Nerds on Site Inc. (NERD) Earnings Call Transcript & Summary

So good morning, everyone. My name is Charlie Regan. I'm the capability expansion orchestrator for Nerds on Site. My pleasure to welcome you to the company's Annual General Meeting of Shareholders. Before we commence the meeting, I'd like to address the meeting structure and note some general reminders. The meeting will consist of the formal business described in the notice of meeting that we sent to everyone. After this meeting's formal portion, I'll open the floor to any shareholder questions. And to ensure a smooth and efficient meeting, I've asked certain shareholders to move for the resolutions tabled this morning. I want to remind everyone that only registered shareholders or duly appointed proxy holders are entitled to vote and speak during the meeting. A shareholder or a proxy holder may register their vote through the Zoom platform when a poll is created and it will be a show of hands for that poll. If you have any questions on registering your vote, please e-mail Patricia Selby using the e-mail posted in Zoom chat, which I will post. Please note that once you've registered your vote on an item, well, we don't need to -- it will again show of hands. And the final one is please carefully consider the item of business before registering your vote.

I probably just fill an interruption, Charlie. Can we have Peter Nelson mute? [Technical Difficulty]

Perfect. And everyone excuse my lack of tech competence. Okay. And the last point of information. In accordance with the company's articles, I'll act as chair and ask Richard Skeith to act as Secretary of the meeting. Richard, I'm sorry, are you here, Bud? He's our corporate lawyer.

I am. I am here.

Okay. Sorry, Bud. Good to see you. And I'm asking Patricia Selby, a representative of TSX Trust Company to act as scrutineer. And if you haven't checked in with the scrutineer, please do so now to ensure there is an accurate attendance count. I think you can probably see everyone on screen, Patricia?

Absolutely can. I've registered all the guests.

Excellent. Thank you. So the notice calling this meeting together with the management information proxy and annual financial statements were posted to SEDAR and the company's website in accordance with the Section 9.1.1 of National Instrument 51-102, continuous disclosure obligations. In accordance with that same instrument, 54-101. These materials were also sent to all responding intermediaries. With the consent of meeting, I will dispense with reading of the notice of meeting and I'll direct that a copy of the proof of service be retained within the minutes of this meeting. So thank you for that. And at this point, I'll ask the Secretary to read the scrutineer's report on attendance.

Perhaps, Patricia, you can just let us know that, please?

Absolutely. There are 35 registered -- 35 proxy holders in person or by proxy holding 52,855,258 shares, which is 52.990% of the issued outstanding of Nerds on Site.

All right. With the appropriate notice of meeting given and the requisite quorum present, which was just confirmed, I declare this meeting regularly called and properly constituted for the transaction of business. Boy, this is really good solid English, isn't it? There will be 4 items of business to be voted on at today's meeting, specifically to receive and consider the financial statements of the company, first. Second, fixing the number of directors. Third, the election of said directors. And fourth, the appointment of auditors. And unless otherwise requested, we'll proceed with the voting on such matters by way of Zoom poll. And that is just a show of hands. I think as Patricia said, we already have majority. So the first item of business is the presentation of the company's audited financial statements for the financial year ended May 31, 2025, together with the auditor's report thereon. With the consent of this meeting, I don't propose that the financial statements and auditor's report be read at this time. There's no objection. But I will table the financial statements for the period ended May 31, 2025, and the auditor's report thereon, ask that the secretary to file them with the records of the meeting. And if any shareholder has questions or concerns, management is pleased to answer them after the formal part of this meeting. So the next item of business is the election of directors for the following year. By way of ordinary resolution, the information circular listed the 7 nominees proposed for election as directors. May I have those nominations, please?

I move that Kevin Ernst, John Harbarenko, Yevgen Konaryev, sorry, I'm not pronouncing it right, David Redekop, Charles Regan, Gresford Barrington Gray and Ping Wang Rawson be nominated for election as directors of the company.

And a seconder?

I will second that.

May I have a motion respecting the election of directors?

Yes. I move that the persons nominated be elected as directors of the company to hold office until the next annual meeting or until their successors are elected or appointed.

And a seconder.

I second the motion.

I'll ask each shareholder to vote using your show of hands, just hand up. [Voting]

All right. So now that everyone's had the opportunity to vote, I declare that poll closed. And based on the voting results, the resolution is passed. I declare the motion carried and that all nominees have been elected as directors of the company to hold office until the next annual election of Directors or until successors are elected, subject to the provisions of the Business Corporations Act of Ontario and the articles of the company. Next item is the appointment of the company's auditor for the ensuing year, fiscal '26. And to authorize the directors to set their remuneration by way of ordinary resolution. May I have a motion in favor of the resolution?

Yes. I move that MNP LLP chartered professional accountants be appointed as the company's auditors and that the directors be authorized to set their remuneration.

Thank you. And a seconder?

I second the motion.

Any discussion on the motion? Okay. I'll ask each shareholder to vote using the meeting, just a show of hands. And if you can't register your vote, please e-mail your vote to [email protected]. [Voting]

All right. Now that everyone's had the opportunity to vote, I declare the polls closed. Based on the voting results, the resolution is passed, and I declare the motion carried. And if there's no further business to be brought before the meeting, formal business. I'll ask that a motion to terminate this meeting be moved. [ Deb ], can I ask you to move...

I'm just waiting if anybody was going to comment. I move that the meeting be terminated.

Okay. And second.

I second the motion.

Thank you. So I declare the motion carried and the meeting -- the formal portion of the meeting is terminated. And I now open the floor to questions, comments, queries. [ Resford ], how are you, Bud?

Very well.

Good. Who might have the second question? Good. First one.

