Avante Corp. (XX) Earnings Call Transcript & Summary

Thank you, everyone, for joining us today, and welcome to Avante's Fiscal Fourth Quarter and Year-End 2026 Investor Webinar covering the 3 months and 12 months ended March 31, 2026. My name is Rajan Sohal, and I will be the moderator for today's call. Joining me on the call today are Emmanuel Mounouchos, Founder and CEO of Avante; and Raj Kapoor, the company's CFO. This call is being recorded. There will be a question-and-answer session at the end of the call. I trust that everyone has received a copy of our financial results press release that was issued last week. Listeners are also encouraged to download a copy of our annual financial statements and management discussion and analysis from sedar.ca. Please note portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Forward-looking statements that are based on management's current views and assumptions and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements that is appended to our news release. Please review our press release and Avante's reports filed on SEDAR + for various factors that could cause actual results to differ materially from the projections. We use terms such as gross profit, gross margin, adjusted EBITDA and RMR on this conference call, which are non-IFRS and non-GAAP measures. For information on how we define these terms, please refer to the definition set out in our management discussion and analysis. And with that, let me turn the call over to Mr. Emmanuel Mounouchos, Founder and CEO.

Thank you, Rajan, and welcome, everyone. We truly appreciate everyone joining us today. On today's call, our CFO, Raj Kapoor will review fourth quarter and full year fiscal 2026 results. and I will provide a general update and business overview of where the company is today and our positive outlook for the fiscal 2027. Before we get into the fiscal results, I will provide a high-level overview of Avante. Avante is a leading provider of security operators and technology-enabled security solutions to residential and commercial clients. Avante's mission is to deliver an elevated level of security globally with white glove mentality to high net worth families and corporations alike. Our platform today spends 5 core areas: security systems, our advanced burger alarms, integrated camera systems and smart box dual factor monitoring backed by our 24/7 professional oversight from our state-of-the-art control center. Protective Services a full range of physical protection, including highly trained executive security operators secure driving rapid alarm response and mobile patrols. Halo, our AI-powered video analytics platform, delivering real-time monitoring, facial recognition and gun detection across residential and commercial spaces. Avante Black, our discrete specialized services delivering worldwide, including secure international travel and transport, complex investigations and covert operations. In Homeworxx, our premium home management offering, including embedded trades and maintenance. Avante's headquartered in Toronto, Ontario, and we have approximately 201 employees in the company. Today, the security landscape for high net worth individuals has become more complex than ever with rising geopolitical tensions, increasing incidents of targeted crime and growing concerns over personal safety the need for a sophisticated security solution has never been greater. High-profile individuals are no longer just seeking traditional protection. They require comprehensive proactive measures that integrate advanced technology with expert oversight. At Avante, we understand these evolving risks and are committed to providing elite security services that offer not only protection but also peace of mind. I'm pleased to report that during the fiscal 2026, our teams completed over 680,000 patrols, executed over 2,600 secured transports and responded to just under 28,000 alarm events maintaining an average response time of 6 minutes or less. On today's call, we will walk through the following topics. First is our Q4 and full fiscal 2026 financial results with Raj will discuss more detail shortly. Second is the innovation at Avante accelerating our growth. And lastly, our positive outlook for fiscal 2027. I would like -- I would now like to return -- to turn it over to our CFO, Raj Kapoor, who will discuss our financial results for the fourth quarter and the full year of fiscal 2026.

