Good day, and welcome to the Aston Martin Lagonda Q3 2026 Results. 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 a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. I would like to advise all participants that this call is being recorded. Thank you. I would now like to welcome Doug Lafferty, CFO, to begin the conference. Doug, over to you.
Thank you. Good morning, everyone. Thanks for joining us as usual for the Q3 call. Realize it is a busy morning for everyone, so I will keep the introductory comments brief before we open up to the Q&A. Overall, Q3 2026 year-to-date performance demonstrates continued progress against our strategic and financial objectives. We have delivered improved profitability, significantly reduced free cash outflow, strengthened liquidity, and remain on track to deliver our full-year guidance and outlook. In more detail, core retail demand continued to outpace wholesale volumes by over 20% year-to-date, demonstrating our ongoing focus on balancing production with underlying customer demand whilst maintaining a stable core order book. Year-to-date revenue increased 38% compared with the prior year period, supported primarily by the Valhalla Coupe deliveries, which has also driven a 25% improvement in total ASP.
Alongside this, we have been working hard on executing the transformational efficiencies related to our derivative strategy and stock optimization, with a declining trend on dealer support also reflected in core and overall ASP. We continue to expect to see core ASP growth of low to mid single-digit percentage on a year-over-year basis. The launch of the DBX GT expands our SUV range and broadens customer choice within the segment. We have also continued to develop our highly successful specials program through the launch of Valen in August, as well as today's unveil of a Valhalla Spider. Building on the success of the Coupe, which is now nearly sold out. Valhalla Spider is an exclusive proposition with a strong order book already taking deliveries into Q4 next year.
Together, these programs demonstrate the strength of the brand and our ability to continue creating highly desirable ultra-luxury products across multiple segments that when combined, gives a strong platform for the future. This all translates to gross margin improvement, which is one of the clearest indicators of the progress we are making during 2026. Driven by the contribution from Valhalla Coupe together with the ongoing benefits of the transformation program, year-to-date gross margin has materially improved to 35%. Compared to the prior year period, adjusted EBITDA increased by GBP 125 million year-to-date, reflecting the stronger gross profit performance and growing operating leverage within the business. Adjusted EBIT also improved 22% year-to-date, despite a 48% increase in D&A linked to the Valhalla Coupe deliveries. We expect to see continued positive momentum across both adjusted EBITDA and adjusted EBIT in Q4.
A key focus throughout 2026 has been on delivering a material improvement in free cash outflow. Year-to-date, this has nearly halved when compared to the same period in 2025. This improvement mostly reflects the stronger operating performance together with lower capital expenditure. Looking ahead to the end of the year, as I said back in July at the half-year results, I wouldn't expect our full-year free cash outflow to be a million miles away from where we were at the end of H1. As a result of July's financing, we entered the final quarter of the year with a total liquidity position of around GBP 320 million. This provides us with greater resilience in what remains a volatile operating environment, whilst also supporting the continued execution of our product and operational plans.
From an outlook perspective and relying on the enhanced product mix and transformation delivery, we continue to expect to achieve material improvement in full year 2026 financial performance. Of course, the broader macroeconomic and geopolitical backdrop remains challenging. We continue to monitor developments relating to a wide range of issues. However, to date this year, we've managed these dynamics and limited or mitigated their direct impact on the business. Against this backdrop, our full-year 2026 guidance remains unchanged, with wholesale volumes expected to be similar to last year on the core portfolio and also expecting to deliver the 500 Valhalla Coupe deliveries.
We expect gross margin to increase into the high 30s percentage range, adjusted EBIT margin to improve towards break even, and critically, free cash outflow to materially improve as already demonstrated year-to-date. Thanks again for joining us. I'll now hand back to the operator to open the line for some questions.
If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Your first question comes from the line of Henning Cosman from Barclays. Your line is open.
Morning, everyone. Morning, Doug. Thanks for taking the question. Have to start with Valhalla Spider. Very exciting vehicle. What can you tell us about it? How many units? What's the price point? I think there's a little bit of confusion whether the units come on top of the coupe or if they come out of the original indicated number of the 999. Perhaps you could clarify that, please. That's the first question. Second question, on the just the overall setup with dealer inventory, variable marketing, ASP, where do we stand? I think you just updated us that the ASP increase year-over-year, you're now seeing it at a low to mid-single-digit increase. Do you expect that to increase further also in 2027, 2028? That's the second question.
Finally on free cash flow, appreciate your repeating the statement there, not a million miles away from H1 in terms of liquidity and free cash flow. Suppose at face value it would mean a reverse or a swing to positive territory, liquidity increase in Q4 and positive free cash flow in a similar amount to the free cash outflow in Q3. Just wondering if that's taking you too literally or any further color you could add there for the Q4 development. Thank you very much.
