Financial Data and Key Metrics Changes - Total revenue for Q3 2026 was $7.5 million, down from $7.9 million in the prior year, reflecting the company's exit from low-margin revenue streams [20] - Total product and retail gross profit increased to $1.4 million, compared to $0.7 million in the same quarter last year, driven by pricing actions and improved product mix [20] - Net loss for the quarter was $0.2 million, or negative $0.02 per share, compared to a net loss of $0.8 million, or negative $0.11 per share in the prior year [21] - EBITDA improved to $0.4 million in Q3 2026 from negative $0.4 million in the same quarter last year [21] Business Line Data and Key Metrics Changes - The company continued to exit lower-margin specialty and wholesale revenue streams, leading to a modest year-over-year decline in total revenue but significant improvement in gross profit margin, which reached 21.4% compared to 10% in the prior year [5][20] - The company implemented targeted price adjustments across its four core franchise categories, contributing to margin expansion [6][7] Market Data and Key Metrics Changes - The company is experiencing momentum in franchise development, with two new stores under construction and 34 stores under area development agreements, indicating strong interest from financially sophisticated operators [4][9] - The company is rationalizing its current store base by closing underperforming locations, which negatively impact brand image [9] Company Strategy and Development Direction - The company is focused on a margin-first transformation strategy, prioritizing profitability and long-term value creation over lower-quality revenue [3] - The strategy includes improving product mix, simplifying the SKU portfolio, and enhancing operational and technology capabilities to support long-term growth [3][4] - Franchise development is a key strategic revenue pillar, with a disciplined approach to expanding into existing and new markets while improving average unit performance [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for margin expansion due to lower cocoa prices and effective purchasing strategies [8][28] - The company aims to return to profitability through disciplined execution and support for franchisees, while also investing in technology initiatives to enhance customer experience and operational efficiency [18][16] Other Important Information - The company completed a $2.7 million equity capital raise, allowing it to pay down $1.2 million of debt and retain $1.5 million in additional working capital [16] - The company is advancing its digital initiatives, including a new POS system and a loyalty program expected to roll out in the first half of the year [15][18] Q&A Session Summary Question: Can you talk about the 34 new stores and the pace of deployment? - The 34 area development agreements are across four franchisees, with a measured rollout expected to accelerate in later years [24] Question: How have you lined up the financing for these stores? - Existing owners have liquidity and are well-capitalized, minimizing the need for significant debt [25] Question: What is the expected impact of cocoa prices on margins? - Cocoa prices have come down, and the company has locked in favorable pricing for a portion of its expected production, which is expected to provide a margin tailwind [28] Question: Where are you in the journey of recapping the balance sheet? - The next steps include reducing debt and investing in the company, primarily from free cash flow [30] Question: When do you expect the accelerated franchise effort to begin affecting the top line? - New stores take roughly three years to mature, with a lag from lease signing to full productivity [35] Question: What are the biggest obstacles to growing the business? - Execution is the primary challenge, with a focus on profitable growth through the franchise system [39]

Financial Data and Key Metrics Changes - Total revenue for Q3 2026 was $7.5 million, down from $7.9 million in the prior year, reflecting the company's exit from low-margin revenue streams [19] - Total product and retail gross profit increased to $1.4 million, compared to $0.7 million in the same quarter last year, driven by pricing actions and improved product mix [19] - Net loss for the quarter was $0.2 million, or negative $0.02 per share, compared to a net loss of $0.8 million, or negative $0.11 per share in the prior year [20] - EBITDA improved to $0.4 million in Q3 2026 from negative $0.4 million in the same quarter last year [20] Business Line Data and Key Metrics Changes - The company continued to exit lower-margin specialty and wholesale revenue streams, leading to a modest year-over-year decline in total revenue but significant improvement in gross profit and margin [5][19] - Gross manufacturing margin for the quarter was reported at 21.4%, compared to 10% for the same quarter of the prior year [5] Market Data and Key Metrics Changes - The company is experiencing momentum in franchise development, with two new stores