshment of our equipment here in Singapore and therefore we need this extension to service the additional capacity that's required. On the technology side, we have announced our investments in AI continues to reap our benefits. We have launched our first AI control tower to monitor our supply chain on the food side. And this is a very important milestone for us because the system that we develop here can have different usage going forward. And control tower using AI is going to be a big part of how we're going to run our business globally going forward. And then on the employer side, we are pleased that we are recognised as one of the top 20% employers in the SG Opportunity Index that's led by the Ministry of Manpower. And we've also been certified as a top employer in Singapore by the Top Employers Institute. This continues our focus on making sure that we are a great place to work for many of our employees and we really want to make sure that this aspect is taken care of so that we can continue to attract our share of talent here in Singapore. This is just to show you all the Business drivers, as you can see from a tonnage standpoint, last quarter we hit almost 3.5 million tons. That's almost 6% growth over the previous quarter. Flights handled continue to show modest growth as well, and meals is now above $50 million in terms of the meal serve. Likewise, for employee standpoint, there's a slight growth in there, primarily driven by the hiring in Brazil to take care of the ground handling operation itself. Next slide. This slide shows you the light-for-light tonnage growth versus non-light-for-light. Again, a growth of about 7.3% over last year. And the pleasing thing is the non-light-for-light growth where we're showing additional new winds of 7.1% is continuing to power our growth in air cargo. Next slide, please. So maybe I'll hand that over to Tim to take you through the financial summary.

Yeah, thanks Kerry and good evening everyone as well. Great to be here to obviously announce our results again. Let me add a bit more colour to the high level that Kerry's already covered. Obviously, I'm very pleased with the overall results as well, as Kerry's already noted. Primarily, I would say the main themes are that actually both year-on-year growth in revenue and earnings have been actually very, very consistent and directionally very consistent with the year-to-date or first half results. What's pleasing, of course, is that we do know that disruptions are taking place, in particular with trade flows around the world, but our network is definitely very resilient in capturing that rerouting, and that continues along with, obviously, the capturing of the new customers as well. We have seen the results in particular from a margin standpoint normalized in Q3, in particular versus Q2. I think many of you on the call would have remembered that we did say that our Q2 results benefited from pull forward volume, which actually went ahead of our cost structure. Some of that cost structure definitely was not sustainable in order for us to fully serve our customer in the right way as we continue to develop our relationship with them. So the Q3 results is a normalisation into what a peak cost structure should look like. And I think we're very pleased to see that on a year-on-year basis in particular, you can see the continued growth of our business, both in top line and bottom line, along with margins. If I dive into the details of the next slide, on slide 8 there, more colour, as you can see, along all the lines of the business. So cargo, very, very quick step-by-step on the businesses. Obviously, cargo continues to be driven by both the organic and inorganic growth. In particular, it continues to be very, very strong in Europe and Asia-Pacific. Weaker in Americas, but we are seeing that business supported by our service of Amazon in that market, which we've talked about in the past that we are the largest provider A third-party contractor for Amazon across nearly 13 stations in the U.S. And that business actually has continued to grow as Amazon activity continues to grow as well. Our ground business is obviously moving along very, very well. Still a lot of contribution there obviously from our Singapore market. So, a little bit more stable. Obviously, in particular, the results are aligned with a lot of our main customers or our major customers in Singapore. That is likewise the case for the aviation on the food side, on our aviation food solutions. I think many of you would have seen that our main customer in Singapore had their passenger growth outside of screwed roughly around 2% to 3%. So it's very indicative of some of the trend that drives our aviation food as well. And non-navigation is more, obviously, the year-on-year continues to be a focus, obviously, of ours to fill the capacity, but we are obviously looking at that as just a sub-segment that supports our overall results from a group perspective. Next slide, please. So diving into a bit more on the year-on-year result, which is the one that shows the real trend of the business. On a year-on-year basis, as I've noted, obviously revenue-wise, outgrowing our operating costs. So we are getting that margin expansion, given that the peak is really comparative on a year-on-year standpoint. We saw great growth around the world that supports that third quarter peak. When I say that our results show that there was brought forward in Q2, we do see