NXT Energy Solutions Inc. (NSFDF) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. My name is Patrick, and I will be your conference operator today. At this time, I would like to welcome everyone to the NXT Energy Solutions Q1 '25 Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to Mr. Bruce G. Wilcox, President and CEO of NXT Energy Solutions. Please go ahead, Mr. Wilcox.

Thank you, Patrick. Welcome, and thank you, everyone, for joining us today for NXT Energy Solutions 2025 first quarter financial and operating results conference call. My name is Bruce Wilcox, NXT's Chief Executive Officer. Joining me on today's conference call is Mr. Eugene Woychyshyn, VP of Finance and CFO. The purpose of today's call is to briefly discuss the highlights of the release of NXT's 2025 first quarter financial and operating results and to give some color as to how efforts in the last year resulted in the first quarter strong results and relate to NXT's new business growth strategy. Our CFO, Eugene Woychyshyn, will start with a financial review, and I will follow with perspective on our business outlook. Following our update, we will open the line for questions. Please note, all statements made by the company and management during this call are subject to the reader's advisory regarding forward-looking information and non-GAAP measures set forth in our Q1 2025 press release and MD&A issued May 8, 2025. All dollar amounts discussed in today's conference call are in Canadian dollars unless otherwise stated. The complete financial and operating results and consolidated financial statements for the 2025 first quarter we published on May 8 and are available on NXT's website, SEDAR+ website and on EDGAR's website. Now over to Eugene for the financial review.

Thank you, Bruce. First, I'll start with a review of our financial results for the first quarter of 2025. The company completed data acquisition of the SFD survey flown for its Strategic Alliance Partner, Synergy E&P Limited, in Q1. As a result, the company recorded SFD-related revenues of approximately $12.6 million for the quarter of 2025 versus $600,000 for the first quarter of 2024. Due to the activity of the survey during the quarter, SFD-related costs increased over 219%. All this contributed to a net income of $7.68 million for the first quarter of 2025, including noncash expenses totaling approximately $1.35 million. This compares favorably to a net loss of $1.7 million for the first quarter of 2024. Net income per share for the quarter was $0.10 per share basic and $0.08 per share diluted, as compared to a net loss for common share of $0.02 in the first quarter of 2024. Cash flow provided by operating activities was approximately $1.47 million during Q1 2025. This again compares favorably to approximately $590,000 used by operating activities in Q1 2024. We ended the quarter with cash and short-term investments of approximately $2.03 million. The net working capital was approximately $610,000 versus a negative working capital of approximately $6.68 million at December 31, 2024, an improvement of approximately $7.2 million. General and administrative expenses increased by approximately $87,000 in Q1 '25 as compared to 2024 with the increased business activity and related support costs. For more detail on these items, please review our first quarter 2025 financial statements and management discussion and analysis, which are available on both SEDAR+ and on EDGAR. To summarize the key financial points. First, there's been a significant improvement in profitability fueled by the SFD survey. Second, as a result, we have had positive operating cash flow and net working capital also became a positive number again, all signs of our potential. Finally, and most importantly, our financial position has improved, giving us the ability to begin focusing resources on sustainable growth. One quarter does not guarantee success, but Bruce will discuss how we will move forward methodically on this good start to the year. The company remains focused on the business fundamentals of revenue generation and growth and prudent cost control. as we execute the previously announced SFD survey contracts and continue to add to our sales funnel with our strategy of frequency, adjacency and repeatability. I would now like to hand the call back over to Bruce to further discuss our business update and forward plans.