No worries. Morning, Henning. Look, on the Valhalla Spider, I think everybody's super excited by it. I've seen the launch video went out overnight, and I think everybody who's seen the car certainly, that I've heard, has very positive things to say about it. So yeah, look, I think we're in a good place with that car. In terms of the total volume, I think we'll end up doing slightly more than the 999 that we initially indicated when you combine the Spider and the coupe. The Spider will represent around about one in four of those cars. So around about a quarter of the total will be the Spiders. The pricing will be around about 20% higher than the coupe. That's not unusual for the difference between a coupe and a roadster or Volante, and particularly from a specials point of view, it's normally around 20% higher.
Personalization-wise, I think we would expect it to be broadly in line with what we've seen on the Valhalla Coupe, which has been around about 20%. So look, I think it positions us very nicely going into next year. As I've said, the coupe is all but sold out. The Spider has started with a very strong order book upon launch today. So we're in a good position with that, I think. On the ASP, yeah, look, I think ASP is trending in the right direction. I think we'll probably end this year with a low to mid-single digit ASP improvement from a core perspective versus 2025. Looking at next year, I'd probably expect it to be about the same year-over-year, so 2027 a low to mid-single digit improvement on 2026.
The driver for that to a certain extent is this reduction in dealer support that we have seen throughout the course of this year that is trending in the right direction. Q4 will be the lowest level of support on a per unit basis, and of course, we will try and make sure that we carry that trajectory into 2027. Core ASP is moving in the right direction. Obviously, total ASP is supported by the specials and will continue to be so in 2027 when you think that we will have the remaining Valhalla Coupes to deliver in the first half. The Valhalla Spiders start delivery in the second half, and we will probably deliver a shade over 50% of the total Spider volume in the second half of 2027. We will also have the Valen delivery, so total ASP will be supported by the specials.
On the cash flow, I guess unsurprisingly I will not be drawn into specifics. But consistent with what I said in July, I think we will end up from a free cash flow perspective at a very similar level to that we saw in the half years. Yeah, look steady and obviously I would point to the fact that the last two Q4s, I think in 2024 and 2025 were modestly positive. So we hope that we can repeat that and end up somewhere very close to where we saw the free cash outflow level at H1.
Thanks, Doug. Just a clarification on the Valhalla Spider. Is that in any way different from how you would have expected originally? Were you hoping to sell 999 off the Coupe and then the Spider would have come on top? Is it somehow attributable to tougher market conditions that it is now inside, I think you said slightly more than 999, so I understand it is not completely on top. Is there anything more you can share around that?
I think the plan for a while has been exactly this. We are comfortable with the plan on the Valhalla. We have invested heavily in a platform which we see working very well in the market. The Valhalla Coupes have been delivered very strongly, positive customer response, expect the same from the Spider. We have got that platform within our portfolio for future use as well. This is the combined, the initial run on the Valhallas. Yeah, it has been in line with our plans for some time.
Thanks, Doug. All the best.
Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one to ask a question. Your next question comes from the line of Harry Martin from Bernstein. Your line is open.
Hi. Morning, Doug. The first question I had, you have referenced it a couple of times, the uncertain macroeconomic environment. Clearly we can see the impact that you might be experiencing on raw materials and logistics. I was actually more interested in the demand side. So far this year, the K-shaped economy seems to have held for premium luxury brands. But I am interested if you are tracking anything when it comes to order books, pricing, personalization rates, and any pockets where there is some orange flags and some signals of any weakness or if your core customer remains pretty strong so far. The second one, I actually have a question on China. It is a time when a lot of the automakers are scaling back ambitions.
Maybe this is just reflective of me spending a bit too much time on your media channels, but I noticed you've opened a new dealership in Suzhou, launched the S range in Shanghai quite recently. Are there maybe some more ambitions for the China business, even in a declining market, where you think you can grow the business? Any reflections on that would be interesting. Then the final question, I thought I would ask for an update on how the conversations with some of your bondholders are going after they were taken a little bit by surprise over the summer with the refinancing. Thank you.
Okay, no worries. On the macro, yeah, look, I think everybody knows it's a challenging environment. It's pretty complicated out there. But from our perspective, I think when we look at the business, certainly there's pockets where I think we see more strength and pockets where there's a little bit more uncertainty or weakness or stretch or challenge. I think from our perspective, the U.S.A. and the U.K. have remained pretty strong. Middle East obviously has been a difficult year, but we've managed to sort of redistribute any volume that we would've had going into that market elsewhere. So, we're managing to mitigate, as I said in my opening remarks, the impact of some of these things during the course of the year. There's a tipping point, no doubt, but at the moment we're on top of it. Order book is relatively stable.
We've talked about order book in the past, probably for the past 12- 18 months of being about five months on the core portfolio. That isn't any sort of significant difference to the length of our order book as we sit here today. It's short of ideal still. You've heard Adrian talk for a while now about wanting our order book to be between six and nine months, depending on the derivative that we're talking about in the core portfolio. So there's still the appetite to improve it, but I don't think we're not seeing any material deviation from where the order book has been for the last number of months and potentially over the last year or two years. So, the retail demand is solid. The retails are running ahead of wholesales. We've got a sensible production plan in what is a complicated market.