under construction and 34 stores under area development agreements [4][8] - The franchise development team is actively working on building a backlog of new franchise opportunities, supported by improved digital marketing efforts [4][10] Company Strategy and Development Direction - The company is focused on a margin-first transformation strategy, prioritizing profitability and long-term value creation over lower-quality revenue [3] - The strategy includes improving product mix, implementing price adjustments, simplifying the SKU portfolio, and enhancing operational capabilities [3][6] - Franchise development is a key strategic revenue pillar, with a disciplined approach to expanding into both existing and new markets [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for margin expansion due to lower input costs, including the elimination of a 10% tariff on cocoa [8] - The company believes it is at an important inflection point in its transformation, with improved gross profit and margin indicating progress towards sustainable long-term growth [17][18] Other Important Information - The company completed a $2.7 million equity capital raise, allowing it to pay down $1.2 million of debt and retain $1.5 million in additional working capital [16] - The company is advancing its digital initiatives, including the launch of DoorDash Storefronts and a new POS system to enhance data visibility and customer engagement [14][15] Q&A Session Summary Question: Can you talk about the 34 new stores and the pace of deployment? - The 34 area development agreements are across four unique franchisees, with a measured rollout expected to accelerate in later years [22][23] Question: How have you lined up the financing for these stores? - Existing owners have liquidity and debt facilities lined up, minimizing the need for significant debt to build a store [23] Question: What is the expected impact of cocoa price normalization on margins? - Cocoa prices have come down, and the company has locked in favorable pricing for a portion of its expected production, which is expected to provide a margin tailwind [24][25] Question: When do you expect the accelerated franchise effort to begin affecting the top line? - It is expected that from lease signing to store opening takes roughly six months, with a store taking about three years to reach maturity [27][28] Question: Do you expect dramatic revenue growth in 2026? - The company does not expect dramatic revenue growth from new stores in 2026 but sees opportunities for increased sales through existing stores and e-commerce channels [29][30] Question: What are the biggest obstacles facing the company in growing the business? - The primary challenge is execution, with a focus on profitable growth and improving top-line performance through the franchise system [30][31]

Financial Data and Key Metrics Changes - The company reported an 11% year-over-year revenue growth in Q4 2025, with operating earnings per share increasing by 13% to $0.71 [3] - The return on assets for Q4 was 1.22%, and the return on tangible common equity was 13.3% [3] - For the full year, operating earnings per share grew by 18%, from $2.30 to $2.71, with total revenue exceeding $1 billion [3][4] Business Line Data and Key Metrics Changes - Retail and small business lending efforts surpassed $1 billion in annual production for the first time, alongside Novitas equipment finance [4] - The loan portfolio grew at an annualized pace of 4.4%, primarily in the C&I and HELOC categories [9] - Non-interest income was $40.5 million, down from the previous quarter, with growth in wealth management and treasury management offset by a seasonal decline in mortgage [11] Market Data and Key Metrics Changes - Deposits grew by 1% for the year, with a notable increase of $293 million in public funds during Q4 [8] - The cost of deposits improved by 21 basis points to 1.76%, and the cumulative total deposit beta increased from 37% to 40% [8] - The loan-to-deposit ratio increased to 82%, marking a trend of higher loan growth relative to deposits [9] Company Strategy and Development Direction - The company is focused on organic growth and enhancing its retail and small business lending capabilities, as well as expanding its presence in Florida [4][6] - There is a commitment to improving the durability of earnings through reduced securities duration and upgraded risk management systems [5] - The company plans to be more assertive in share buybacks, given strong capital build and favorable credit quality [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for continued growth in 2026, citing a strong economy in their markets [13] - The competitive landscape remains robust, with a focus on client service and employee culture to attract talent [36] - The company anticipates stable credit quality and a charge-off rate in the range of 20 to 25 basis points for 2026 [50] Other Important Information - The efficiency ratio improved by 264 basis points, and credit losses declined during the year [3] - The company