Nanalysis Scientific Corp. ($NSCI)

Good morning or good afternoon to our European shareholders, everyone. Welcome, and thank you for joining Nanalysis Scientific Corp.'s Q1 2026 Earnings Call. I'm Jake Bouma, an IR consultant for Nanalysis. Today, on the line discussing Nanalysis' Q1 2026 financial results and company highlights are the company's President, CEO and Founder, Sean Krakiwsky; and Interim CFO, Heather Kury. Following their remarks, we will open up the call for an analyst Q&A session. Before handing over the call to Sean and Heather, please note that information we present today could contain forward-looking information that is based on management's expectations, estimates and projections. Please consider the risk factors, including those in the filings made by Nanalysis on SEDAR when reviewing this information. Also, all amounts discussed will be in Canadian dollars unless otherwise noted. With that, I'd like to turn the call over to Nanalysis' Interim CFO, Heather Kury.

Thank you, Jake, and thank you to everyone joining us on the call for taking the time out of your day to allow us to share with you the progress we are making here at Nanalysis. I will begin by walking through the financial results for the first quarter, which ended March 31, 2026. For the 3 months ending March 31, 2026, the company reported consolidated revenue of $10,667,000, an increase of $73,000 or 1% from the comparative period in 2025. While there was a decline in product revenue due to lower bench top sales and the termination of third-party equipment sales contracts, Security Services revenue increased primarily due to higher levels of project-related work associated with the airport security maintenance business. Gross margin percentage for product sales for the 3 months ended March 31, 2026, was 58% versus 66% from the comparative period in 2025. The decrease was primarily due to changes in product mix following the termination of the third-party equipment sales contracts. Gross margin percentage for the comparative period in 2025, excluding third-party equipment sales contracts, was 60%. Gross margin percentage for the Security Services business for the 3 months ended March 31, 2026, was significantly improved at 19% versus 6% from the comparative period in 2025. This increase in margin was driven by operational efficiencies, including enhanced logistics processes and more effective management of overtime and on-call hours as well as higher levels of project-related security services activity. Management believes the operational improvements implemented in 2025 position the segment for continued margin improvement throughout 2026. The company recorded adjusted EBITDA of $292,000 for the 3 months ended March 31, 2026. This represents an increase of $112,000 over adjusted EBITDA of $180,000 for the 3 months ended March 31, 2025. This was primarily the result of an increase in services margin, lower spending in sales and marketing and general and administrative expenses, offset by lower product sales. Net loss was $1,281,000 for the 3 months ended March 31, 2026, which is an improvement of $26,000 from the comparative period in 2025. The decrease in net loss for the 3 months ended March 31, 2026, was due to improved business margins. With that, I will turn the call over to our Founder and CEO, Sean Krakiwsky. Sean?

Thanks very much for that financial overview, Heather. And maybe I'll just talk about some of the highlights from the recent quarter. So first of all, we were successful in our equity raise, which closed in January, which allowed us to make a $2.1 million repayment on our term loan with ATB, taking it down to approximately $3.7 million remaining in the term loan. Very enthusiastic about the trajectory for our services margins. I'd like to commend Mark Thomlinson, the Head of our Services business unit for achieving those numbers in Q1. We've worked really hard to fix some of the issues associated with our direct sales organization and also the management of our dealer network around the world. And although that didn't bear fruit in terms of revenue for Q1, we expect it to do so going forward and some fundamental changes being made there. We're very proud of the amazing new directors that we've been able to attract to our company. Jonathan Lad, a seasoned technology CEO and executive, Mr. Steven Fike, associated with the Manal organization in Calgary, which is a very large and successful investment group and also Dr. Werner Ma, who is the former President of Bruker BioSpin, the leader in magnetic resonance in the world. And just the fact that he was willing to join our organization and lend his name to our magnetic resonance company is quite a testament to what we've accomplished and to the potential that we have going forward. And then lastly, just to continue to emphasize the operational improvements that we're making, largely led by Heather Kury, who's doing a fabulous job on those and making sure that we're focused in on return on investment for every dollar that we spend. So I'd like to thank her for adding that ingredient to our company since she joined. So with those types of highlights, looking backwards, looking forward, we're really excited about where we're going. We remain committed to the future of benchtop NMR, which is to take it from a now in R&D type environments to quantitative analysis and quality control and manufacturing environments. And we have several exciting initiatives along those lines going forward as well as our -- also our broader magnetic resonance offerings. We've talked about the things that we've done in the clinical MRI space with partners we're by no means a clinical MRI expert, but we do have exciting platform technology that experts step in that space are very interested in as well as also the high field magnetic resonance opportunities via our strategic partner in Switzerland. So with that, I'll turn it back over to the operator and welcome any questions or comments from investors on this call.

Thanks, Sean. Thanks, Heather. [Operator Instructions]. Give it another 30 seconds or so. Well, if we have no questions on the line, please feel free to reach out any time to the company directly. I want to thank everybody for joining us today, and we look forward to talking to you again soon at our second quarter 2026 conference call.

Thanks very much, everybody. Have a wonderful day.