Thank you, Manny, and welcome, everyone. I am pleased to report another year of growth in revenue and adjusted EBITDA for Avante, capping off a strong fourth quarter to close out fiscal 2026. For the full fiscal year ended March 31, 2026, Avante achieved revenue of $37.2 million compared to $33.8 million in fiscal 2025, an increase of 10%. Revenue growth was driven by several divisions, including the company's secure transport division, which experienced an increase of 24% in revenue compared to the previous year. Additionally, SSG revenue experienced a growth of 67% over the previous year, including an increase in its consulting division of 97%. Adjusted EBITDA for the full fiscal year grew to $2.3 million compared to $1.8 million in fiscal 2025, an increase of 30%. EBITDA growth was driven by an increase in revenue in our higher-margin businesses and achieving greater operating efficiencies. Our fiscal 2026 full year results are as follows: reoccurring monthly revenue or RMR of $17.2 million compared to $13.8 million, an increase of 24%. Gross profit of $15.6 million compared to $13.3 million an increase of 17%, driven by revenue growth in the year and improved gross profit margins. Gross margin of 41.8% compared to 39.3% fiscal 2025, and an improvement of 25 basis -- sorry, 250 basis points. This full year performance reflects the continued strength of our reoccurring revenue base, marketing discipline and the growing contribution of our higher-margin service lines. Turning now to our fourth quarter results. For the 3 months ended March 31, 2026. Avante achieved revenue of $10.5 million compared to $9.3 million in Q4 of fiscal 2025, an increase of 12%. Adjusted EBITDA for the quarter was $509,000 compared to $287,000 in Q4 of fiscal 2025, an increase of 77%. Our fiscal fourth quarter 2026 results were as follows: recurring revenue of $4.8 million compared to $3.5 million, an increase of 35%, gross profit of $4.7 million compared to $3.3 million an increase of 42%, gross margin of 45.2% compared to 35.7% in Q4 fiscal 2025, a significant improvement of 950 basis points the improved profitability in the business. I'd like to take a moment to highlight Avante's consistent growth profile. On this slide, you'll see our trailing 12 months revenue over the past several quarters. Notably, our TTM revenue has grown sequentially every quarter over this period, highlighting the durability and consistency of our growth trajectory. The company's growth has been driven by the onboarding of new customers through focused sales efforts, enhance customer support, the launch of new services and strategic acquisitions such as SSG. Our business model remains predictable with a significant portion of our revenue recurring in nature. 45% of our revenue in fiscal Q4 came from contracted reoccurring revenue, providing strong visibility and predictability for future performance. Recurring revenue increased 35% in fiscal Q4 compared to the same period last year. Other revenue in Q4 fiscal '26 was elevated due to the increase in onetime NSSG engagements tied to heightened geopolitical issues in the Middle East during the quarter. Our client contracts are typically 1 year in length, and we maintain a 98% client retention and renewal rate, demonstrating the strength of our value proposition. I'm pleased to report that we have maintained the strength of our balance sheet, giving us the flexibility to fund the company's organic growth initiatives. As of March 31, 2026, Avante has $6.2 million in cash and cash equivalents compared to $4.7 million as of Q4 2025, an increase of 32%. We have access to a $12 million undrawn line of credit, which we intend to use to support future acquisitions. Our working capital as of March 31, 2026, was $4 million. We remain able to continue funding our growth with cash flow from operations. Overall, the company is operating from a very strong financial position. Revenues are growing. Profit margins are increasing and our cash is improving. I will now turn the call back over to Manny.

Thank you, Raj. I will now discuss how our innovation continues to accelerate growth at Avante. Our company was founded on the principle of combining cutting edge technology with best-in-class security operatives and innovation remains at the heart of our strategy. I'd like to take a moment to walk through 2 of our key growth drivers: MASTMAST and SSG. MAST, our mobile automated surveillance tower is an unmet solar-powered wireless communication security tower and has been a significant area of momentum for the business. We are seeing strong early traction across multiple verticals, including construction, parking, telecommunications, law enforcement, retail, events and oil and gas. We are experiencing a growth pipeline of opportunities as market awareness of MASTMAST increases. Some of our recent wins are listed in our -- here on our slides. We secured a deployment agreement with the Ontario Regional Police Force for our shop gun detection capability to be installed across 3 crime locations further demonstrating the strength of MASTMAST expansion expanded threat detection capabilities. We also partnered with Target Park to deploy MAST across the above-ground parking lots in Canada and the United States. We're selected for the second consecutive year to provide full perimeter security coverage for [indiscernible] production in Toronto. And deployed MASTMAST for remote AI video monitoring in Toronto during the FIFA World Cup tournament. On the operational side, our global supply chain is now fully established, enabled us to deliver MAST unit to any part of any entry worldwide. We currently have 29 MAST and box is deployed, and we have 18 additional MAST units now in production on order for delivery within the next 4 weeks, allowing us to support rising demand and reduce lead times as deployment activity accelerates. We're also building out our sales and customer support capabilities to meet growing demands across the platform. We currently have over additional 100 units on our sales pipeline. With its sustainable design, network architecture and highly flexible deployment model, MAST is well positioned to become a high-growth recurring revenue contributor to our performance as adoption continues to expand through calendar 2026 and beyond. Turning now to NorthStar Support Group, or NSSG, our global risk management and crisis response to Siguiri. As a reminder, we acquired a 55% stake in SSG in September of 2023. The SSSG executes Strategic Advisory and bespoke implementation solutions for international businesses operating in challenging security environments and complex jurisdictions. A key competitive advantage for NSSG is its global footprint with offices and representation across Europe, the Middle East, North America and Africa. NSSG is well positioned to leverage its global reach to support multinational clients, including Fortune 500 companies operating in complex and high-risk jurisdictions. Since the acquisition, we've accelerated NSSG's growth by tightly integrating NSSG with Avante's technology platform, combining its deep deploying risk services with our innovation infrastructure, intelligence tools and advanced security technology. This integration has also allowed us to introduce Avante's technology into new -- into new global markets, including Europe, and is helping our team close large, more complex international contracts and differentiating us through our technology. Financially, NSSG delivered 67% revenue growth in the fiscal 2026 compared to 2025, driven by strength in commercial execution, improved global sales practices and rising demand for specific risk management services, including 97% growth with its consulting division. NSSG also delivers a 52% gross margin -- profit margin in the fiscal 2026, underscoring the high-margin nature of its specialized risk management services. I will now conclude this call with some comments on our positive outlook for fiscal 2027. As you look ahead to fiscal 2027, our priorities are as follows: increased recurring revenues by developing and scaling our halo and MAST deployments across new verticals. Improved consolidation adjusted EBITDA margins, driven by an increase in higher-margin service lines and greater operating efficiencies. Take advantage of our consolidated opportunities within the fragmented security services industry through disciplined M&A and to continue to expand NSSG International secured transportation investigations and consulting revenue. We expect growth across NSSG, Halo, MAST and Avante Black in the fiscal year ahead, and we remain focused on driving organic growth across the businesses. We also see meaningful opportunities to expand our service offerings to customers in new industries. We believe we have laid an excellent foundation for the company and the positive outlook for fiscal 2027. Meanwhile, we are actively seeking new opportunities to expand and enhance our services through acquisitions. Finally, I want to thank the entire team at Avante, including the employees whose hard work elevates the company at the higher levels. We want to thank our customers around the globe who trust and rely on us to manage their risk and provide elevated security solutions and services. Last but not least, I'd like to thank you all for joining us on this call today. We look forward to providing more updates next quarter. I will now hand it back to Rajan for questions.