was recognized for its community commitment and client satisfaction, indicating strong brand positioning [5] Q&A Session Summary Question: Balance sheet growth expectations for 2026 - The company expects balance sheet growth to depend on deposit growth, modeling it a couple hundred basis points below loan growth [17] Question: Anticipated asset class and geographic loan leaders - Florida led production, with C&I and owner-occupied CRE performing well, and Novitas contributing significantly [18] Question: Future buyback strategy - The company intends to be more assertive with buybacks in 2026 due to strong capital build and favorable credit quality [22] Question: Expense growth outlook - The company targets a 3% to 3.5% growth rate in expenses for 2026, despite a challenging environment [38] Question: M&A opportunities - The company is focused on organic growth and sees limited M&A opportunities, preferring quality targets [40][78] Question: Loan growth expectations for 2026 - The company is optimistic about loan growth, expecting similar results to Q4 2025, with potential for 5% or higher growth [84]

Financial Data and Key Metrics Changes - The company reported net income of $7.6 billion for Q4, up 12% from Q4 2024, with EPS increasing 18% to $0.98 per share [6][10] - Year-over-year revenue growth was 7%, driven by a 10% improvement in net interest income, reaching $15.9 billion [7][16] - Operating leverage of 330 basis points was achieved in Q4 through disciplined expense management [7][30] Business Line Data and Key Metrics Changes - Consumer Banking generated $11.2 billion in revenue for Q4, up 5% year-over-year, with net income of $3.3 billion, reflecting a 17% increase [35] - Global Banking reported net income of $2.1 billion for Q4, down 3% year-over-year, but achieved a 6% improvement in fees [40] - Global Markets achieved a record year with $24 billion in revenue, up 10% year-over-year, and net income of $6.1 billion, up 8% [42] Market Data and Key Metrics Changes - Average loans grew 8% year-over-year to $1.17 trillion, with commercial loans increasing by 12% [24] - Average deposits increased nearly 3% from Q4 2024, with Global Banking deposits growing by 13% [22] - Consumer investment balances reached nearly $600 billion, supported by strong client flows and market appreciation [36] Company Strategy and Development Direction - The company emphasized its commitment to responsible growth through diversified business models and investments in technology and digital capabilities [9][10] - Focus on maintaining operating leverage and improving efficiency ratios while investing in client-facing roles and technology [32][33] - The company aims to achieve 5%-7% growth in net interest income for 2026, supported by loan and deposit growth [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic environment, with consumer spending growing 5% and stable unemployment rates [15] - The company anticipates continued stability in net charge-offs and improvements in asset quality [34] - GDP growth is projected at 3.4% globally and 2.6% in the U.S. for 2026, with risks acknowledged but a constructive outlook maintained [15] Other Important Information - The company returned $8.4 billion to shareholders in Q4, including $2.1 billion in dividends and $6.3 billion in share repurchases [19] - The CET1 ratio decreased to 11.4%, remaining above the regulatory minimum, with plans to manage capital efficiently [20][21] Q&A Session Summary Question: Outlook on expense ratio guidance - Management indicated that the expense ratio guidance of 55%-59% remains unchanged despite accounting changes, as prior periods have been recast [48][51] Question: Expectations for absolute expenses and operating leverage - Management reiterated that organic growth and disciplined expense management will drive operating leverage, with expectations for NII growth of 5%-7% [56][60] Question: Update on technology spending and AI investments - Technology spending is expected to increase by 5%-7%, with significant investments in AI aimed at improving efficiency and reducing costs [68][72] Question: Timeline for CET1 ratio targets - Management plans to gradually reduce the CET1 ratio through business expansion and capital management, with a focus on maintaining a strong balance sheet [77][78] Question: Outlook for loan growth and drivers - Loan growth is expected to continue in the mid-single digits, driven primarily by commercial lending, with consumer categories also showing growth potential [82]

Bank of America (NYSE:BAC) Q4 2025 Earnings call January 14, 2026 08:30 AM ET Company ParticipantsLee McEntire - Head of Investor RelationsAlastair Borthwick - CFOGerard Cassidy - managing directorBrian Moynihan - CEOErika Najarian - senior equity research analyst and managing directorGlenn Schorr - senior managing director and a senior research analystChristopher McGratty - Bank Research and Managing DirectorMike Mayo - Managing DirectorKen Usdin - Managing DirectorConference Call ParticipantsSaul Martinez ...