that Q1 and Q2 basis from second quarter to third quarter. The growth was definitely more muted versus prior years. So that was the benefit of then that cost structure in Q2. But having normalised down now, you will observe that our third quarter margin It's actually very similar to our first quarter margin, and obviously both quarters showing that positive year-on-year growth, which represents the business model working and obviously leveraging on our overall scale. Moving down the page, obviously there is a normalisation also on our SOE JV. You would all recall that in the last quarter, we also noted there was some upfront cost impact in our SOAJV. We had some additional costs that we invested into in particular in picking up and starting new customers in our SOAJV. So suffice to say that that's normalized out also in Q3 and our results show a strong year-on-year growth there in the third quarter, which I think we do see that that third quarter performance will obviously continue from here on from a seasonality basis. And lastly, then, all the way to the bottom line, once again, I would remind everyone that we did say that last quarter we had a one-off adjustment on our tax line in the Q2 results. So, once again, as you look at the third quarter results, that in itself has also normalised. And overall, then, if you put all that into play, obviously, we're getting the natural margin accretion, obviously, on a year-on-year basis, and the results are showing good momentum. Obviously, heading into our fourth quarter, which is traditionally our lower quarter of the year, which we'll touch on in a minute as well with Kerry to finish up. Next slide, please. Diving into a few more metrics, and I will leave the cash flow a little bit to the next slide, but I'll highlight a little bit of context. I think no major surprises now. I think most of the metrics on the left-hand side are just consistent with the announcement of the results, and I think we all would agree it's a good set of numbers to see the business deliver. From a cash flow perspective, the third quarter year on year is impacted by a significant timing and working capital that actually occurred last year. So I will recommend that we look at the year-to-date cash flow as a more true representation of where we are at the moment, which I'll touch on in the next slide. I think beyond that, obviously the organisation continues to address our debt and we continue to pare down the borrowings and we do see that number We do see that number as progressing towards a target that we believe probably end up in a full year at around this 160 odd million range. Ultimately, we do believe now going forward our debt level continues to be at a level that's much more manageable and we see then good opportunity for us to deploy that capital into CapEx. Obviously, there's the dividend conversation coming at the end of the year and any excess cash returning to the shareholders, which we can certainly address more details later on. Overall, I think on the right-hand side, no major call-outs here. I think all of the metrics then are obviously moving in the right direction, given the set of operational and financial results that we're seeing across the business. Outside of the cash conversion on the bottom right there, primarily driven by higher CapEx on a year-on-year basis. And if you look at that cash conversion on a like-for-like comparison with the same capex as last year, we are up just a little bit above 70% on that metric if you normalize it out. So I've moved to then my last slide here on the cash flow. So let's take a look at that on a year to date basis. So overall, I think operational cash flow year on year is obviously positive given our overall results. That number is actually negative impact by two areas. Number one, Excuse me. Number one, there is a timing on working capital and obviously the team and I continue to manage that and we believe that we do see that timing coming back to us as we work through that in Q4. But there is another impact in there in the sense that there is a higher tax component for cash basis this year versus prior year, mainly because last year's tax was benefited from some COVID-related carry forward losses still, which then were fully utilised in FY25. So therefore, once again, I would say that the FY26 is the clean number and we do We do see that obviously that delta then contributes to the overall year-on-year cash flow from operations there. But beyond that, Beyond that, then, it's really down to higher lease payments and obviously related to our new facilities both in Amsterdam and the Menzies facility and our new warehouse in particular in London and a few other small ones. And obviously outside of that, then, you can see that the capex is also certainly a significant increase on a year-on-year basis. The primary component of some of that capex is because of our food facility in Thailand and also the finishing of our Singapore cruise terminal, of which that's larger than being competed. Beyond that, it is as expected, our CapEx, we are still travelling at around this 4.5% of revenue range, which is obviously within our guidance that we have talked about in the past, sort of between this 4% to 6%. So overall then, given the CapEx profile, that is obviously what's driving our overall free cash flow to be lower in particular at the very bottom of the page. I'll hand it back over to Kerry to finish us up on our walk.