With that, we will now open the call to questions. [Operator Instructions] We have Gabriel Young of Bacon Securities on the call.

Just been a couple of things, Manny, can you talk a little bit about the Target Park agreement, that recent agreement how that came about and how you think that rollout is going to play out over the next 12, 24 months?

Well, it's a unique opportunity for us. Besides the issue that above parking facilities have where places like hotels are getting their cars broken into install or other above-ground parking facilities where cars are being stolen, there is a technology that we're working on with Target Park to be able to automate billing processes in the United States, where if somebody comes in and parks the car, we read the plate. They walk to the machine to enter the driver license. I'm sorry, there's a little bit of noise in the background. License plate and they punch in 2 hours. When the person comes back to pick up their car, they leave. And if they take 3 or 4 hours, the software in the back end via the MAST will determine that they overstate what they paid for and automatically get -- take an issue to their home. This is something that is allowed in the U.S. We can't work on that in Canada yet, but we're working on those solutions. It's a very big opportunity, and it's opening up a lot of other opportunities for us in the above-ground parking businesses.

Got you. And I know you talked about sort of 18 additional MASTMAST units coming in. Are those dedicated specifically for Target Park for some other stuff you're working on as well?

We have some other stuff that we're working on in Northern Ontario, very unique processes. It's really -- it's very exciting of the way things are getting put together. I'm preparing to put another order in for Europe and Africa. As we have interest in [indiscernible] were the point in [indiscernible], and we have a meeting tomorrow for Germany.

Got you. No, that's great. And then just shifting over to NSSG. I mean the revenue profile there has been quite solid over the last couple of quarters. I think it was a record high you mentioned part of that was due to some of the valuation work you're doing, I guess, in the Middle East. How should we think about that revenue profile in Q1 and towards the back half of this year? Do you think the Q4 level is sort of sustainable? Or would you expect a pull back?

No, absolutely sustainable, and I'm actually [indiscernible] right now, and we have a lot of exciting projects on the go, not only with NSSG traditional business, but because they're introducing MAST, they do have opportunities and doors that are opening. For example, the Cairo project is project. And even here in Romania, they have projects that they're talking to. They're really working hard in Ukraine. So we have opportunities all over the world. And NSSG is opening those doors since they have a very good presence in this part of the world.

Got you. And then just moving over to Halo. Just to remind us again where you're at in terms of rate of adoption within your core sort of high net worth residential market right now, your customer base, I guess, and what the opportunity is in terms of upsell on Halo?

The -- Halo is growing in a constant level. We are expanding our footprint. For example, we opened up Oakville. Atomico is growing. And because we have the ability to have 2-way voice, Halo is growing in areas like [indiscernible], where we don't have rapid response, but we have the ability to talk down to using 2-way voice. Through special cameras that we have made for us. So that opportunity is growing because we're moving outside our core 6-minute response areas to general public who want to have the detection of trust passers. And for us to be able to communicate to them via these cameras that we've manufactured.

Got you. Maybe one last question for Raj. In terms of the EBITDA margins, I saw the dip a little bit from Q3 to Q4. Just curious if there were some additional costs in Q4 and what your expectations would be in terms of EBITDA margins going into Q1 and for the current fiscal year?