Financial Data and Key Metrics Changes - Bank of America reported net income of $7.6 billion for Q4 2025, up 12% from Q4 2024, with EPS increasing 18% to $0.98 per share [4] - Revenue grew by 7% year-over-year, reaching over $113 billion for the full year, with net interest income improving by 10% to $15.9 billion [5][6] - The company achieved 330 basis points of operating leverage in Q4 through disciplined expense management [4] Business Line Data and Key Metrics Changes - Consumer Banking generated $11.2 billion in revenue for Q4, up 5% year-over-year, and net income of $3.3 billion, up 17% [31] - Global Banking reported net income of $2.1 billion for Q4, down 3% year-over-year, but average deposits increased by $71 billion, or 13% [36] - Global Markets achieved a record year with $24 billion in revenue, up 10% year-over-year, and net income of $6.1 billion, up 8% [38] Market Data and Key Metrics Changes - Average loans grew by 8% year-over-year to $1.17 trillion, with commercial loans increasing by 12% [20] - Average deposits rose nearly 3% from Q4 2024, driven largely by commercial client activity [19] - Consumer investment balances reached nearly $600 billion, supported by strong client flows and market appreciation [32] Company Strategy and Development Direction - The company emphasized its commitment to responsible growth and diversified business model, focusing on investments in technology, brand, and digital networks [5] - Management highlighted the importance of maintaining operating leverage and disciplined expense management to drive shareholder returns [29] - The company aims for 5%-7% growth in net interest income for 2026, supported by loan and deposit growth [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about consumer health and economic conditions, projecting GDP growth of 3.4% globally and 2.6% in the U.S. for 2026 [11] - The company noted improvements in credit quality and stable delinquency trends, indicating a positive outlook for loan growth [30] - Management acknowledged potential risks but remained constructive about the year ahead [11] Other Important Information - The company returned $8.4 billion in capital to shareholders in Q4, including $2.1 billion in dividends and $6.3 billion in share repurchases [17] - The effective tax rate for Q4 was 21%, with an expectation of approximately 20% for 2026 [40] Q&A Session Summary Question: Outlook on expense ratio and accounting changes - Management confirmed that the expense ratio guidance remains at 55%-59% despite accounting changes, emphasizing that prior periods were recast for comparability [44][48] Question: Update on technology spending and AI investments - Management indicated a 5%-7% increase in technology spending this year, with significant investments in AI expected to enhance operational efficiency [62][66] Question: Loan growth sustainability and drivers - Management projected mid-single-digit loan growth, driven primarily by commercial loans, with continued growth expected in consumer categories [72]

Financial Data and Key Metrics Changes - Revenues for Q3 FY 2026 were $5.1 billion, reflecting a sequential growth of 0.6% and a year-on-year growth of 1.7% in constant currency terms [5][11] - Adjusted operating margin for Q3 was 21.2%, with a reported margin of 18.4% impacted by changes in labor codes [11][12] - Free cash flow generated was $915 million, with an adjusted free cash flow conversion for nine months standing at 118% [15][16] - The company revised its revenue growth guidance for FY 2026 to 3%-3.5% in constant currency [9][21] Business Line Data and Key Metrics Changes - Large deal total contract value (TCV) for Q3 was robust at $4.8 billion, with 57% being net new deals [14][17] - Financial services vertical saw a year-on-year growth of 3.9% in constant currency terms, with Europe leading growth at 7.2% [12][17] - The healthcare sector benefited from a significant $1.6 billion deal with the National Health Service in the UK, contributing to incremental revenues [5][39] Market Data and Key Metrics Changes - The company signed 26 large deals during the quarter, with 10 in financial services and 16 in the Americas [17][18] - There is a noted shift in client priorities towards AI-led transformation and vendor consolidation across various sectors [19][20] - The manufacturing vertical is facing challenges due to tariff uncertainties, while the energy sector is witnessing increased demand driven by infrastructure investments [18][19] Company Strategy and Development Direction - The company is expanding its strategic partnerships with AI companies and has deepened its AI capabilities with the Topaz AI suite [6][8] - Six AI-led value pools have been identified as significant growth opportunities, including AI engineering services and legacy modernization [8][9] - The company aims to position itself as a leading AI value creator for global enterprises, with a focus on driving value realization from AI investments [9][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory for FY 2027, particularly in financial services and energy sectors, driven by strong deal wins [9][21] - The operating environment remains challenging, with a focus on cost discipline and efficiency among clients [20][21] - Management highlighted the importance of AI in driving future growth and the increasing demand for AI infrastructure and services [19][20] Other Important Information - The company completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid in EPS accretion [16] - The labor code changes had a notable impact on operating profit, net profit, and free cash flow for the quarter [11][12] Q&A Session Summary Question: Why is the implied outlook for Q4 