We're doing the right things with the dealers in adjusting the inventory levels to the ones that we think are now appropriate. And we're on that journey, on that path. So I think we're in a good place in that regard. But obviously cautious and on the lookout and all the usual sort of caveats that all of the external pressures do tend to apply. As it relates to China, look, I think China, we've rotated through quite a lot of dealers in China over the last two years. I think the total number of dealerships that we have in China, notwithstanding the fact that we've just opened a new one, is probably 40% down on where it was two years ago. I think we've quite consistently said that as painful as it's been losing the volume out of China, we've always seen an opportunity.
I think to continue to position the brand and the product in the best possible way that we can in China, so that as and when that market returns, we can rise with the tide, I think is important to do so. We just need to be mindful of the quality, as we do everywhere, of the dealers that we have in place, and make sure that we have the right dealer partners in the right parts of the country, geography, to make sure that we take advantage of the opportunity as and when it arises. There is nothing sort of special or specific, I would say, to read into there, Harry, but keep reviewing the media channels because you would always get some good insight on the company and the brand and the products through those means.
China is, like we do with every other market, where there is opportunity to improve what we think we have on the ground, we will take it. Then with regards to the bondholders, nothing really to say, Harry, at this stage. We are where we were. We outlined the reasons for the refinancing during our first half results. I think you can see from the shape of the company, the liquidity is in a stronger place. That is what it was all about. It has provided us with resilience and flexibility and the means to go on and execute the plan that we are focused on delivering. So nothing more to say on that at this stage.
Thank you very much.
Your next question comes to the line of Michael Tyndall from HSBC. Your line is open.
Morning, gents. Mike from HSBC. Two questions, if I may. Just on the dealer destocking, I just want to understand how far through we are, because I think at Q2, the suggestion was that you are pretty much close to being done. There was still a little bit left. Are we now pretty much completely done, or is there still some more to go? That sort of leads into my second question, which is, when we have looked at previous Q4s, we have seen a significant uptick in activity, but the hangover from that is that we tended to have dealer inventory to resolve. Not saying the two are necessarily connected, but what is different this year that can kind of reassure us that we are not going to have an inventory problem again in the first half of next year? Thanks.
Hi, Mike. Yeah, look, I think we are largely through it. There is always a bit of seasonality in Q4. I think next year, when we look at the shape of the plan, we are very focused on trying to make it as smooth as possible. I think when I look back at our volumes over the last however many quarters, the retail offtake has been pretty stable quarter- by- quarter, and that is where we are trying to get the wholesales into that kind of mantra as well. Yes, there will be an uptick in Q4, but then the focus next year is to try and make sure that we stay in sync retails and wholesales as much as we possibly can, as quickly as we possibly can.
I am not going to sit here and guarantee that Q1 is going to be looking the same as Q2, Q3, and Q4 next year, but probably between now and within four or five months' time, I think we will be in sync from a wholesale and retails perspective on a quarterly reporting basis, and also have the dealer inventory at the right level for a consistent. I think the summary, Mike, is we are nearly there. There is a little bit more work to do, hence the reason there is still some dealer support going in and getting the variable marketing down remains a focus. But we are not far from where we want to be, and we will have made a significant move in the right direction during the course of 2026.
Got it. I am going to show my ignorance here. The U.K. tariff allocation, where does that sit at the moment? When we think about 2027, how is that allocated to you, thinking about your compatriot and what their plans are? They have been fairly busy, so I am just wondering, how does that work for 2027?
As far as I'm aware, it works in exactly the same way as it's worked in 2026, which is we do not have a specific allocation for ourselves. The U.K. has the ability to ship 100,000 cars into the U.S. with a tariff of 10%. Anything above that is 27.5%. Every quarter, there's an allowance of 25,000 cars. Effectively, on January 1, 2027, slate starts clean, and Q1, there's 25,000 cars that can travel between the U.K. and the U.S. at that rate. It's first come, first served. Any under delivery in Q1, so if the U.K. sold 22,500 cars to the U.S. in Q1, then the 2,500 that you didn't deliver would be added to the Q3 quota.
But as of January 1 each year, it starts a clean slate. We start again with 100,000 and we start again with the 25,000 per quarter. We, and as far as I'm aware, no OEMs from the U.K. have a specific allocation within that number. It is first come, first served.
Got it. Thank you.
Yep, no worries.
There are no further questions at this time, so I'd like to hand back to Doug for closing comments.
Thank you very much. We are focused very heavily on executing the plan, as you'll have seen. I think we're making good, steady progress. We've got some really exciting things coming. It's great to get the Valhalla Spider out there and launched. I'm hoping that we'll have very positive things to say about the progress that we've made in that regard when we speak again with the full year results. So thanks for your time this morning. I appreciate it's busy and all the best to you. Thank you.
That does conclude our conference for today. Thank you for participating. You may now all disconnect.