Operator: Hello, and thank you for standing by. My name is Liza, and I will be your conference operator today. At this time, I would like to welcome everyone to the MEEZA conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask questions during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Phibion. Please go ahead.
Phibion Makuwerere: Thank you, Liza. Good morning to you all, and I welcome you all to the MEEZA QSTP earnings conference call for 3Q and 9M 2026. From MEEZA's management team, we have the CEO, Mohamed Al-Ghaithani, the CFO, James Corby, the Investor Relations Director, Yaman Al Jundi. As usual, they will first give us an overview of Q3, and then we will have a Q&A session immediately afterwards. Let me turn over the call to Yaman to begin. Over to you, sir. You can go ahead.
Yaman Al Jundi: Thank you, Fabian, and thank you all for joining us. A few items before we begin. The investor presentation is also available on the investor relations section of our website. I call your attention to the disclaimer on slide 2, which is an important part of this presentation regarding any information provided, and any forward-looking statements made. Before we turn to the quarter's results, a quick note on an event that we are looking forward to. MEEZA will hold its first capital markets day Inshallah, during MWC Doha week on 10 November. Our executive team will take you through our strategy, the market, our technology, and our financials, followed by a live Q&A. The presentation will be broadcast online on Microsoft Teams and is open to everyone on this call. Seats are limited, so in-person attendance will be by invitation.
Yaman Al Jundi: To register, please email investors@meeza.net and we will send the joining details and full agenda. Now on to our third quarter results, and our CEO, Mr. Mohamed Al-Ghaithani.
Mohamed Al-Ghaithani: Good morning, everybody. Can you hear me? I want to check because I am via phone. I could not log on to the system. I have some technical issue. Usual IT stuff happens at the last minute. I would like to see if you can hear my voice clear and loud.
Phibion Makuwerere: Yes.
Mohamed Al-Ghaithani: Okay. I would like to thank all of you for joining us today, the investor call for Q3 results. We had, thank Allah, a very good result this quarter, and we are building on our financials, net profit, our operations going to the right direction, Inshallah. Our revenue, we achieved QAR 365.9 million, which is 27% year-on-year growth. Our EBITDA increased by 19%. Our net profit contributed to MEEZA QAR 49 million, which is 16% year-on-year. Year-to-date CapEx around QAR 300 million. We have a record of sales order for QAR 1 billion for one hyperscaler for 8MW in M-VAULT 7. We are partnering with the AI company, backed by the government. We have signed a sovereign agreement with Microsoft. All our data centers constructions are going as planned, to achieve, as we promised, Inshallah, more than 62MW in the coming 2 years.
Mohamed Al-Ghaithani: Commercial position, we have year-to-date TCV QAR 1.5 billion, pipeline around QAR 1.3 billion, and current backlog, circa QAR 4 billion. For data center, just the statement I said, we have 4 sites under construction, 1 already handover, which is M-VAULT 4 4MW expansion, last June. We are handing and commissioning M-VAULT 8. It is another 4MW. It will be very soon operational, talking about maximum end of next month or before that, Inshallah. That is the plan. M-VAULT 6 is progressing very well. We are finishing the civil work, and we started the LVD work and fit out very soon, Inshallah, within 2 to 3 months from now, Inshallah. M-VAULT 7, we are mobilizing and starting the project as planned. This will be the 18MW data center. MEEZA going to the right direction. We are achieving what we have planned for the last 2 years.
Mohamed Al-Ghaithani: We are looking forward, Inshallah, to bring all the good news going forward, Inshallah. James, I will hand over to you.
James Corby: Thank you, Mohammed, and good morning, everyone. I am James Corby, the CFO of MEEZA. I will now give you a brief overview of our Q3 financial results. First of all, looking at the year-to-date financial position versus FY25, the consolidated revenues grew 26.7% with strong growth in all of our segments. As a result of this higher revenue, EBITDA increased 16.3 or by 19% to QAR 102.3 million, and net profit attributable to MEEZA shareholders for the 9 months reached QAR 49 million, a QAR 6.6 million increase or 15.6% increase year on year due to that EBITDA flow through, partially offset by lower finance income, as well as higher finance costs and higher depreciation. Looking at the year-to-date for MEEZA only, the results are also very positive, with EBITDA growth exceeding total revenue growth year on year.