not stronger despite strong signings? - Management indicated that while there is strong momentum, the lower working day calendar in Q4 presents a headwind [25][29] Question: Are there signs of discretionary spending expanding beyond financial services and energy? - Management confirmed that growth is expected in financial services and energy, but other sectors are still emerging [25][26] Question: Is AI a headwind or tailwind for margins? - Management stated that AI projects are not negatively impacting pricing and are seen as accretive [30][32] Question: What is the outlook for North America and specific industries? - Management noted a contraction in North America due to lower third-party costs across segments [35][36] Question: How is the healthcare sector performing? - The healthcare sector saw significant growth, partly due to the NHS deal, with expectations for continued contribution [39][41] Question: What is the impact of new labor laws on margins? - The recurring impact of new labor laws is expected to be approximately 15 basis points on an ongoing basis [61][62]

Financial Data and Key Metrics Changes - Revenues for Q3 FY 2026 were $5.1 billion, reflecting a sequential growth of 0.6% and a year-on-year growth of 1.7% in constant currency terms [11][12] - Adjusted operating margin for Q3 was 21.2%, with a reported margin of 18.4% impacted by changes in labor codes [12][16] - Free cash flow for the quarter was robust at $965 million, representing 113% of adjusted net profit [16] - The company revised its revenue growth guidance for FY 2026 to 3%-3.5% in constant currency [9][22] Business Line Data and Key Metrics Changes - Financial Services saw a year-on-year growth of 3.9% in constant currency terms, with strong momentum in large deals and discretionary projects [12][17] - The healthcare sector benefited significantly from a $1.6 billion deal with the National Health Service in the U.K., contributing to incremental revenues [5][40] - The manufacturing vertical is facing challenges, particularly in the automotive sector, while some strength is noted in data center supply capabilities [57][58] Market Data and Key Metrics Changes - Europe led growth with a 7.2% year-on-year increase in constant currency terms [12] - The Americas experienced a contraction of approximately 1% year-on-year, attributed to lower third-party costs across segments [35][36] - The energy and utilities sectors are expected to see growth acceleration in FY 2027, driven by increased discretionary spending [20][22] Company Strategy and Development Direction - The company is focusing on expanding its AI capabilities, with 90% of its largest clients engaged in AI projects and a total of 4,600 AI projects underway [6][9] - Infosys aims to capture market share across six identified AI value pools, including AI engineering services and legacy modernization [8][9] - Strategic partnerships with AI companies, such as Cognition, are being pursued to enhance service offerings [6][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain environment, citing strong year-to-date performance and robust deal wins [22] - The company anticipates a shift from compliance to business growth in Financial Services, with elevated interest in AI-led transformation [18][21] - There is a cautious optimism regarding discretionary spending in various sectors, with expectations for growth in FY 2027 [9][22] Other Important Information - The company completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid in EPS accretion [16] - Adjusted EPS in Rupee terms grew by 11.5% year-on-year for the nine-month period [16] - The impact of new labor laws is expected to result in a recurring margin impact of approximately 15 basis points [60] Q&A Session Summary Question: Why is the implied outlook for Q4 not stronger despite strong signings? - Management noted that while there is strong momentum, the lower working day calendar in Q4 presents a headwind [26][29] Question: Are there signs of discretionary spending expanding beyond Financial Services and energy? - Management confirmed that growth is expected in Financial Services and energy, but other sectors are still emerging [26][27] Question: Is AI a headwind or tailwind for margins? - Management indicated that AI projects are not negatively impacting pricing and are seen as accretive [30][32] Question: What is the outlook for North America? - Management expects a contraction in North America due to lower third-party costs across segments [35][36] Question: How are clients approaching their 2026 budgets? - There is increased activity in AI and discretionary spending in Financial Services, with expectations for growth [36][37] Question: What is the impact of the NHS deal on healthcare growth? - The NHS deal contributed significantly to healthcare growth, with expectations for residual contributions [40][41] Question: What is the recurring impact of new labor laws on margins? - The recurring impact is expected to be approximately 15 basis points going forward [60]