Thank you, Eugene. To begin, I want to convey my sincere thanks to everyone for their support over the last year. I especially wish to express my gratitude to our strategic partner, Dr. Daere Akobo, CEO of Synergy E&P for his leadership, mentoring and tangible support during this period of change for NXT. Our last conference call was over a year ago, and I believe it is an important time to provide a comprehensive update on our progress and forward-looking plans. As Eugene mentioned, the company had a strong first quarter, strongest in 9 years to be exact. Having spent 40 years on Wall Street, I'm reminded of the same: one quarter doesn't make a year and one year doesn't make a career. NXT is fully committed to executing new business growth strategy, which was implemented 1.5 years ago when I first took over leadership of the company by becoming Interim CEO. The central theme of this strategy is frequency, adjacency and repeatability. The business growth strategy objective is to generate diversified revenue growth concentrating efforts on the foremost highly active exploration regions in the world: Africa, South and Southeast Asia, the Americas and Turkish Middle East region. Since inception, we have announced 6 new contracts, including another repeat contract in Africa, press release on May 1, all of which are scheduled to be executed and largely completed by year's end. I want to reiterate my vision for the company that I brought forward at the beginning of my leadership and our progress on its vision today. The vision and strategy can be summarized in a handful of key words: One, actively market; two, high grade; three, diversify; four, monetize; five, collaborate; and six, grow. Let me report each in more detail. Actively market. After being nominated for the best exploration technology awarded, the 2023 Gulf Energy Awards in Houston, Texas, NXT won the award in October 2024. Shortly afterwards, in December 2024, NXT was in New York City having been named a finalist at the Platts Global Energy Transition award. By the way, Platts is the oldest industry journal covering the oil and gas sector. This is evidence that industry recognition is increasing. Our own business development and outreach efforts have proven successful. Increased survey activity in multiple international markets that are active in exploration also raise industry awareness. Two, high grade, quality prospects with regards to value revenue potential and adjacent opportunities, our announcing on May 1 of another African SFD survey in 2025 is an example of our focus on high-grade work. Three, diversify. First, by geography. We are focusing efforts on highly active areas of exploration. These include Africa, South and Southeast Asia, the Americas and Turkish regions. We have seen success in this strategy as per our announcement of contracts in Africa, Southeast Asia and Pakistan. Second, by company size and type. We will continue to target national oil companies, which generally can produce larger contracts that tend to be slower to comment. We are increasingly engaging with independent oil companies in all focus regions. Our current announced and completed contracts are with a diversified set of companies. Four, monetize. NXT presented over 140,000 line kilometers of survey data which remain unmarketed to the industry. Five, collaborate. We continue discussions with other oil and gas service providers such as seismic survey and data service providers to explore opportunities to work together to our mutual benefit. These discussions are exploratory in nature with the purpose of determining if and where possible synergies exist. And six, grow. Grow revenues and earnings. Growth equals shareholder value. Quarter 1 was a good start. We will continue to focus on the business fundamentals of excellent execution, which will lead to organic growth. In summary, we remain committed to executing our business growth strategy and increasing shareholder value. Before closing, I want to recognize and thank our outstanding staff for their dedication, perseverance and accomplishments. On behalf of our Board of Directors and the entire team at NXT, I want to thank all of our shareholders for their continued support. I now ask our operator, Patrick, to open the line for us to take your questions.

[Operator Instructions] Our first question is from Jerome Hass from Lightwater Partners.

First, I'd like to congratulate the whole team for an excellent quarter. By far, the best point in recent memory, so well done on that. And also, I'm very impressed with the fact that you were able to hold fiscal discipline despite growing the top line as you did. So kudos on that. My question is with regards to best prospects for this year. Is it possible that you could outline what the potential revenues you would look for, for the remainder of this year?

So Jerome, this is Bruce speaking. We are precluded in virtually all of our contracts in disclosing revenues, and you should not expect quarter-over-quarter growth because sometimes we do demonstration projects. But I think that we've announced a second Nigerian contract, and I don't want to put a number on it, but it will be a strong revenue year.

[Operator Instructions] The next question is from [ Tom Wood ] from [ Woodlet ].

Bruce, Thomas here. I also add my congratulations and for sure, it's the best quarter in a long memory. I just wonder if we could talk about where you're just feeling at in terms of runway. This is obviously a great thing in having a great quarter like this. I'm wondering, do you still feel like we're in kind of an emergency mode? Or does it feel like we've got enough in the pipeline right now that we're feeling more optimistic?

Bruce speaking again. We are definitely not in emergency mode. We are in -- I've been on the Board of Directors since 2015. This is the most sustainable and substantial financial and operational position we've been in that entire time. So we are continuing to -- we've got a fairly full calendar for 2025. We have very high prospects for the first couple of quarters of 2026. So my goal is that we build out the pipeline in the geographies that we've discussed. But we are in a secure financial position and have the luxury of thinking about how we expand our reach and functionality.