James Corby: Total revenue grew QAR 16.2 million or 5.6%, driven by the data center revenue increasing by QAR 16.1 million year on year from the M-VAULT 4 extension and fit-out revenue, as well as managed services growing by QAR 8.3 million from higher volumes and an increase in customers. EBITDA reached QAR 94.3 million, increasing QAR 8.3 million, primarily due to this higher revenue and OpEx control, with EBITDA margin improving 1.2 percentage points year on year.
James Corby: Net profit increased QAR 2.3 million to QAR 44.7 million. Moving to the quarter performance, quarterly revenue increased substantially by 48.6% to reach QAR 147.6 million, driven by organic growth and the impact of Black Arrow. As a result, EBITDA and net profit increased by 40.4% and 37.7% respectively. Moving now onto the quarter-on-quarter results. Quarterly revenue increased 31.1%, driven by the new data center capacity in M-VAULT 4 and an increase in MEEZA Solutions revenue, as well as a small increase in Black Arrow.
James Corby: As a result, EBITDA and net profit increased by 13.3% and 15.9% respectively. You will note a decline in managed services revenue quarter on quarter. This is due to a reallocation of Black Arrow managed services revenue to Black Arrow Solutions revenue. This is subsequent to a review of the nature of Black Arrow's contract by the parent, and the year-to-date position has also been updated. Moving to the gross margin by service. The absolute gross margin improved 29.5% to QAR 107.6 million, and the consolidated margin increased 0.6 percentage points to 29.5%. This is primarily due to higher managed services margin from higher volumes and cost optimization, marginally offset by lower DC margin, and this is due to lower margin fit-out revenue in FY26, with an underlying DC gross margin of 38.3%. We also had lower solutions margin from the mix of deals and increased competition. Profitability margin trends.
James Corby: EBITDA margin and net profit margin in Q3 declined because of an increase in solutions revenue at lower margins. Net profit was further impacted by higher depreciation and financing costs. Consolidated year-to-date net profit margin is relatively flat at 14.6% compared to 14.7% in FY25, despite a QAR 3.6 million decline in finance income in FY26. Moving to CapEx. As you would expect, CapEx has been ramping up due to the data center builds.
James Corby: Capital intensity or CapEx intensity increases to 78%, with M-VAULT 4 extension completed in Q2 FY26 and the builds of M-VAULT 6, M-VAULT 7, and M-VAULT 8 ongoing, as detailed by Mohammed. Year-to-date CapEx reaches QAR 283 million, with an expectation of CapEx to exceed QAR 600 million this year. Annualized return on capital employed, excluding construction financing, is increasing to near double digits as operations scale. Ending with cash flow. Cash flow from operations has declined QAR 94.3 million year on year.
James Corby: This is mainly due to the regional conflict and a slowdown in collections from government entities. Net debt position closed at QAR 273 million, with QAR 125 million cash and QAR 398 million in financing. As you know, QAR 55 million in dividends were distributed this year for FY25. The net debt's annualized EBITDA ratio stands at 3.26 times. That brings the presentation to a close, and we will now have a Q&A session.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, press star one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, press star one again. For web questions, you may type them in the box below the Q&A session.
Phibion Makuwerere: Thank you, Liza. I think while we wait for people to call in for their questions, we do have a few questions in the chat, and I will read them out for the MEEZA management team to respond to. The first question is from Phani Kumar from HSBC. The question is: Can you discuss the scope of the Qai project? How many megawatts committed, and does MEEZA expect higher engagement with Qai?
Mohamed Al-Ghaithani: Can you hear me?
James Corby: Yeah.
Mohamed Al-Ghaithani: Yeah. Qai as a client, the commitment is less than 1 megawatt. This is just the beginning with them. Qai, they have their own strategy. They have much bigger plans than MEEZA for AI investments. Their mandate is totally different than MEEZA plans. But we will partner for some time until they will be ready for the data center, as they announce in their meetings with investors and the market. So I would consider this as one of the good deals that we have, that we will tie up with Qai for a while to provide some services, and we will build on this deal. It is not big, but it is a good deal.
Phibion Makuwerere: Okay. Thank you. Another question again from Phani is: Can you elaborate on the reallocation of revenues between managed services and solutions?
Mohamed Al-Ghaithani: Before this question number 2, he said that reason for reallocation of resources. What does he mean by that question?
James Corby: Yeah. I will take this, Mohammed. Okay.
Mohamed Al-Ghaithani: No, it's not mentioned anywhere in our presentation. What's the question about it?
James Corby: There's a revenue reallocation on managed services. The parent company ourselves, we did a review
Mohamed Al-Ghaithani: Okay
James Corby: of the Black Arrow contracts.