Financial Data and Key Metrics Changes - Revenues grew 0.6% sequentially and 1.7% year-on-year in constant currency terms, reaching $5.1 billion [3][8] - Adjusted operating margin was 21.2%, while the reported operating margin, impacted by labor code changes, was 18.4% [8][9] - Free cash flow generated was $915 million, with an adjusted free cash flow conversion for nine months standing at 118% [8][12] - The company revised its revenue growth guidance for FY26 to 3%-3.5% in constant currency [6][18] Business Line Data and Key Metrics Changes - Large deals totaled $4.8 billion in Q3, with 57% being net new deals, across 26 deals [3][11] - Financial services saw a year-on-year growth of 3.9% in constant currency terms, with strong momentum in large deals and discretionary projects [9][14] - The healthcare sector benefited from a significant $1.6 billion deal with the National Health Service in the UK, contributing to incremental revenue growth [3][35] Market Data and Key Metrics Changes - Europe led growth with a 7.2% year-on-year increase in constant currency terms [9] - The Americas saw a contraction of approximately 1% year-on-year, attributed to lower third-party costs across segments [30][31] - The company is witnessing increased demand for AI-led transformation and modernization across various sectors, particularly in financial services and energy utilities [16][18] Company Strategy and Development Direction - The company is focusing on expanding its AI capabilities, with 90% of its 200 largest clients engaged in AI projects [4][6] - Six AI-led value pools have been identified as significant growth opportunities, including AI engineering services and legacy modernization [5][6] - Strategic partnerships with AI companies, such as Cognition, are being pursued to enhance service offerings [4][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model and the relevance of offerings despite seasonal weaknesses [8] - There is an expectation of growth acceleration in FY27, particularly in financial services and energy utilities, driven by strong deal wins [6][18] - The company anticipates a shift from compliance to business growth in financial services, with increased discretionary spending expected [15][18] Other Important Information - The company completed its largest-ever buyback, returning INR 18,000 crores to shareholders, which is expected to aid in EPS accretion [12] - Labor code changes had a notable impact on operating profit, net profit, EPS, and free cash flow for the quarter [8][9] - The company is investing in talent, with a net headcount increase of 5,000 to 337,000 employees [10] Q&A Session Summary Question: Why is the implied outlook for Q4 not stronger despite strong signings? - Management noted that while there is strong momentum, lower working days in the quarter are a headwind for guidance [22][25] Question: Are margins under pressure due to pricing? - Management indicated that pricing has been accretive, with no significant headwinds from AI projects affecting margins [26][27] Question: What is the outlook for North America? - Management expects a contraction in North America due to lower third-party costs across segments [30][31] Question: Is there a shift in AI strategy across verticals? - Management confirmed increased interest in AI across various industries, with financial services showing significant momentum [41][82] Question: What is the impact of new labor laws on margins? - The recurring impact of new labor laws is expected to be approximately 15 basis points on an ongoing basis [55]

Financial Data and Key Metrics Changes - Revenue grew 0.6% sequentially and 1.7% year-on-year in constant currency terms [2] - Adjusted operating margin was 21.2% [2] - Free cash flow generated was $915 million [2] - Revenue growth guidance for the financial year revised to 3%-3.5% in constant currency [4] Business Line Data and Key Metrics Changes - Large deals amounted to $4.8 billion, with 57% being net new across 26 deals [2] - Significant large deal with the National Health Service in the U.K. valued at $1.6 billion [2] - Strong momentum in AI adoption, with 90% of the largest 200 clients engaged in AI projects [3] Market Data and Key Metrics Changes - Positive outlook in financial services and energy sectors, with good demand observed [8][18] - Manufacturing and Europe showed significant growth, previously experiencing softness [53] Company Strategy and Development Direction - Focus on AI capabilities, with six emerging AI-led value pools identified [3] - Plans to share a comprehensive view of the company's approach at an upcoming Investor Day [4] - Continued investment in sales and marketing, with a focus on building capacity for future growth [10][11] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in market demand, leading to headcount increases [8] - Positive outlook for the next financial year based on strong execution and large deal pipeline [8][18] - Management noted that while some sectors are showing improvement, others remain under pressure [18] Other Important Information - Adjusted margins expanded by 20 basis points sequentially, despite challenges from labor codes [24] - Ongoing impact of labor codes expected to be approximately 15 basis points annually [80] Q&A Session Summary Question: Headcount increase amidst job cuts in peers - Management indicated that the headcount increase reflects confidence in market demand and is part of their strategy to build future capacity [8][10] Question: Guidance upgrade factors - The guidance upgrade is influenced by large deals and strong execution, particularly in financial services and energy sectors [8][18] Question: Sequential margin dip despite currency tailwinds - Management explained that margins were impacted by various factors, including higher variable pay and lower utilization due to training new hires [10][11] Question: AI adoption and pricing models - Management noted that AI adoption is strong across client bases, with evolving pricing models being tested [19][20] Question: M&A strategy and market trends - Management confirmed ongoing discussions for potential acquisitions, focusing on areas like cyber, consulting, and energy services [31] Question: Labor code impact on margins and appraisals - Management clarified that the impact of labor codes has been accounted for, with no immediate changes to appraisal processes [80]