I have just a question, Charlie. Could you just talk a little bit about like the financials like in terms of the revenue growth and things of that nature in the last quarter?

I'd be happy to. As we know from our year-end last year 2025, we had -- in the last quarter, we were profitable. The whole quarter was profitable. Now it was only $55,000, but that was ahead of my prediction that we would have 1 profitable month in fiscal '25. So we have since the 2 quarters, we're halfway through our fiscal '26 right now. And our quarter 1 was up 19.9%. Our gross profit was up 13.7% and our operating loss was down 38%. So in real dollars as well as percentages, we moved ahead. So far, for fiscal '26, our revenues are up 23.2%, which is an increase over fiscal 2025, where the whole year, we were only up 10.3%. Our gross profit is up 13.7%. And our absolute costs in SG&A costs, expenses are down 2.3%. So we're 26% -- we're down 21% when it comes to actual cost as well. So we've been focused on the slow but steady process of not just driving up revenues, but also driving down actual total dollars in our costs, thanks to [ Deb ] and her team at the office in [indiscernible] and in percentages as well. So we're off to a good start in fiscal '26. But we're very excited, to be frank, incredibly excited. We're pushing on the AI front, which is, as you may already know, is a new initiative for us over this past, I'm going to say, 9 to 11 months. And we now have developed the capability to deliver private LLM to our clients, and we're going to go about the process of expanding that offering. But also our AI work has been contributed to by other players on the Nerds team around the world, and we've got some exciting new opportunities, we believe, to extend to our clients as well. So as we all know, AI will permeate every single industry, every single vertical on the face of this earth. No question. The differentiator going forward. It's been noted by all who are schooling themselves in this field. The single solitary differentiator is relationship dynamic. It's one thing for an AI bot to take care of this, that or the other when it comes to the execution of a job or execution of an element inside your business model. But bottom line, relationship dynamic is not taken over by the placement of so-called artificial intelligence spot has been, I believe, more accurately noted. It's not artificial intelligence, it's aggregated intelligence. It's bringing together every bit of data from around the world. We are focused for our clients specifically on providing private data capability under the banner of sovereign data custody. We believe that everything you own should, in fact, stay yours and yours alone. You don't need to share it with anyone else. And with our edge devices tailored to a number of verticals, accounting, retail, utilities, manufacturers, municipalities. With that tool, we can make sure that your data is never shared in general pools up in the cloud with anyone else's data and that everything is certified safe and secure on site. So again, we trumpet the notion of the value of privacy in today's world. It may not be something that everyone thinks about on a regular basis, but we believe that the consistent news releases of breach of your information now in the hands of people you did not agree to share your information with is going to permeate every single players' life. They're all going to become aware that I need to take care of my stuff. The players out there in the mega tech world, they are not taking care of my stuff. They're using it. They're aggregating it and repackaging and repurposing and selling. Our job is to help our SME clients as you know with 100,000-plus 5-star reviews, trust is used very often. That word specifically in describing and defining the relationship they believe they have with their Nerd. And we are going to continue to work to keep that trust door open, not just with the clients we have, but with more and more clients as we approach them. So thank you very much for that question, Kevin. Probably a longer response. Who might have another? [ Jackie ]?

I have one. So with -- I know that your focus -- Nerds on Site's focal point is SMEs. But with Anthropic having dropped their guardrails and with OpenAI being called on the carpet for not reporting the Tumbler Ridge issues in Western Canada, do you see any opportunity for Nerds on Site to create space? Does it create space for Nerds on Site in government channels? Is that a possibility?

That's a great question. And David is our resident cyber expert. I don't know if you could chime in on that one, my friend.

That is a good question. I don't know about government specifically around those topics. It is currently so early to offer any kind of prediction at this point would be premature. I think all of the models are in extremely rapid flux, and there's high concentration of influence and power amongst just a few key players that how it shakes out will largely depend on what their decisions are day by day. But what I do believe there will be a great -- a need of is when we take a look at where abundance versus scarcity leads to, there's going to be an abundance of AI capabilities, but we will always have a scarcity of humans. And so the human aspect in the loop will actually become the most valuable portion. And as we start applying AI-related processes and automations to a variety of business processes, it's going to be the -- what we affectionately call, AI wranglers, that will be humans. They will be the ones that will need to apply actual human intellect that have a good context window of the humans -- as humans, we have a context window of our entire lifetime. And even the best agents today have a very small context window. And so if we just start to understand the different roles that humans have, I think even though there's going to be a lot of white-collar job losses, there will actually be an extremely large demand for the people that can actually apply it properly. And I don't see that changing anytime soon where a human being needs to be involved before things have a runaway process. So it doesn't answer your question directly about government market opportunity necessarily, but it's more of a broader picture. Hopefully, that helps.

And as we're all aware, governments tend to be behind the title wave. And we certainly see that with only a handful of governments now moving in the direction of legislating or beginning to check the mega tech corporate world and cybersecurity is a big part of that. So we have work to do. We have much work to do, but we're excited to get at it. Anyone else with a question, comment, query of any sort? As you must know, we are very appreciative of your participation, very appreciative of your support. And we're looking forward to providing you a solid return on the investment you've made, both in time, effort and energy, watching us go up and down. But we are in a steady climb upward on key metric fronts, which will deliver, hopefully, a market response when it comes to your share price. So I'm just as anticipatory in a positive mind as you are regarding that. But continue that belief. We're very grateful for it, very grateful. All right. I guess, we can wrap. Would that be okay, Pat? Patricia?

Absolutely, okay. I got to report to you shortly. Thank you very much.

All right. Good to have you all. Thank you again. Richard, thanks for joining, Bud. Appreciate it.

Thank you.