Mohamed Al-Ghaithani: Okay. That's accounting. I think that was advised by the external auditors also.
James Corby: Yeah. Essentially, we did a review of the Black Arrow contracts subsequent to Q2, and now there has been a reduction in managed services revenue per the contracts, and an increase in solutions.
Mohamed Al-Ghaithani: Okay.
James Corby: Okay. Next question, please, Kevin.
Phibion Makuwerere: Okay. If there are no questions on the line, I will continue with the questions in the chat. Okay, the other question regards operating cash flows. This is from Seed QIC Asset Management. The question is: Operating cash flows turned positive in Q3, but trade receivables continued to increase. What was the actual cash collection trend during the quarter, and do you still expect receivables to normalize by year-end?
James Corby: Yeah. It is a good question. We are actively monitoring our AR position. Our collections to the end of September were close to QAR 200 million, and the target is to collect a further QAR 150 million to QAR 200 million before the end of the year. Obviously, the regional conflict has had an impact earlier in the year, and we are seeing now payments of our receivables improving and increasing in terms of the timely fashion. Next question.
Phibion Makuwerere: Okay. I think there is a question from Mohammed. Mohammed M, RZM Investments. The question is: Excluding Black Arrow, how much EBITDA and revenue growth came from core of MEEZA?
James Corby: Okay. We presented MEEZA standalone, and you can see that in the presentation. Standalone MEEZA EBITDA was QAR 94.3 million.
Mohamed Al-Ghaithani: Yeah, the growth around 9.7% for MEEZA standalone and 5.6%, almost 6% in revenue growth year-on-year.
Phibion Makuwerere: Okay. The next question from Mohammed Shahid, Franklin Templeton Investments. The question is: Can we assume M-VAULT 8, 4MW, to start operational and revenues generative from December? And then it goes on to say, "The rise in higher software, hardware, and license costs by 183% year-over-year, was it a one-off?
James Corby: Okay, I will take this question.
Phibion Makuwerere: Do you expect the receivables improving soon?
James Corby: I have got it, Vivian. Okay. MV8 4MW. As Mohammed said, we are just finishing the commissioning of that data center. We do expect to start recognizing revenue in that data center in Q4. We have not sold all the capacity yet. I think we have sold close to 2MW of the 4MW capacity as we stand right now. Not all of that is coming online this Q4. Some revenue will be recognized for MV8 in the Q4. In terms of the higher software hardware license cost, this is a function of higher Solutions revenue. Given that Solutions is one time in nature and relatively unpredictable, it is hard to know whether this is going to be a one-off or not, but we typically see Q4 being a strong Solutions quarter.
James Corby: We expect similar trends in Q4 to Q3 on Solutions. Do we expect receivables improving soon or extending? We expect receivables to improve. As you have seen a significant increase from December in our receivable balance to close to QAR 240, 250 million. We target to bring that down to QAR 150 million or lower by the end of the year. Okay.
Mohamed Al-Ghaithani: First of all, the receivables, we are working directly with the government. We have many promises to settle the payments as soon as possible. Only delay because of the dual tax issue. There is no issue. It is only about the treasury step for payments from the government.
Phibion Makuwerere: Okay. Thank you, Mohammed. The next question is from Abdullah, RZM Investments. What is the difference in gross margin for fit-out projects compared to commercial projects?
James Corby: Yeah. So the fit-out projects are approximately 10% margin versus the typical data center margin of closer to 40%.
Mohamed Al-Ghaithani: Those are very generic fit-out projects like furniture, some non-IT fit-out projects, small things. This is why it is a low margin.
Phibion Makuwerere: Thank you. Another question again from Pani Kumar, HSBC, is what is driving the EBITDA margin decline?
James Corby: The EBITDA margin decline is driven by an increase in Solutions revenue. That's the primary reason.
Phibion Makuwerere: All right. Thank you, James. We don't have questions in the chat. I think you've answered all of them. If we've got questions on the line, I think they can come through.
Operator: I believe there is no questions.
Phibion Makuwerere: On the line. Okay, thank you. In that case, I think it is safe to say that it brings us to the end of our call today. I would like to take this opportunity to thank the MEEZA management team for taking its time to update and respond to questions. Thank you for joining us, and please do join us for future MEEZA calls. Enjoy the rest of your day.
James Corby: Thank you, everyone.
Operator: Ladies and gentlemen.
Mohamed Al-Ghaithani: Thank you.
Operator: Yes, ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
