Andrew Scott

Andrew Scott asked for details on the factors influencing VersaBank's Net Interest Margin (NIM) stability in 2026, including potential upside, considering both the benefits from the U.S. RPP portfolio and any headwinds from CMHC lending. He also inquired about the long-term opportunity for the digital media program as it expands in Canada and the United States over the next couple of years.

Answer

President David Taylor explained that the upward-sloping yield curve is contributing to NIM expansion on credit assets, and CMHC-insured lending is also generating a positive spread of about 270 basis points. He noted that while overall NIM was previously depressed by accumulated cash, it is expected to stabilize around 265-270 basis points for credit assets, with some upside. For the digital media program, Mr. Taylor highlighted two opportunities: establishing a new, economical, diversified deposit channel priced around checking accounts, and licensing the proprietary technology to smaller community banks in the U.S. for additional revenue.

Andrew Scott of Morgan Stanley questioned the modest 1% Average Sales Price (ASP) increase in North America, asking about the realization of the price increase and if better pricing is needed to hit full-year growth targets.

Answer

CEO Aaron Erter explained that the company is realizing its price increase as anticipated, but the reported 1% ASP figure was negatively impacted by product mix. Specifically, the significant decline in the multifamily segment created a headwind of nearly 1.5 percentage points. He affirmed the company's commitment to achieving positive ASP moving forward.

Andrew Scott of Morgan Stanley questioned the balance between investing for market share growth and maintaining near-term margins, referencing the 'pedal and clutch' metaphor. He also asked for clarity on the company's approach to its share buyback program.

Answer

CEO Aaron Erter explained that the Hardie Operating System (HOS) provides efficiency savings that allow the company to fund long-term growth initiatives without sacrificing margins. CFO Rachel Wilson reiterated that share repurchases are a key capital allocation priority but declined to comment on specific timing, noting the current $300 million authorization runs through October 2025.

Andrew Scott from Morgan Stanley asked if the lower Q2 North American margin guidance was solely due to volume deleverage and inquired about the margin impact on the APAC segment from exiting the Philippines market.

Answer

CFO Rachel Wilson confirmed the lower Q2 margin guidance is primarily driven by lower volumes, but also noted that raw material headwinds are expected to be 'particularly hard' in the quarter. CEO Aaron Erter stated that exiting the Philippines will increase the Asia Pacific segment's margin over the long term, as the decision was made to focus resources on markets where the company has a 'right to win'.

Inquired about future guidance and key metrics investors should monitor to track the company's progress toward minimizing operational losses, and encouraged the release of such metrics.

Answer

The company is shifting its messaging to focus on four key segments (subsidized wireless, prepaid wireless, prepaid top-ups, and POS SaaS) to make the business model more understandable for investors. They will provide consistent updates on subscriber counts and recurring revenue from stores. The executive expressed that the business plan now aligns with the business summary for the first time, and the team is energized for growth despite the Q3 financials.

Asked for a macro perspective on whether the company is seeing greater overall market adoption and penetration for its products, despite the slowdown in North America.

Answer

The company is seeing strong adoption, particularly in the rental market for the cable laying application, where its patented technology is becoming the standard in Europe. The broader acceptance of the Echoscope for real-time monitoring and obstacle avoidance continues to grow, and the company believes it has no competition in these markets. The DAVD system also has several opportunities being worked on.