Next question is from [ Charles Davidson ], a private investor.

Bruce, congrats. We've been shareholders for a long time, and this is really a terrific news and a great quarter, and we've got a lot of confidence in your team now. Just a quick question. Where is the company in terms of thinking about backup sensors, not only to cover the additional growth, but if something unforetold that's happening to the existing equipment?

Well, so all of our sensors were not being deployed in the field are lodged in our office in Calgary. But we have a good inventory of sensors. We continue to build new sensors and test them and condition them. So I think that -- I suppose if you really wanted to get extreme about it, it could be a locational risk. But I think we are very secure with regards to our equipment and our capacity with the existing and emerging sensor inventory.

Yes. Do we have enough -- excuse me, okay. Go ahead.

Okay. I'll just add to that. So we actually just had some test sensors up on a flight 2 weeks ago. So we are constantly trying to get new sensors built and qualified. So that is an important thing to make sure that we don't have a risk on the sensors.

Okay. That's great. So for example, if the volume continues to increase, we could possibly run 2 aircraft if we needed to do that?

Okay. So let me address that. We have a strategic planning committee, and we are thinking ahead. I mean, I think, as I look forward, it is possible and maybe even likely that we will have an additional aircraft in the next few years. The aircraft is the easy part. It's the deployable staff that is more complicated -- not complicated, but that needs very careful thought. But look, my goal as a career Wall Street buy side portfolio manager is to develop a sustainable growth path for this company. So yes, that probably implies additional -- maybe an additional aircraft, maybe, and certainly additional people. But those are things that we're going to do very thoughtfully and very, very carefully.

Great. Well, that's good news, and we all have a lot of confidence in what you guys are doing because obviously, you're producing. So congrats, and it's really great to be part of this program.

Well, thank you. Thank you very much for your questions and your comments.

[Operator Instructions] The next question is from [ Norman Sarafian ] from RBC Wealth Management.

Yes. Congratulations, Bruce. And Eugene, I really appreciate seeing good news as you know. I'm in the investment business, and that's what we really want and boy, did you come through. Congratulations. I had one question about Turkey, though. I just wondered how that worked out in the summary of business activities? And is it over? Or is there any opportunity to continue to grow the business in Turkey? And just curious how that turned out for you.

Well, Norm, it's good to hear your voice. So I would say Turkey was a very large success. The primary contract we did was for a Turkish independent company, partnered with a -- I think, they were Scottish, was it? Remind me, Eugene. But with a U.K.-based company, we executed survey. The Turkish entity decided that they wanted to more data from us. So we did some independent work, and it led to -- this is the adjacency part of my kind of business formula. We did a demonstration survey for, I'll just call it a very, very, very large Turkish entity. So Turkey, in my view, was a large success. And all these E&P communities are pretty small and pretty close and a lot of people were paying attention. We have an outstanding agent in Ankara. And so he's sort of working the field there, which is not just confined to Turkey, but there are Turkish operating companies that have interests and/or projects in North Africa. And so again, my theme is frequency, adjacency and repeatability. I think we've demonstrated frequency, but the adjacency part is really, really important. And so Turkey, what we've done so far, has been a tremendous success and I think will lead to some pretty promising leads in adjacent geographies.

That's fantastic. That's fantastic news. Do you feel confident that, that's the way it works on the other projects, too? Are you seeing people knocking on the door, so to speak? Or are you having to solicit everything you can one by one? How does it go with the prospecting or the gathering of new opportunities going forward?

Well. Okay. So, Norm, having a highly qualified regional agents is sort of the foundation of our outreach. And so in Southeast Asia, for instance, we're going to do a fairly small project in the Southeast Asian country but there are a lot of people, including some giant entities paying attention. So so I think that our business development conveyor belt is in really, really good shape with our own efforts and with a handful of really, really qualified agents around the world; Southeast Asia, Pakistan, India, Brazil. So I think the pipeline development is in really good shape.

[Operator Instructions] There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Wilcox.

Okay, Patrick. Thank you very much for all the listeners. Thank you for attending. Stay tuned. We're on a really good development path. We appreciate your attendance today. And we're always available for questions, Eugene and myself. But thank you very much for your attendance and your questions.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.